Wrapping up Q3 earnings, we look at the numbers and key takeaways for the property & casualty insurance stocks, including Palomar Holdings (NASDAQ: PLMR) 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 strong Q3. As a group, revenues beat analysts’ consensus estimates by 14.7%.
Thankfully, share prices of the companies have been resilient as they are up 5.4% on average since the latest earnings results.
Palomar Holdings (NASDAQ: PLMR)
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
Palomar Holdings reported revenues of $244.7 million, up 64.8% year on year. This print exceeded analysts’ expectations by 10.2%. Overall, it was a very strong quarter for the company with a beat of analysts’ EPS and net premiums earned estimates.
Mac Armstrong, Chairman and Chief Executive Officer, commented, “Our third quarter results were exceptional, highlighted by record gross written premium and adjusted net income. We continue to achieve strong top and bottom-line growth as gross written premium grew 44% and adjusted net income increased a stellar 70% across our unique and diverse portfolio. This strong growth underscores the stability of our balanced book of E&S and admitted residential and commercial property and casualty products. Our operating and return metrics were also impressive as we generated an adjusted combined ratio of 75%, and a 26% adjusted return on equity.”
Palomar Holdings scored the fastest revenue growth of the whole group. Unsurprisingly, the stock is up 14.5% since reporting and currently trades at $134.85.
Best Q3: 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 $387.8 million, up 26.9% year on year, outperforming analysts’ expectations by 4.5%. The business had an incredible quarter with a beat of analysts’ EPS and 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 19.7% since reporting. It currently trades at $71.87.
Is now the time to buy Root? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: Progressive (NYSE: PGR)
Starting as a small auto insurance company in 1937 with a pioneering focus on high-risk drivers, Progressive (NYSE: PGR) is a major auto, property, and commercial insurance provider that offers policies through independent agents, online platforms, and over the phone.
Progressive reported revenues of $22.51 billion, up 14.2% year on year, in line with analysts’ expectations. It was a softer quarter as it posted a significant miss of analysts’ EPS estimates and a miss of analysts’ book value per share estimates.
As expected, the stock is down 4.3% since the results and currently trades at $230.10.
Read our full analysis of Progressive’s results here.
Fidelity National Financial (NYSE: FNF)
Issuing more title insurance policies than any other company in the United States, Fidelity National Financial (NYSE: FNF) provides title insurance and escrow services for real estate transactions while also offering annuities and life insurance through its F&G subsidiary.
Fidelity National Financial reported revenues of $4.03 billion, up 11.9% year on year. This number beat analysts’ expectations by 13%. Overall, it was an exceptional quarter as it also logged an impressive beat of analysts’ revenue estimates and a beat of analysts’ EPS estimates.
The stock is up 1.2% since reporting and currently trades at $55.24.
Assured Guaranty (NYSE: AGO)
Serving as a financial safety net for over $11 trillion in debt service payments since its founding in 2003, Assured Guaranty (NYSE: AGO) provides credit protection products that guarantee scheduled payments on municipal bonds, infrastructure projects, and structured finance obligations.
Assured Guaranty reported revenues of $207 million, down 23% year on year. This print topped analysts’ expectations by 12.2%. It was an incredible quarter as it also recorded a beat of analysts’ EPS estimates and an impressive beat of analysts’ revenue estimates.
Assured Guaranty had the slowest revenue growth among its peers. The stock is up 11.3% since reporting and currently trades at $90.67.
Read our full, actionable report on Assured Guaranty here, it’s free for active Edge members.
Market Update
Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
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