巴克莱-美股-保险行业-美国保险行业2019年Q1预览：预期财险结果稳定-2019.4.1-102页.pdf

Equity Research 1 April 2019 CORE Barclays Capital Inc.and/or one of its affiliates does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.PLEASE SEE ANALYST CERTIFICATION(S)AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 96.Restricted-Internal U.S.Insurance 1Q Preview:Expect Solid P&C Results;Mixed Macro Factors in Life Insurance P&C Results Should be Robust.1Q P&C insurance results are expected to be favorable,including lower-than-normal catastrophe losses.P&C market conditions are currently stable although on the cusp of tightening by the most in five years,in our view.Although property catastrophe reinsurance rates were flat in January 19,this situation appears likely to tighten as the year progresses.Meanwhile,personal lines insurers continue to generate favorable underwriting results and the focus appears to be shifting to growth.Importantly,AIG has appeared confident it should deliver a P&C underwriting profit in 2019 as well as in 1Q.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),AIG(turnaround opportunity with top-tier management team),and Chubb(core global P&C holding with superior franchise value).Life Insurers Face Macro Cross-Currents.Life Insurers are likely to benefit from the year-to-date recovery in equity markets(which could be a benefit for earnings if it these gains hold).However,the 10-year Treasury yield has declined to a 15-month low,the yield curve is flat,and there are ongoing concerns regarding legacy long-term care insurance exposure.Bellwether life insurer valuations remain compressed with a median P/E of 7x,although we do not envision increased valuations given the interest rate environments downward pressure on earnings power.We expect 1Q 19 life insurer median operating EPS to increase+4%y/y(+5%on a core basis),although the range widely varies.We expect ATH and VOYA to generate among the strongest 1Q core earnings growth.Meanwhile,BHF and PFG could show the largest y/y declines in 1Q core operating EPS.Our OW-rated Life Insurance stocks include:PRU has EPS power of$13 based on our estimates,and its current P/E of 7x looks attractive.The company has delivered consistent results in its annuity,asset management,and international businesses.UNM should benefit from improving employment trends.Legacy long-term care exposure is a concern,but we believe this is already discounted in its valuation.UNM continues to deliver ongoing share buybacks and dividend increases,and is currently valued at 6x earnings.LNC has delivered solid results in its US-focused annuity and life insurance businesses along with accretive acquisitions.The company has a robust share buyback program and group insurance results are recovering.LNCs current valuation of 6x earnings has upside potential,in our view.INDUSTRY UPDATE U.S.Insurance/Life NEUTRAL Unchanged U.S.Insurance/Non-Life NEUTRAL Unchanged For a full list of our ratings,price target and earnings changes in this report,please see table on page 2.U.S.Insurance/Non-Life Jay Gelb,CFA+1 212 526 1561 BCI,US Andrew Karp+1 212 526 9015 BCI,US U.S.Consumer Finance Mark C.DeVries+1 212 526 9484 BCI,US Barclays|U.S.Insurance 1 April 2019 2 Summary of our Ratings,Price Targets and Earnings Changes in this Report(all changes are shown in bold)Company Rating Price Price Target EPS FY1(E)EPS FY2(E)Old New 29-Mar-19 Old New%Chg Old New%Chg Old New%Chg U.S.Insurance/Life Neu Neu Ameriprise Financial(AMP)OW OW 128.10 135.00 146.00 8 15.75 15.75-17.50 17.50-AXA Equitable Holdings Inc.(EQH)EW EW 20.14 18.00 20.00 11 4.00 4.00-4.30 4.30-Voya Financial,Inc.