Analysis of fourth-quarter 2013 financial data of life and P&C insurers covered by investment bank Keefe, Bruyette & Woods finds varying results for the two sectors.
Life stocks continued to perform strongly in the fourth quarter, as they exhibited leverage to improvements in both interest rates and the broader equity market, KBW said. The 4Q performance capped off a strong year in which the median stock in the life universe increased 68.5 percent. “Since the end of the 3Q13 reporting period on November 7, the median life stock is up 10 percent (vs. 6 percent for the S&P),” KBW said. “In terms of relative performance within the group, there continued to be some correlation with rate and macro sensitivity.”
As for P&C, given below-average catastrophic weather-related losses, KBW expects fourth-quarter earnings to include strong underwriting results that will be accompanied, and in some cases overshadowed, by directionally disappointing pricing rhetoric. “P&C insurers’ superficially acceptable 2013 results (we estimate the industry’s 3Q13 annualized operating ROE at 11.1 percent) left us not particularly surprised by recent negative insurance pricing data points,” KBW said. “On the other hand, we’re discouraged by the rate deceleration-slash-decreases, since we attribute much or most of the industry’s acceptable 2013 returns to lower-than-expected claim cost inflation and below-average catastrophe and weather-related losses.”
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