The multiline insurance sector is on an upward trajectory, fueled by several positive factors. Improved pricing strategies, cautious underwriting practices, and expanding exposure to new risks are all contributing to industry growth. This trend is reflected in the sector’s impressive year-to-date performance, with a 17.7% return, outpacing the Finance sector’s growth of 15.3%.
Furthermore, multiline insurers benefit from product diversification, which helps them mitigate concentration risk and boost retention rates. The rapid adoption of digital technologies is streamlining operations, while a favorable rate environment is driving investment income higher.
In this article, we focus on two leading multiline insurers: Assurant, Inc. (AIZ) and Old Republic International Corporation (ORI). Assurant, with a market capitalization of $10.26 billion, provides a range of business services that support, protect, and connect consumer purchases across North America, Latin America, Europe, and the Asia Pacific. Old Republic International, with a market capitalization of $9.21 billion, primarily operates in the United States and Canada, offering insurance underwriting and related services through its subsidiaries. Both companies are currently rated as Zacks Rank #2 (Buy).
The diversified portfolios of multiline insurers provide a key advantage by lowering concentration risk. Life insurance operations benefit from increased demand for protection products, leading to higher sales and premium income. Meanwhile, the non-life insurance segment enjoys premium growth driven by better pricing and expanded coverage for intangible assets and cyber threats. Deloitte Insights points to the transition to green energy and related insurance products, as well as exposure to intangible assets, as significant growth opportunities. Industry reports from Carrier Management and Swiss Re further reinforce the positive outlook, with AM Best expecting profitable commercial lines and improving personal lines in 2024, and Swiss Re forecasting high single-digit premium growth in the same year.
The rising interest rate environment is also a boon for insurers. They invest a portion of their collected premiums, and long-tail insurers, with longer investment horizons, tend to benefit more from rising rates as they have more time to earn higher returns on their investments.
The Federal Reserve’s recent move to cut the interest rate by 50 basis points, marking the first such reduction in four years, signifies a shift in monetary policy. The rate now stands at 4.75-5%, down from a more than two-decade high of 5.25-5.5%.
Multiline insurers are also making significant investments in technology to enhance their scale and efficiency. This strategic move helps them generate higher margins and improve profitability. These combined factors contribute to the building of solid policyholders’ surplus, which acts as a buffer against losses. The strong capital positions of multiline insurers are fueling merger and acquisition activities, driving growth and enabling shareholder-friendly moves.
To better assess which multiline insurer is better positioned currently, we delve deeper into specific parameters.
