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Evercore ISI analyst David Motemaden on Tuesday upgraded Travelers (NYSE:TRV) to Outperform from In Line, Aon (NYSE:AON) to In Line from Underperform and downgraded Hartford Financial Services (NYSE:HIG) to In Line from Outperform, as he takes stock of commercial insurers in the new year.
For Travelers (TRV), Motemaden sees earnings strength improving through 2023 earnings due to “more exposure to re-acceleration in commercial property rates — with the potential for more to fall to the bottom line given less reliance on reinsurance and what we believe will be an improving personal auto story.” For auto insurance, he sees renewal premium change to reach the mid-teens by ’23.
Aon (AON): His downgrade thesis on the stock has played out, with organic revenue growth lagging Marsh & McLennan (MMC) and Arthur J. Gallagher (AJG), but margins have been more resilient. “The added benefit of fiduciary investment income that will likely flow entirely to the bottom line sets the stock up for decent EPS beats going forward,” Motemaden said in a note to clients.
Hartford Financial (HIG): The stock gets a downgrade as Motemaden sees more relative upside at Travelers (TRV), Chubb (CB), and W.R. Berkley (WRB). While he expects the company to achieve its ambitious targets for underlying combined ratio in commercial lines for 2022, there’s less room for improvement going forward. Its lower exposure to property lines and more exposure to workers’ comp also won’t help, he said.
The SA Quant system rates TRV, AON, and HIG at Hold, while the average Wall Street rating for TRV and AON are Hold and Buy for HIG.
SA contributor Mike Zaccardi still sees Travelers (TRV) as reasonably valued ahead of earnings.