巴克莱-美股-保险行业-美国非寿险：财险与再保险市场状况改善-2019.4.15-189页.pdf

Barclays capital Inc.and/or one of its affiliates does and seeks to do business with companiescovered in its research reports.As a result,investors should be aware that the firm may have aconflict of interest that could affect the objectivity of this report.Investors should consider thisreport as only a single factor in making their investment decision.Please see analyst certifications and important disclosures beginning on page 183 3.u.s.Insurance/Non-LifeThe Long View:P&C Re/InsuranceMarket Conditions ImprovingThis report is designed to provide context,analysis and insighton key drivers of the property-casualty insurance industry andthe companies.We provide a deep-dive perspective on industrytrends and projections in Part I-VI.The company sectionsprovide summary analysis of major issues for the P&C stocks wecover including fundamental,quantitative,and valuation trends.Equity Research15 April 2019U.S.Insurance/Non-LifeJay Gelb,CFA+1 212 526 BcI,ussue Lee+1 212 526 BcI,usAndrew Karp+1 212 526 BcI,usFocusBarclays|US Insurance/Non-Life 15 April 2019 2 The Long View:P&C Re/Insurance Market Conditions Improving Property-Casualty Insurance Industry Conditions Improving.Following the worst two-year period of insured catastrophe losses on record,commercial P&C re/insurance prices are rising,and we expect this trend to persist.This factor,along with a sustained economic recovery and stabilizing core underwriting margins and modestly rising investment income should improve normalized earnings power for most P&C re/insurers.Although there is still plenty of excess capital,we expect sustained positive pricing momentum in commercial P&C and reinsurance resulting from outsized catastrophe losses and the growing consensus that this situation could be the new normal.Long term,the global P&C insurance industry needs to take into account the potential for outsized natural disasters as well as cyber events,in our view.The tailwind of reserve releases,which has lasted for a dozen years,appears likely to persist based on low overall inflation,which could result in somewhat less need for price improvement in certain P&C lines.We said a year ago that the performance gap between strong and weak underwriters would likely widen and we believe this has proven to be the case.CB,TRV and ACGL led the way in sustained outperformance in their core businesses.Meanwhile,AIG has struggled,although we anticipate improvement in 2019 and beyond.Robust M&A Activity.Major acquisitions announced or completed during the past year include AIG buying Validus for$5.6bn,and AXAs$15bn deal for XL,as well as the consolidation of Aspen and Navigators.We expect further consolidation of re/insurers with weakened performance and/or below$10bn in market cap.Therefore,it seems difficult for investors to have an underweight or short position in most small-mid cap P&C re/insurers,in our view.It also seems reasonable to expect large-scale M&A could resume.For example,is Chubb ready for another large deal?Personal Lines and Insurance Brokers:Favorable Results.Auto insurance margins have improved,although pricing power has slowed.We expect Progressive to continue to gain the most market share among the large personal auto insurers,and Allstates top-line growth should also improve.The insurance brokers,which are undergoing consolidation,should generate solid organic revenue growth and margin expansion.Several Opportunities in P&C.Our OW-rated P&C stocks include Berkshire Hathaway(favorable positioning to higher short-term rates,and potential for accretive acquisitions as well as share buybacks),Allstate and Progressive(strong earnings trends in auto and home insurance),Chubb(core global P&C holding with superior franchise value),and Arch Capital(tailwinds from mortgage insurance as well as top-tier P&C franchise).Users Guide:Our Long View report is designed to provide context,analysis and insight on key drivers of the property-casualty insurance industry and the companies.We provide a deep-dive perspective on industry trends and projections in Part I-VI.The company sections in this report provide summary analysis of major issues for the P&C stocks we cover including fundamental,quantitative,and valuation trends.Barclays|US Insurance/Non-Life 15 April 2019 3 CONTENTS The Long View:P&C Re/Insurance Market Conditions Improving.2 Catastrophe Risk Will be a Defining Factor for the P&C Insurance Industry.6 Part I:P&C Underwriting Results Hit by 2017-18 Catastrophe Losses,Result In Upward Pricing Trends.7 Property-Casualty Insurance:Generally Improving Environment.14 Property-Casualty Insurance Industry:Solid Fundamentals.28 Part II:Commercial P&C Lines:Improving Pricing.36 Part III:Reinsurers Consolidating Amid Dynamic Market Conditions.57 Part IV:Insurance Brokers Deliver Solid Results.69 Part V:Personal Lines P&C Returns are Favorable.81 Part VI:P&C Stock Performance&Valuation.100 Chubb Limited(Overweight/Neutral).110 Berkshire Hathaway Inc.