In a new report, analysts at Credit Suisse took an in-depth look at the property and casualty (P&C) insurance business and initiated coverage on several names in the space.
Here’s a breakdown of what they had to say.
Soft Market
Analysts believe low interest rates will limit the decline in casualty pricing. Credit Suisse is forecasting 9 to 10 percent average book value growth during 2015 and 2016, slightly lower than the 11 percent rate of growth in the past five years.
Analysts also predict average return on equity of 12 percent for the group in the next two years.
Defensive, Value-Driven Trading
While analysts see few business-related catalysts on the horizon to boost share prices in the near-term, they believe that several names in the space offer buying opportunities on other grounds. Analysts predict that excess capital on the balance sheets of many P&C insurers will continue to be returned to shareholders.
According to the report, maintenance of current capital return levels (70 to 130 percent of operating earnings) will continue to be a “key value driver” for stocks.
Stock Picks
Credit Suisse assigned an Outperform rating on the following stocks:
- Allstate Corp ALL 0.22%
- Chubb Corp CB 0.22%
- XL Group plc XL 0.52%
- ACE Limited ACE 0.19%
- Arthur J. Gallagher & Co. AJG 0.28%
- Marsh & McLennan Companies, Inc. MMC 0.69%
Credit Suisse issued Neutral ratings on these names:
- Travelers Companies Inc TRV 0.59%
- Arch Capital Group Ltd. ACGL 0.15%
- Progressive Corp PGR 0.45%
- Willis Group Holdings PLC WSH 0.23%
Credit Suisse initiated the following two names at Underperform:
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