KBW analysts’ forecast for the third quarter results season are generally below consensus for the carriers and slightly above consensus for the brokers.
Carrier estimate’s have been primarily driven by higher catastrophe losses, while broker’s are anticipated to achieve faster organic revenue growth.
Notwithstanding slowly decelerating rate increases, analysts state that most reinsurers’ and commercial underwriters’ core combined ratios should improve on earned rate increases, while personal auto insurers’ results should include mostly flat rates and rapidly rising claim costs.
The modestly steepening yield curve and very slightly positive equity performance imply a little book value pressure beyond operating income.
KBW adds that brokers’ organic revenue growth should include persistent P&C rate increases and material y/y exposure unit growth that should outpace difficult (but not insurmountable) prior-year comparables.
Overall, analysts expect above-average 3Q21 catastrophe losses following a combination of adverse weather (mostly Hurricane Ida and European flooding)and rising costs for vehicle parts and repairs, construction materials, and related labor costs.
In personal lines, normalizing driving patterns, significant loss cost inflation, and flat-to-down earned rate levels should drive core loss ratios up y/y, modestly offset by declining marketing spend.
KBW expects modest written auto rate decreases to persist through year-end, reflecting both market competition and regulatory friction.
Personal property rates should soon rise in response to persistent large losses, rising claim costs, and still-rising reinsurance costs.
Reinsurers, KBW adds, should disproportionately bear Q3’s catastrophe losses, reflecting both actual losses and aggregate reinsurance protections, although core loss ratios should generally decline y/y.
Despite very abundant capital, analysts expect optimistic 1/1 reinsurance renewal pricing forecasts, reflecting 2021’s significant and unusual losses.
In the broking space, there’s an expectation for persistent commercial P&C rate increases and steady y/y exposure unit growth to drive at least upper-single-digit organic revenue growth, which should generally outpace otherwise difficult prior-year margin comparables.