(Overweight/Neutral).114 The Travelers Companies,Inc.(Overweight/Neutral).118 Arch Capital Group Ltd.(Overweight/Neutral).122 Everest Re Group,Ltd.(Overweight/Neutral).126 American International Group(Overweight/Positive).130 Hartford Financial Services Group Inc.(Overweight/Positive).134 RenaissanceRe Holdings Ltd.(Underweight/Neutral).138 Willis Towers Watson(Overweight/Neutral).142 Arthur J.Gallagher&Co.(Overweight/Neutral).146 Aon plc(Equal Weight/Neutral).152 Brown&Brown,Inc.(Underweight/Neutral).156 The Progressive Corporation(Overweight/Neutral).160 Allstate Corp(Overweight/Neutral).164 Barclays|US Insurance/Non-Life 15 April 2019 4 FIGURE 1 Barclays U.S.Non-Life Insurance Coverage Universe Industry View:Neutral Stock Rating Rationale CB OW Chubb was formed in 2016 from the merger of ACE and legacy Chubb.The company is well positioned to generate strong ROE and book value growth based on its global commercial P&C insurance presence,a favorable market position in high-end personal lines insurance,and long-term international life insurance growth opportunities,in our view.Chubb also benefits from among the strongest management teams in the industry with a favorable reserve position.We would expect the company to pursue additional mid-to-large sized acquisitions.BRK OW Berkshire Hathaway,led by Warren Buffett,appears well positioned to benefit from economic expansion,higher short-term interest rates,potential future accretive acquisitions,and share buybacks.Warren Buffett,age 88,could still be CEO for a number of years and uncertainty around his succession plans has been largely resolved,in our view.Berkshire now has$90+bn of deployable cash available for accretive acquisitions to supplement organic growth,which we would expect to be immediately accretive to EPS.Berkshires substantial investment in Kraft Heinz is now an area of weakness,given recent weak performance,in our view.HIG OW The Hartfords core businesses includes commercial lines and personal lines P&C,group benefits,and mutual funds.The companys sale of its Talcott Resolution unit,which consisted primarily of runoff variable annuity business,has resulted in the welcome exit of a low-ROE,non-core business.Hartfords announced acquisition of specialty P&C insurers Navigators,and its completed purchase of Aetnas US group life and disability insurance business should expand its presence in product lines with favorable growth potential and attractive margins.Share buybacks are expected to resume in late 2019.AIG OW AIG has a top-tier management team and should generate ROE improvement from a low base,in our view.The road to recovery for AIG has been uneven,but we expect sustained progress in the years ahead,driven by its new management team.In 2019,AIG anticipates delivering a P&C underwriting profit by reducing large coverage limits,reducing net exposures after reinsurance protection,limiting multi-year insurance deals,and reducing expenses.AIGs plan to achieve a 10%ROE goal(ex-DTA/AOCI)by 2021 is driven by expectations of a changing business mix,exiting underperforming business lines,and improving performance in P&C lines already generating an underwriting profit.RE OW Everest Re has a strong reinsurance business with a smaller(although faster-growing)primary insurance presence.The company has suffered large catastrophe losses over the past two years along with other re/insurers.In an improving pricing environment,we anticipate Everest can deliver decent top-line growth,an 11%ROE,and strong book value growth.Everest appears to have little appetite for M&A,unlike other reinsurers.The companys capital base is sizable which means it is important to major customers and small enough to be nimble.CEO Dom Addesso has announced his plan to retire;the board plans to explore internal and external candidates for his replacement.TRV OW Travelers is a top-tier P&C insurer,in our view,with a domestic focus on both commercial and personal lines.We view the company as having among the best track records in the industry of generating favorable underwriting results with conservative reserving practices as well as a favorable low double-digit ROE profile.The company has faced challenges generating favorable personal lines underwriting results,but we view it as being on a path toward improvement.Travelers has appeared interested in potential acquisitions(both bolt-on and large scale)to increase its ROE,reduce volatility,or add a strategic capability although we would expect its focus to remain on domestic opportunities.ACGL OW Arch Capital is among the industrys most disciplined P&C underwriters,in our view.We anticipate modest annual increases in premium volume in both P&C Insurance and Reinsurance.Archs mortgage(re)insurance unit could account for the vast majority of total underwriting income over the next several years,with a stronger return profile than its P&C units.Management has appeared open to bolt-on P&C acquisitions including adding underwriting teams,renewal rights