(VOYA)EW EW 49.96 45.00 49.00 9 5.40 5.40-6.25 6.25-U.S.Insurance/Non-Life Neu Neu Aon Corporation(AON)EW EW 170.70 153.00 155.00 1 9.00 9.00-10.00 10.00-Arch Capital Group Ltd.(ACGL)OW OW 32.32 32.00 38.00 19 2.45 2.45-2.65 2.65-Arthur J.Gallagher&Co.(AJG)OW OW 78.10 87.00 93.00 7 3.85 3.85-4.25 4.25-Berkshire Hathaway Inc.(BRK/A/BRK.A)OW OW 301215.00 375000.00 375000.00-15000.15 15000.22 0 15979.64 15981.88 0 Hartford Financial Services Group(HIG)OW OW 49.72 55.00 57.00 4 5.05 5.05-5.40 5.40-Progressive Corp.(PGR)OW OW 72.09 81.00 86.00 6 5.40 5.40-5.70 5.70-RenaissanceRe Holdings(RNR)UW UW 143.50 125.00 130.00 4 12.15 12.50 3 12.50 13.00 4 The Travelers Companies,Inc.(TRV)OW OW 137.16 145.00 160.00 10 10.75 10.75-11.25 11.25-Willis Towers Watson Plc(WLTW)OW OW 175.65 185.00 200.00 8 10.75 10.75-11.75 11.75-Source:Barclays Research.Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency.FY1(E):Current fiscal year estimates by Barclays Research.FY2(E):Next fiscal year estimates by Barclays Research.Stock Rating:OW:Overweight;EW:Equal Weight;UW:Underweight;RS:Rating Suspended Industry View:Pos:Positive;Neu:Neutral;Neg:Negative Barclays|U.S.Insurance 1 April 2019 3 US Insurance:Raising Price Targets We raise our price targets for several insurers in both P&C and Life insurance as summarized in Figure 1 below.We also slightly increase our 2019/20 EPS estimates for RenaissanceRe to$12.50/$13.00 from$12.15/$12.50.FIGURE 1 Price Target Change Summary Source:Barclays Research P&C Insurance:Expect Solid 1Q Results;Improving Commercial P&C Pricing We anticipate solid underlying results for the P&C re/insurers and brokers in 1Q 19,including generally low catastrophe losses.P&C market conditions are currently stable although on the cusp of tightening by the most in five years,in our view.Although property catastrophe reinsurance rates were flat in January 19,conditions appear likely to tighten as the year progresses.Meanwhile,personal lines insurers continue to generate favorable underwriting results,and the focus appears to be shifting to growth.Price TargetBV ex AOCI2019E Implied P/B ex AOCI MultipleTickerRatingOldNew2019EOldNewCommercial Lines&ReinsuranceTRVOW$145$160$93 1.6x 1.7x ACGLOW32 38 24 1.3 1.6 RNRUW125 130 115 1.1 1.1 Personal LinesPGROW$81$86$20 4.0 x 4.2x Multi-LineHIGOW$55$57$43 1.3x 1.3x Price TargetAdj.Cash EPS 2019E Implied P/B ex AOCI MultipleTickerRatingOldNew2019EOldNewInsurance BrokersWLTWOW$185$200$10.75 17.2x 18.6x AJGOW87 93 5.11 17.0 18.2 AONEW153 155 9.00 17.0 17.2 Price Target2019E Implied P/E MultipleTickerRatingOldNew2019E EPSOldNewLife InsuranceAMPOW$135$146$15.75 8.6x 9.3x EQHEW18 20 4.00 4.5 5.0 VOYAEW45 49 5.40 8.3 9.1 Barclays|U.S.Insurance 1 April 2019 4 FIGURE 2 1Q 2019 Summary Non-Life Insurance Sector Estimates Source:Company data,Refinitiv,Barclays Research estimates (a)BRK premiums are P&C net earned premiums.(b)P&C premiums only.(c)Organic revenue growth and margins for insurance brokerage only except for AON and WLTW,which refer to whole company.(d)Brokerage margins for WLTW,AJG,and BRO refer to adjusted EBITDA measures as presented by each company.Aon margin based on pre-tax margin excluding amortization.Operating Earnings Per ShareCombined Ratio1Q18A1Q19EY/Y%ChgEst.NWP1Q18A1Q19E1Q18A1Q19EActualBarclaysConsensusvs Barclays Est.