Q3 Earnings Roundup: First American Financial (NYSE:FAF) And The Rest Of The Property & Casualty Insurance Segment

Earnings results often indicate what direction a company will take in the months ahead. With Q3 behind us, let’s have a look at Stewart Information Services and its peers.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

The 33 property & casualty insurance stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 14.7%.

Thankfully, share prices of the companies have been resilient as they are up 5.4% on average since the latest earnings results.

Stewart Information Services

Founded in 1893 during America's westward expansion when property records were often disputed, Stewart Information Services provides title insurance and real estate services, helping homebuyers, sellers, and lenders verify property ownership and protect against title defects.

Stewart Information Services reported revenues of $796.9 million, up 19.3% year on year. This print exceeded analysts’ expectations by 31%. Overall, it was a stunning quarter for the company with an impressive beat of analysts’ revenue and EPS estimates.

"I am proud of our third quarter results as they demonstrate our momentum," commented Fred Eppinger, chief executive officer.

Unsurprisingly, the stock is down 6.4% since reporting and currently trades at $70.27.

Best Q3: Root

Pioneering a data-driven approach that rewards good driving habits, Root is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.

Root reported revenues of $387.8 million, up 26.9% year on year, outperforming analysts’ expectations by 4.5%. The business had an incredible quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ net premiums earned estimates.

Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 19.7% since reporting. It currently trades at $71.87.

Weakest Q3: Progressive

Starting as a small auto insurance company in 1937 with a pioneering focus on high-risk drivers, Progressive is a major auto, property, and commercial insurance provider that offers policies through independent agents, online platforms, and over the phone.

Progressive reported revenues of $22.51 billion, up 14.2% year on year, in line with analysts’ expectations. It was a softer quarter as it posted a significant miss of analysts’ EPS estimates and a miss of analysts’ book value per share estimates.

As expected, the stock is down 4.3% since the results and currently trades at $230.10.

Read our full analysis of Progressive’s results here.

First American Financial

Tracing its roots back to 1889 when California was experiencing its first major real estate boom, First American Financial provides title insurance, settlement services, and risk solutions for residential and commercial real estate transactions across the United States and internationally.

First American Financial reported revenues of $1.98 billion, up 40.7% year on year. This print surpassed analysts’ expectations by 6.2%. Overall, it was a stunning quarter as it also logged an impressive beat of analysts’ revenue estimates and a beat of analysts’ EPS estimates.

The stock is up 1.1% since reporting and currently trades at $62.06.

Read our full, actionable report on First American Financial here, it’s free for active Edge members.

Trupanion

Born from a vision to help pet owners avoid economic euthanasia when faced with expensive veterinary bills, Trupanion provides medical insurance for cats and dogs through data-driven, vertically-integrated products priced specifically for each pet's unique characteristics.

Trupanion reported revenues of $366.9 million, up 12.1% year on year. This number beat analysts’ expectations by 1.3%. It was an exceptional quarter as it also produced a beat of analysts’ EPS estimates and a solid beat of analysts’ book value per share estimates.

The stock is down 9.4% since reporting and currently trades at $38.14.

Read our full, actionable report on Trupanion here, it’s free for active Edge members.

Over the past six months, RLI’s shares (currently trading at $64.88) have posted a disappointing 10.2% loss, well below the S&P 500’s 11.7% gain. This may have investors wondering how to approach the situation.

Following the pullback, is now a good time to buy RLI? Find out in our full research report, it’s free for active Edge members.

Why Does RLI Spark Debate?

Founded in 1965 and named after its original focus on "replacement lens insurance" for contact lens wearers, RLI is a specialty insurance company that underwrites property, casualty, and surety products through wholesale brokers, independent agents, and carrier partnerships.

Two Things to Like:

1. Net Premiums Earned Skyrocket, Fueling Growth Opportunities

Insurers sell policies then use reinsurance (insurance for insurance companies) to protect themselves from large losses. Net premiums earned are therefore what's collected from selling policies less what’s paid to reinsurers as a risk mitigation tool.

RLI’s net premiums earned has grown at a 13.3% annualized rate over the last two years, better than the broader insurance industry and in line with its total revenue.

2. Stellar ROE Showcases Lucrative Growth Opportunities

Return on equity (ROE) is a crucial yardstick for insurance companies, measuring their ability to generate returns on the capital provided by shareholders. Insurers that consistently deliver superior ROE tend to create more value for their investors over time through strategic capital allocation and shareholder-friendly policies.

Over the last five years, RLI has averaged an ROE of 28.4%, exceptional for a company operating in a sector where the average shakes out around 12.5% and those putting up 20%+ are greatly admired. This shows RLI has a strong competitive moat.

One Reason to be Careful:

Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

RLI’s EPS grew at a weak 10.3% compounded annual growth rate over the last two years, lower than its 13.6% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

RLI’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 3.3× forward P/B (or $64.88 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.