transactions,and buying books of business.The company has had some executives leave for AIG,although we view Arch as having a strong bench of management strength.RNR UW RNR is among the best-managed reinsurers,in our view,with a long-term track record of effective risk management as well as book value per share growth.RenRe views its bolt-on acquisition of Tokio Millennium Res business as fitting well with its existing book of business based on the lines it expects to retain.We believe RNR could be open to additional bolt-on transactions.RenRe appears likely to maintain its current independent strategic course despite recent activist investor pressure,and any implied boost in its valuation from a potential takeover is largely unwarranted,in our view.WLTW OW Willis Towers Watson was formed by the merger of Willis Group and Towers Watson.This combination transformed Willis from a pure-play global insurance broker to one with core capabilities in consulting,employee benefits,and private health insurance exchange.WLTW appears confident in its long-term target of double-digit adjusted EPS growth,although its 19 growth rate could be negatively impacted by pension,tax rate and FX.In our view,it is unclear whether WLTW could re-engage with Aon as a potential merger partner,or whether another potential buyer could emerge.WLTWs CEO John Haleys succession planning is ongoing;we think an internal successor is the most likely outcome.AJG OW AJ Gallagher should benefit from flat-to-slightly up P&C pricing,exposure growth as the economy expands,and strong organic revenue growth.AJG appears more focused on organic growth than margin expansion,although margin expansion appears likely based on expectations of favorable organic revenue growth.AJGs Risk Management segment could also show favorable top-line growth along with mostly stable margin.The company has continued to supplement its growth with bolt-on acquisitions,and our sense is the company could be operationally ready for a larger deal.Source:Company Data,Barclays Research Note:Stock Rating:OW:Overweight;EW:Equal Weight;UW:Underweight.Barclays|US Insurance/Non-Life 15 April 2019 5 FIGURE 2 Barclays U.S.Non-Life Insurance Coverage Universe Industry View:Neutral(continued)Stock Rating Rationale BRO UW Brown&Brown is a pure-play insurance broker;nearly all revenues are commission-based and typically benefit from rising commercial P&C insurance rates.BRO also benefits from an US economic expansion leading to increased demand for commercial insurance.We view BRO as a well-run insurance broker with strong expense discipline and industry-leading margins.BRO continues to deploy excess capital mostly into bolt-on acquisitions of insurance agents,although deal valuations have increased.In 2018,the company delivered the largest acquisition-related revenue in its history.We view BROs valuation as elevated compared to other insurance brokers.AON EW Aon should benefit from P&C exposure growth and stabilizing commercial re/insurance rates,similar to other insurance brokers.Aon targets at least mid-single digit organic revenue growth over the long term.Management has also appeared confident there is significant opportunity for margin expansion.As a point of reference,Aon has expanded its margins by 70-80 bps annually on average over the last decade.In March 19,Aon said it was exploring an all-stock combination with WLTW,although Aon backed away from this stance only one day later.It is unclear whether Aon and/or WLTW could re-engage on this potential transaction,in our view.It also raises the possibility of Aon pursuing another large transaction,in insurance brokerage or elsewhere,we believe.ALL OW Allstate should deliver ongoing favorable margins along with improved growth in its auto and home insurance.Notably,the company provided evidence in 2017-18 of its strong catastrophe risk management framework.Allstate anticipates a 2019 overall underlying P&C combined ratio of 86%-88%,which we view as conservative since the company has beat its annual guidance every year for at least the past decade.Robust share buyback activity is expected to continue.ALL should generate an attractive 15%ROE in 2019/20,based on our projections.Bolt-on acquisitions of SquareTrade and InfoArmor should extend Allstates presence in insuring personal devices and identity protection.PGR OW Progressive is poised to continue its track record of industry-leading growth,margins and ROE in the personal lines P&C market,we believe.The company should continue to be the most successful auto insurer in terms of gaining profitable market share.We expect PGR to deliver strong top-line growth with favorable underwriting margins.We project PGRs ROE could be in the mid-to-high 20%range,which would likely be the best result among any P&C insurer we cover.PGRs personal auto policiesin-force(PIF)growth is currently the fastest among any large insurer.The company views bundling auto insurance with its homeowners coverage as a significant long-