Insurance claims from Covid-19 (estimated at $40-$100 billion) have accelerated and amplified a “turn” in the property-casualty underwriting cycle that was sparked by record catastrophe losses and social inflation. Despite price increases that averaged nearly 12% in the third quarter of 2020, revenue growth remains constrained by the Covid-19 induced recession.
An economic recovery combined with a “hard” insurance pricing environment provides the shares of commercial lines property-casualty insurers with a catalyst for outperformance.
CFRA views Chubb (CB) as the best positioned commercial lines insurer set to leverage opportunities for global growth, while Alleghany (Y) offers exposure to a stronger reinsurance pricing environment as well. American International Group (AIG) and Hartford Financial Services Group (HIG) are both turnaround/restructuring candidates whose shares now have an additional catalyst of an upturn in property-casualty insurance pricing.