As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the property & casualty insurance industry, including Skyward Specialty Insurance and its peers.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

The 33 property & casualty insurance stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 14.7%.

Thankfully, share prices of the companies have been resilient as they are up 6.2% on average since the latest earnings results.

Skyward Specialty Insurance

Founded in 2006 to serve markets where standard insurance coverage falls short, Skyward Specialty Insurance provides customized commercial property, casualty, and health insurance solutions for underserved or specialized market niches.

Skyward Specialty Insurance reported revenues of $382.5 million, up 27.1% year on year. This print exceeded analysts’ expectations by 14.3%. Overall, it was a stunning quarter for the company with an impressive beat of analysts’ net premiums earned estimates and a solid beat of analysts’ revenue estimates.

Skyward Specialty Chairman and CEO Andrew Robinson commented, “Our third quarter results were exceptional, extending our track record of profitable growth and double-digit returns. Gross written premiums grew more than 50%, we achieved a Company-best combined ratio of 89.2% and annualized return on equity of 19.3%. Five of our nine divisions grew by more than 25% in the quarter, led by the agriculture and credit (re)insurance division. These results underscore the strength and discipline of our “Rule Our Niche” strategy and the benefits of our intentionally diversified portfolio, much of which is less exposed to P&C market cycles.

Interestingly, the stock is up 11.1% since reporting and currently trades at $51.73.

Read why we think that Skyward Specialty Insurance is one of the best property & casualty insurance stocks, our full report is free.

Best Q3: Root

Pioneering a data-driven approach that rewards good driving habits, Root is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.

Root reported revenues of $387.8 million, up 26.9% year on year, outperforming analysts’ expectations by 4.5%. The business had an incredible quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ net premiums earned estimates.

Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 17.2% since reporting. It currently trades at $74.10.

Weakest Q3: Progressive

Starting as a small auto insurance company in 1937 with a pioneering focus on high-risk drivers, Progressive is a major auto, property, and commercial insurance provider that offers policies through independent agents, online platforms, and over the phone.

Progressive reported revenues of $22.51 billion, up 14.2% year on year, in line with analysts’ expectations. It was a softer quarter as it posted a significant miss of analysts’ EPS estimates and a miss of analysts’ book value per share estimates.

As expected, the stock is down 5.4% since the results and currently trades at $227.52.

Read our full analysis of Progressive’s results here.

Kinsale Capital Group

Founded in 2009 during the aftermath of the financial crisis when many insurers were retreating from riskier markets, Kinsale Capital Group is an insurance company that specializes in writing policies for hard-to-place, unusual, or high-risk businesses that standard insurers typically avoid.

Kinsale Capital Group reported revenues of $497.5 million, up 19% year on year. This result beat analysts’ expectations by 10.9%. Overall, it was a strong quarter as it also produced an impressive beat of analysts’ net premiums earned estimates and a solid beat of analysts’ revenue estimates.

The stock is down 12.5% since reporting and currently trades at $396.89.

Read our full, actionable report on Kinsale Capital Group here, it’s free for active Edge members.

Cincinnati Financial

Founded in 1950 by independent insurance agents seeking stable market options for their clients, Cincinnati Financial provides property casualty insurance, life insurance, and related financial services through independent agencies across 46 states.

Cincinnati Financial reported revenues of $2.87 billion, up 12.1% year on year. This print was in line with analysts’ expectations. It was an exceptional quarter as it also put up an impressive beat of analysts’ book value per share estimates and a beat of analysts’ EPS estimates.

The stock is up 5.3% since reporting and currently trades at $165.93.

Read our full, actionable report on Cincinnati Financial here, it’s free for active Edge members.

As the Q3 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the property & casualty insurance industry, including Trupanion and its peers.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

The 33 property & casualty insurance stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 14.7%.

Thankfully, share prices of the companies have been resilient as they are up 6.1% on average since the latest earnings results.

Trupanion

Born from a vision to help pet owners avoid economic euthanasia when faced with expensive veterinary bills, Trupanion provides medical insurance for cats and dogs through data-driven, vertically-integrated products priced specifically for each pet's unique characteristics.

Trupanion reported revenues of $366.9 million, up 12.1% year on year. This print exceeded analysts’ expectations by 1.3%. Overall, it was an exceptional quarter for the company with a beat of analysts’ EPS and book value per share estimates.

“We delivered record quarterly profitability while accelerating subscription pet growth for the third consecutive quarter,” said Margi Tooth, Chief Executive Officer and President of Trupanion.

Unsurprisingly, the stock is down 10.3% since reporting and currently trades at $37.74.

We think Trupanion is a good business, but is it a buy today? Read our full report here, it’s free for active Edge members.

Best Q3: Root

Pioneering a data-driven approach that rewards good driving habits, Root is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.

