The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Skyward Specialty Insurance (NASDAQ: SKWD) and the rest of the property & casualty insurance stocks fared in Q1.
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 Q1. As a group, revenues beat analysts’ consensus estimates by 2.4%.
In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.
Skyward Specialty Insurance (NASDAQ: SKWD)
Founded in 2006 to serve markets where standard insurance coverage falls short, Skyward Specialty Insurance (NASDAQ: SKWD) provides customized commercial property, casualty, and health insurance solutions for underserved or specialized market niches.
Skyward Specialty Insurance reported revenues of $328.5 million, up 24% year on year. This print exceeded analysts’ expectations by 5.5%. Overall, it was a stunning quarter for the company with a solid beat of analysts’ net premiums earned and book value per share estimates.
The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $53.05.
Best Q1: 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 $349.4 million, up 37.1% year on year, outperforming analysts’ expectations by 9.1%. The business had an incredible quarter with a solid beat of analysts’ EPS and net premiums earned estimates.
The market seems unhappy with the results as the stock is down 12.1% since reporting. It currently trades at $123.30.
Is now the time to buy Root? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: 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 $2.73 billion, down 17.3% year on year, falling short of analysts’ expectations by 17.9%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates.
Fidelity National Financial delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 12.6% since the results and currently trades at $56.26.
Read our full analysis of Fidelity National Financial’s results here.
American Financial Group (NYSE: AFG)
With roots dating back to 1872 and a business model that empowers local decision-making, American Financial Group (NYSE: AFG) is an insurance holding company that specializes in commercial property and casualty insurance products for businesses through its Great American Insurance Group.
American Financial Group reported revenues of $1.73 billion, flat year on year. This number missed analysts’ expectations by 8.6%. It was a disappointing quarter as it also recorded a significant miss of analysts’ net premiums earned and EPS estimates.
The stock is up 1.9% since reporting and currently trades at $126.22.
Read our full, actionable report on American Financial Group here, it’s free.
Bowhead Specialty (NYSE: BOW)
Named after the Arctic bowhead whale known for navigating challenging waters, Bowhead Specialty Holdings (NYSE: BOW) is a specialty insurance company that provides customized coverage for complex and high-risk commercial sectors.
Bowhead Specialty reported revenues of $122.7 million, up 35.3% year on year. This print topped analysts’ expectations by 1.8%. However, it was a mixed quarter as it logged a slight miss of analysts’ net premiums earned estimates.
The stock is down 16.4% since reporting and currently trades at $34.54.
Read our full, actionable report on Bowhead Specialty 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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