Trump victory is a boon for P&C, life insurers: Evercore ISI
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Property and casualty insurers, as well as life insurers, are expected to benefit from Donald Trump’s presidential election victory, Evercore ISI said on Wednesday.
On P&C underwriters, in particular, the rise in Treasury yields — one of the main so-called Trump trades — “is a net positive” for net investment income, analyst David Motemaden wrote in a note.
Insurers with shorter duration portfolios, such as W. R. Berkley (NYSE:WRB), RenaissanceRe Holdings (NYSE:RNR), Arch Capital Group (NASDAQ:ACGL) and Everest Group (NYSE:EG), “were likely to start seeing some pressure given the drift down in interest rates so the reflationary implications of a Trump win somewhat lifts that pressure.”
Motemaden sees the Trump win as reflationary for the U.S., though, “which likely is a modest negative for the US P&C insurers given higher loss costs on property coverages.”
But, overall, “we think the NII benefit from higher interest rates more than offsets the higher loss costs because we estimate ~50% of industry loss costs are directly tied to the reflationary dynamics (mostly property coverages),” the note said.
In a separate note, Evercore’s Thomas Gallagher said that most life insurers’ earnings should benefit from the Trump win on higher borrowing costs. But, for companies that have sizable non-U.S. businesses, such as Aflac (NYSE:AFL), Prudential Financial (NYSE:PRU), MetLife (NYSE:MET), Principal Financial Group (NASDAQ:PFG) and Reinsurance Group of America (NYSE:RGA), “a stronger dollar could be a partial offset on earnings.”
Most P&C and life insurance stocks took part in the broader stock market rally induced by the Trump win, with Brighthouse Financial (BHF) +10.6%, Lincoln National (LNC) +12.5%, Corebridge Financial (CRBG) +10.7% and Equitable Holdings (EQH) +12.5% posting double-digit intraday gains.
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