%ChgAs Reportedex-cats and PY devel.Commercial Lines and ReinsurersCB$2.34$2.75$2.6318%4%90%88%88%89%BRK.B(a)2.142.252.345%9%95%95%101%97%RE5.345.505.593%7%93%93%87%90%TRV2.462.702.7710%4%95%96%92%93%ACGL0.560.570.622%8%79%81%83%85%RNR3.403.002.98-12%3%71%77%78%82%Average4%6%87%88%88%89%Median4%5%92%91%87%89%Personal LinesALL$2.96$2.50$2.59-16%6%88%92%84%88%PGR1.291.351.385%17%88%91%87%88%Average-6%11%88%92%86%88%Median-6%11%88%92%86%88%MultilineAIG(b)$1.04$1.00$1.06-4%5%104%99%100%97%HIG(b)1.271.251.24-1%1%93%96%90%93%Average-3%3%98%97%95%95%Median-3%3%98%97%95%95%Operating Earnings Per ShareEst.Margin(d)1Q18A1Q19EY/Y%ChgOrganic 1Q18A1Q19EActualBarclaysConsensusvs Barclays Est.Growth(c)As ReportedBrokers WLTW$2.71$3.00$3.0311%4.0%24%26%AJG1.521.601.615%5.0%35%35%AON2.973.253.329%4.9%32%32%BRO0.330.350.366%3.5%31%30%Average8%4%30%29%Median8%4%31%30%Industry Average4%Industry Median5%Barclays|U.S.Insurance 1 April 2019 5 FIGURE 3 P&C Focus Areas for 1Q 2019 Company Focus Area Commentary Commercial Lines&Reinsurance CB Underlying Combined Ratio Our 1Q outlook is for an underlying P&C combined ratio(ex cats and prior year development)of 88.9%versus 87.6%a year ago and 88.3%in the prior quarter.Share Buybacks We expect CB to repurchase$375mn of shares in 1Q.On November 15,2018,Chubb announced a new$1.5bn share repurchase authorization through the end of 2019.BRK Bottom Line We anticipate 1Q 2019 operating EPS(excludes market-to-market investment gains/losses)of$3,369 per A share($2.25 per B share),up from$3,215(2.14 per B share)a year ago.We project improved y/y earnings for Insurance,BNSF and the Manufacturing,Service,and Retail segment.We anticipate$2.0bn of earnings in Insurance in 1Q including a$584mn underwriting gain.Book Value Growth Book value could increase 6%q/q in 1Q,driven largely by positive equity market performance.Mark-to-market investment losses could be approximately$18bn pre-tax driven by strong performance of a few large holdings(including AAPL,BAC,AXP).Excess Cash/Buybacks We estimate Berkshire now has$90+bn of immediately deployable cash for accretive acquisitions to supplement organic growth as well as for investments and share buybacks.We anticipate$1bn of share buybacks in 1Q 19,$4bn in FY19 and$4bn in FY20 with upside potential if the company is unable to deploy excess cash in large acquisitions.We still view a shareholder dividend as unlikely for now.RE CEO Succession Everest Res CEO Dom Addesso intends to retire at the end of his current contract term effective YE19.This transition was largely expected,in our view,as he turns 65.The company has said it would consider both internal and external successors.We expect this to be a smooth transition for Everests business and investors.Top-Line Growth Everests net written premiums could increase 7%y/y to$1.8bn in 1Q.We estimate RE could achieve gross written premium growth of 7%,including increases in both Insurance(+6%)and Reinsurance(+7%).Underlying Results We expect Everest to report a 1Q underlying CR(ex-cats and reserve development)of 90.0%,above 87.1%a year ago and mostly consistent with 90.4%in the prior quarter.We anticipate modest favorable prior reserve development of$11mn(0.6 CR points).Share Buybacks Although we view Everest as having sufficient capital,we would expect the company to curtail share buyback activity in 2019 following large catastrophe losses.We expect$100mn of repurchases in 2020.TRV P&C Rates Commercial P&C renewal rate increases in 4Q18 were mostly stable at+1.6%compared to+1.7%in the prior quarter which likely means the pace of commercial P&C rate increases has peaked.Workers compensation rate declines remain a drag on the overall result.Personal Auto TRVs pace of personal auto insurance growth in 4Q18 was unchanged compared to the prior quarter(PIF down 0.4%y/y in 4Q and 3Q 18).In 4Q,the personal auto underlying CR of 97%was weaker than the prior quarter but was the fourth consecutive quarter