As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the property & casualty insurance industry, including MGIC Investment (NYSE:MTG) and its peers.
Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.
The 33 property & casualty insurance stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 1.5%.
In light of this news, share prices of the companies have held steady as they are up 3.5% on average since the latest earnings results.
MGIC Investment (NYSE:MTG)
Founded in 1957 when the modern mortgage insurance industry was in its infancy, MGIC Investment (NYSE:MTG) provides private mortgage insurance that protects lenders when homebuyers default on their loans, enabling borrowers to purchase homes with smaller down payments.
MGIC Investment reported revenues of $304.2 million, flat year on year. This print fell short of analysts’ expectations by 0.6%, but it was still a strong quarter for the company with a beat of analysts’ EPS estimates and net premiums earned in line with analysts’ estimates.
Tim Mattke, CEO of MTG and Mortgage Guaranty Insurance Corporation ("MGIC") said, "For the second quarter we earned net income of $192.5 million and recorded an annualized 15% return on equity building upon the momentum we've maintained over the past few years.
Interestingly, the stock is up 8.3% since reporting and currently trades at $27.52.
Is now the time to buy MGIC Investment? Access our full analysis of the earnings results here, it’s free.
Best Q2: Root (NASDAQ:ROOT)
Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ:ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.
Root reported revenues of $382.9 million, up 32.4% year on year, outperforming analysts’ expectations by 7.5%. The business had an incredible quarter with a beat of analysts’ EPS estimates and a solid beat of analysts’ net premiums earned estimates.
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 26.9% since reporting. It currently trades at $90.
Is now the time to buy Root? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: Selective Insurance Group (NASDAQ:SIGI)
Founded in 1926 during the early days of automobile insurance, Selective Insurance Group (NASDAQ:SIGI) is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.
Selective Insurance Group reported revenues of $127.9 million, down 89.3% year on year, falling short of analysts’ expectations by 90.3%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates and a significant miss of analysts’ book value per share estimates.
Selective Insurance Group delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 13.4% since the results and currently trades at $78.35.
Read our full analysis of Selective Insurance Group’s results here.
Kinsale Capital Group (NYSE:KNSL)
Founded in 2009 during the aftermath of the financial crisis when many insurers were retreating from riskier markets, Kinsale Capital Group (NYSE:KNSL) is an insurance company that specializes in writing policies for hard-to-place, unusual, or high-risk businesses that standard insurers typically avoid.
Kinsale Capital Group reported revenues of $469.8 million, up 22.2% year on year. This print surpassed analysts’ expectations by 8.2%. Zooming out, it was a satisfactory quarter as it also recorded a solid beat of analysts’ net premiums earned estimates but a slight miss of analysts’ book value per share estimates.
The stock is down 7.6% since reporting and currently trades at $436.98.
Read our full, actionable report on Kinsale Capital Group here, it’s free.
CNA Financial (NYSE:CNA)
With roots dating back to 1853 and majority ownership by Loews Corporation, CNA Financial (NYSE:CNA) is a commercial property and casualty insurance provider offering coverage for businesses, including professional liability, surety bonds, and specialized risk management services.
CNA Financial reported revenues of $3.72 billion, up 5.6% year on year. This result missed analysts’ expectations by 0.8%. In spite of that, it was a very strong quarter as it put up a beat of analysts’ EPS estimates.
The stock is up 8.4% since reporting and currently trades at $47.52.
Read our full, actionable report on CNA Financial here, it’s free.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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