KBW’s Shields: Q2 earnings calls to focus on pricing, loss trends, reserves and capital deployment

By David Bull

July 8 - (The Insurer) - With the Q2 P&C earnings season set to get underway next week, the main areas of focus on calls with analysts are likely to be pricing, loss trends, reserve development and capital deployment, KBW’s Meyer Shields said in a preview note.

The analyst said that while there have been catastrophe losses in the quarter they were relatively modest as he suggested one topic of discussion will be the development of loss reserves, including those related to Russia-Ukraine leased airplane losses.

As previously reported, last month a UK High Court judgment ruled in favour of lessors in the Russian aircraft test case, affecting aviation insurers.

In his note, Shields said: “We expect Q1 2025 P&C results to include: slowing, still-positive, commercial/specialty NWP growth; moderate catastrophe losses; company-specific commercial casualty reserve development; and solid core personal auto and homeowners’ core underwriting results with mostly-improving (policies-in-force) growth.”

The analysts said KBW’s earnings per share (EPS) estimates for underwriters are mostly unchanged or “modestly” raised to reflect the moderate cat losses in the period, with its broker estimates also mostly unchanged.

“We’ve mostly lowered target prices, applying lower multiples to reflect tariff-related uncertainty,” Shields said.

By P&C sub-sector, the analyst said that KBW is a “little more cautious” on cat reinsurers, with mid-year renewals mostly including risk-adjusted rate decreases despite rising demand and the impact of first quarter wildfire losses and Florida hurricanes in the second half of 2024.

This suggested that even losses from a normal or slightly above normal 2025 hurricane season won’t reaccelerate pricing in coming renewals.

“We expect solid Q2 2025 catastrophe reinsurance underwriting results, and we believe that mid-year 2025 renewals still incorporate at-least adequate pricing, but we (probably belatedly) acknowledge that investors are more likely to focus on pending pricing trends than on near-term profits,” said Shields.