of underwriting profitability following two years of losses.The companys personal auto business is now generating targeted returns,which we believe means it could focus on returning to growth as long as margins can be maintained.TRV plans to moderate its rate increases in 2019 although rate change is still expected to be positive.In 2019,underwriting results are expected to be broadly consistent with 2018,including slightly better results in 1H19 on a y/y basis,while 2H19 results will likely be slightly weaker y/y.Our outlook is for a 105%combined ratio(99.7%underlying)in Domestic Agency Auto in 4Q.Share Buybacks We project$400mn of buybacks in 1Q 19.We project$1.75bn of annual buybacks in 2019/20.ACGL Mortgage Insurance In 1Q 19,we expect the combined ratio in Mortgage Insurance could be 37.5%(44.6%underlying)compared to 22.7%(33.1%underlying)in the prior quarter.Top-Line Growth ACGLs net written premiums could increase 8.4%y/y in 1Q 19 to$1.5bn including strong growth in Mortgage Insurance(+14%)and Reinsurance(+9%).We also expect+5%NWP growth in Insurance.RNR Top-Line Growth In 1Q,total gross written premiums(which can be lumpy)could increase 6%y/y to$1.2bn,driven by growth across segments.Combined Ratio We expect a 1Q combined ratio of 77.0%(81.9%excluding catastrophe losses and prior year development),compared to 70.6%(77.7%underlying)a year ago.M&A RNR recently completed its bolt-on acquisition of Tokio Marines European reinsurance business for$1.5bn(1x tangible book value)in the form of cash and RNR shares as well as State Farms new$250mn equity investment stake in RNR.Our sense is RNRs initial accretion expectation could end up being conservative.The company has initially guided to a run-rate after tax earnings contribution of$100mn from the acquisition.RenRe appears likely to maintain its current independent strategic course despite recent activist pressure,and any implied boost in its valuation from a potential takeover is largely unwarranted,in our view.Source:Company data,Barclays Research Barclays|U.S.Insurance 1 April 2019 6 Company Focus Area Commentary Multiline Insurance HIG Acquisition of Navigators On August 22,2018,HIG announced its acquisition of specialty underwriter Navigators for$2.1bn in cash.The pending acquisition is expected to strengthen HIGs position in the US commercial middle market and specialty lines business as well as add complementary specialty and surplus lines insurance capabilities.The acquisition is expected to be immediately accretive to HIGs 2019 net income and result in modest book value dilution.Over time,HIG expects the deal to produce a low double-digit return,driven by revenue growth and modest expense savings.It is unclear in our view if the acquisition of NAVG could change the potential for HIG to become a consolidation candidate.Capital Management HIG announced a new$1bn share buyback authorization with 4Q18 earnings and expects to use a portion of this in 2019,which is sooner than our prior expectation that repurchases would restart in 2020.We anticipate$200mn of repurchases in 2019(all in 4Q)and$800mn in 2020.2019 Guidance In terms of 2019 component expectations,the commercial lines combined ratio outlook is 94.5%-96.5%(91.0%-93.0%underlying).The personal lines combined ratio outlook is 97.5%-99.5%(91.0%-93.0%underlying).The group benefits core earnings margin outlook is 6.0%-7.0%P&C Underlying Combined Ratio In 1Q,we expect a P&C underlying combined ratio of 93.1%,including a commercial lines underlying combined ratio of 93.9%and a personal lines underlying combined ratio of 91.0%.AIG P&C Combined Ratio In 1Q 19,we model