HIG - Morgan Stanley bullish on P&C insurers; Arch Capital Everest Re rated Overweight

2023-06-20 11:23:10 ET

Morgan Stanley on Tuesday initiated coverage of the property and casualty insurance sector with an 'Attractive' view, saying strong pricing should support the industry growth in 2024.

"Strong pricing driven in part by elevated losses, inflation, and catastrophe risks should support the P&C insurance industry's performance for the foreseeable future," said analyst Bob Huang. "We expect the group to outperform the broader market."

He said companies with superior underwriting discipline, stronger pricing power, solid expense management, and further ROE expansion opportunities should outperform in the current environment.

Morgan Stanley initiated coverage of 14 P&C insurers, brokers, and reinsurers:

• Arch Capital ( NASDAQ: ACGL ) was rated Overweight, given its efficient capital allocation and improving ROE. Price target was set at $92 (29.3% potential upside to last close).
• Everest Reinsurance ( NYSE: RE ) was rated Overweight, as its valuation does not fully reflect the upside potential. High catastrophe losses and limited capital supply should support pricing and growth well into 2024. PT is $429 (21.8% potential upside to last close).
• Lemonade ( NYSE: LMND ) was rated Underweight as the path to profitability remains long and it is expected to be adjusted EBITDA positive by 2027. PT is $14 (28.9% potential downside to last close). Shares -11.9% in morning trade.
• Companies rated Equal-weight: Allstate ( ALL ), AIG ( AIG ), AON ( AON ), Chubb ( CB ), Hartford Financial ( HIG ), Intact Financial ( IFC:CA ), Marsh McLennan ( MMC ), Progressive ( PGR ), Renaissance Re ( RNR ), Travelers ( TRV ), and Willis Towers Watson ( WTW ).

More on P&C insurers

• Lemonade: Big Strides On All Fronts
• Arch Capital Focuses On Specialty, Security For Stable Upside Potential
• P&C insurers' underwriting results expected to improve in 2023 - Fitch

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