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Insider US in Full: Q4 top line growth: Are the signs of slowdown coming?

The growth positives of last year are showing signs of fading.

In many ways, 2023 presented favorable market conditions for strong organic growth for the US P&C insurance industry.

Core factors included inflation, a more resilient than expected economy, a micro-cycle in property pricing, and property revaluations. This year, those growth positives are showing signs of fading.

Editor-at-large Adam McNestrie recently discussed the possibility of the super cycle momentum dissipating for P&C brokers in 2024, which could put an end to a remarkable run since H2 2020.

For carriers, growth is one of many metrics to assess performance and one that needs to be kept in balance with risk exposure.

Nonetheless, the trajectory of top line growth in relation to this year’s macro-economics and rate environment is worth watching. Especially so because there is likely to be more battle for growth among commercial lines carriers given these moving pieces.

Looking for early indications, the Insurance Insider US has compiled top-line growth of select commercial lines carriers that reported Q4 2023 results so far to see where they landed year-end compared to earlier quarters.

The compilation was mostly based on gross premiums written, the only exceptions being The Hartford (which does not disclose GPW) and The Hanover, for which we used net written premiums.

   

The results showed a mixed bag, implying the signals of a broader slowdown for the industry’s top line growth are not yet taking effect. Factors other than the general market environment played into the reduction in top-line growth for some carriers, but others were bullish on ongoing growth prospects.

Markel for example showed a significant slowdown of growth through 2023, which CEO Jeremy Noble told analysts was the effect of “remixing the portfolio” during the firm’s Q4 2023 earnings call.

“We're focused on bottom line profitability so that may continue to be the case,” he added. During the fourth quarter alone, the carrier shed over $100mn of premium in certain classes that are challenged in the casualty and professional lines of business, according to the CEO. 

However, he also stressed that the company is growing in certain segments, pointing to personal lines, property, inland marine programs business, binding operations, workers’ compensation, surety, and several lines in the professional space.

Chubb, on the other hand, showed a rebound in the pace of top line growth in Q4 2023 and CEO Evan Greenberg told analysts that his firm “fully expect[s] to return to more robust growth beginning with the first quarter”.

“Underwriting conditions overall are favorable, although they vary by business and geography. It's an underwriter's market and that's what we are,” he added.

Another topic this publication has been following closely for years is the Golden Age in E&S, and whether that sustained period of growth will show signs of reversing this year for the same reasons mentioned above.

But among the early reporting specialty carriers, RLI and WR Berkley showed the pace of top line growth accelerate quarter on quarter.

“I don't think that party is over. When we are looking at the submission flow, we continue to be quite encouraged,” WR Berkley CEO Rob Berkley told analysts during the carrier’s Q4 earnings call.

Rate commentary

From a rate perspective, some of the lines that were leading growth in the commercial lines segment are slowing down.

US-specific numbers are not out yet. But Marsh’s Global Insurance Market Index posted an overall increase of 2% in Q4 2023, decelerating from 3% in the two previous quarters.

   

In 2023, the largest driver behind commercial rate increases was property. Around mid-year, commercial property rates were increasing by double digits, with cat-exposed accounts renewing up to 25%-40%, while underwriters were gaining ground in valuation updates.

That range is largely expected to come down to single digits this year, sources told this publication.

“We do have competition [that] started to creep in, in the fourth quarter. I think it's going to accelerate into 2024,” RLI COO Jennifer Klobnak said during the firm’s latest earnings call.

RLI still wants to take advantage of the market, as it is still able to achieve rate, but the executive added that the firm is “allowing the exposure to go down a bit as we look to see how the market is going to react to the 2024 reinsurance renewal”.

And as for casualty, the outlook is more opaque, apart from public D&O where pricing has been on a rapid decline.

There are mixed views on whether rate stabilization will continue in 2024 or take on a path of re-accelerating rate increases due to prior year loss emergence.

WR Berkley CEO Rob Berkley said the underwriting environment for liability lines is “every bit as healthy in Q4 as it was earlier in the year, possibly better,” and anticipated the momentum to continue.

“Quite frankly, it's just simply being driven by loss costs and the environment, which appropriately, I think, is making people focus on it more and more,” he added.

Macro economics

A recession has ceased to be the consensus projection – although bears remain given scope for rising interest rates to act on a major lag – but all forecasters expect a slowing of economic growth after an extremely robust 2023.

   

The question is exactly when that deceleration will start to manifest. The latest US job report’s data somewhat contradicted that bearishness, showing that the US economy added 350,000 more jobs in January, exceeding expectations.

During a call with analysts, The Hartford’s CEO Christopher Swift refused to give a qualitative indicator on top line growth projections, but referred to those job numbers as indication that the economy is performing well and “the macro sets up well” for further growth.

Early indications during the month of January show “much of the same coming out of 2023 and sort of that double-digit range in commercial,” he said, adding that one month does not make a trend but he expects the environment to be “fairly conducive” to continuing going forward.

“We perform very well when the economy is performing well, and I think that's the general view I have heading into 2024,” Swift said.

 

Insurance Insider US provides unparalleled market intelligence on the entire US P&C market – from small commercial and personal lines right through to reinsurance and Bermuda. Redeem your complimentary 14-day trial for more premium content from Insurance Insider US. 

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