Root reported revenues of $387.8 million, up 26.9% year on year, outperforming analysts’ expectations by 4.5%. The business had an incredible quarter with a beat of analysts’ EPS estimates and a solid beat of analysts’ net premiums earned estimates.

Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 18.2% since reporting. It currently trades at $73.23.

Weakest Q3: Progressive

Starting as a small auto insurance company in 1937 with a pioneering focus on high-risk drivers, Progressive is a major auto, property, and commercial insurance provider that offers policies through independent agents, online platforms, and over the phone.

Progressive reported revenues of $22.51 billion, up 14.2% year on year, in line with analysts’ expectations. It was a softer quarter as it posted a significant miss of analysts’ EPS estimates and a miss of analysts’ book value per share estimates.

As expected, the stock is down 5.3% since the results and currently trades at $227.69.

Read our full analysis of Progressive’s results here.

Selective Insurance Group

Founded in 1926 during the early days of automobile insurance, Selective Insurance Group is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.

Selective Insurance Group reported revenues of $1.36 billion, up 9.3% year on year. This number topped analysts’ expectations by 364%. Taking a step back, it was a softer quarter as it produced a significant miss of analysts’ EPS estimates and a significant miss of analysts’ book value per share estimates.

Selective Insurance Group scored the biggest analyst estimates beat among its peers. The stock is up 4.8% since reporting and currently trades at $85.06.

Read our full, actionable report on Selective Insurance Group here, it’s free for active Edge members.

Employers Holdings

With roots in Nevada and a strong concentration in California where 45% of its premiums are generated, Employers Holdings is a specialty provider of workers' compensation insurance focused on small and select businesses engaged in low-to-medium hazard industries across the United States.

Employers Holdings reported revenues of $239.3 million, up 6.8% year on year. This result surpassed analysts’ expectations by 10.4%. However, it was a slower quarter as it logged a significant miss of analysts’ EPS estimates and a significant miss of analysts’ book value per share estimates.

The stock is up 5.1% since reporting and currently trades at $42.79.

Read our full, actionable report on Employers Holdings here, it’s free for active Edge members.

As the Q3 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the property & casualty insurance industry, including Mercury General and its peers.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

The 33 property & casualty insurance stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 14.7%.

Thankfully, share prices of the companies have been resilient as they are up 5.7% on average since the latest earnings results.

Mercury General

Founded in 1961 and maintaining a network of over 6,300 independent agents across the country, Mercury General is an insurance company that primarily sells automobile insurance policies through independent agents in 11 states, with a strong focus on California.

Mercury General reported revenues of $1.58 billion, up 3.6% year on year. This print exceeded analysts’ expectations by 6.7%. Overall, it was a stunning quarter for the company with a beat of analysts’ EPS and revenue estimates.

Interestingly, the stock is up 17.3% since reporting and currently trades at $93.57.

Best Q3: Root

Pioneering a data-driven approach that rewards good driving habits, Root is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.

Root reported revenues of $387.8 million, up 26.9% year on year, outperforming analysts’ expectations by 4.5%. The business had an incredible quarter with a beat of analysts’ EPS and net premiums earned estimates.

Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 16.7% since reporting. It currently trades at $74.55.

Weakest Q3: Progressive

Starting as a small auto insurance company in 1937 with a pioneering focus on high-risk drivers, Progressive is a major auto, property, and commercial insurance provider that offers policies through independent agents, online platforms, and over the phone.

Progressive reported revenues of $22.51 billion, up 14.2% year on year, in line with analysts’ expectations. It was a softer quarter as it posted a significant miss of analysts’ EPS and book value per share estimates.

As expected, the stock is down 6.9% since the results and currently trades at $223.87.

Read our full analysis of Progressive’s results here.

Erie Indemnity

Operating under a unique business model dating back to 1925, Erie Indemnity serves as the attorney-in-fact for Erie Insurance Exchange, managing policy issuance, claims handling, and investment services for this reciprocal insurer.

Erie Indemnity reported revenues of $1.07 billion, up 6.7% year on year. This result missed analysts’ expectations by 1.6%. It was a slower quarter as it also produced a miss of analysts’ revenue estimates and a narrow beat of analysts’ EPS estimates.

The stock is down 10.5% since reporting and currently trades at $277.

Read our full, actionable report on Erie Indemnity here, it’s free for active Edge members.

Skyward Specialty Insurance

Founded in 2006 to serve markets where standard insurance coverage falls short, Skyward Specialty Insurance provides customized commercial property, casualty, and health insurance solutions for underserved or specialized market niches.

Skyward Specialty Insurance reported revenues of $382.5 million, up 27.1% year on year. This print topped analysts’ expectations by 14.3%. Overall, it was a stunning quarter as it also produced a solid beat of analysts’ net premiums earned estimates and an impressive beat of analysts’ revenue estimates.

The stock is up 9.8% since reporting and currently trades at $51.10.

Read our full, actionable report on Skyward Specialty Insurance here, it’s free for active Edge members.