The two most important factors concerning the insurance industry are impact of two catastrophe events and uncertainty over the next rate hike.
The third-quarter results of non-life insurers will be hurt by the two hurricanes — Harvey and Irma — that rampaged Houston, Texas Gulf Coast and regions ranging from Caribbean to Florida. Losses from these catastrophes will surely upset the underwriting results dragging the bottom line.
While The Travelers Companies, Inc. (TRVÂ -Â Free Report) projects pre-tax catastrophe loss between $375 million and $750 million or $245 million and $490 million after-tax, Assurant Inc. (AIZÂ -Â Free Report) projects between $134 million and $140 million pre-tax of reportable catastrophe losses, net of reinsurance and reinstatement premiums resulting from the Harvey tropical storm. Assurant also projects loss from Irma to exceed its retention of $125 million pre-tax.
However, there is still a faint ray of hope to harp on. For such catastrophes will help insurer increase price that remained flat due to a not-so-active catastrophe environment. Also, cautious underwriting should help insurers from capital erosion.
The cloud of uncertainty regarding the next rate hike makes investors eagerly wait for the upcoming FOMC Meeting on Sep 19. While the Federal Reserve has already hiked rates twice in 2017, everybody now eagerly awaits the third one. Good news is that the Fed announced intention for three rate hikes in 2017.Â
However, at the annual central banking conference in Jackson Hole, WY on Aug 25, no hints were dropped about the next hike in interest. In fact, lack of signals about the announcement of the next rate hike was interpreted as ‘dovish’ by the markets.
Benefits of improving rates could already be seen in insurers’ results. Progressing economy, encouraging employment data, stringent underwriting standards as well as influx of capital instill confidence among investors.
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Florida-based Health Insurance Innovations, Inc. (HIIQ - Free Report) develops, distributes and administers cloud-based individual health and family insurance plans and supplemental products in the United States. The company has a Zacks Rank #1 with a Value Score of B and a Growth Score of A. The company delivered positive surprises in the last four quarters with an average beat of 87.49%.
