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Commercial carriers poised to benefit from continued rate improvements: JP Morgan

21st August 2019 - Author: Matt Sheehan

Broad industry pricing improvements are expected to provide a tailwind to commercial carriers’ top-line growth and earnings, according to JP Morgan analyst Keith Cornelius.

This is likely to be supported by year-on-year improvements in bet investment income, as well as a manageable quarter in terms of catastrophe activity.

Cornelius believes that small account, specialty underwriting should outperform larger account and more commoditised underwriting, although he noted that some surveys are forecasting an acceleration in rates for large accounts.

Pricing continues to benefit from two consecutive years of historic loss activity in addition to loss creep stemming from those events.

JP Morgan, however, is not anticipating that the industry will enter a hard pricing market, given the abundant capital that remains available.

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Cornelius estimates that overall underlying margins could improve slightly as better pricing is somewhat offset by deteriorating loss ratios.

Additionally, JP Morgan expects commercial carriers to produce solids returns on equity in the low-teens, despite the active catastrophe quarter.

The Council of Insurance Agents & Brokers (CIAB) recently reported that Q1 2019 was the sixth consecutive quarter of premium price increases across small, medium and large accounts.

Commercial auto and commercial property lines continue to benefit from the most significant pricing improvements.

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