EquityResearch1March2019COREBarclaysCapitalInc.and/oroneofitsaffiliatesdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.PLEASESEEANALYSTCERTIFICATION(S)ANDIMPORTANTDISCLOSURESBEGINNINGONPAGE27.Restricted-InternalUSInsuranceAIFAPreview:ProspectsBetterforP&CthanLife;MoreM&A?WeanticipateamoreconstructivetonefromP&CinsurersthanLifeinsurersattheupcomingAIFAInsuranceindustryconferenceonMarch4-5,2019basedonimprovingP&Ctop-lineandmargintrends.Also,potentialP&Cindustryconsolidationisusuallyamajortopicatthisannualconference.Meanwhile,lifeinsurersfacechallengesincludingasub-3%yieldon10-yearUSTreasuries,aflatyieldcurve,andlingeringconcernsregardinglegacylong-termcareexposure.P&Cmarketconditionsarecurrentlystablealthoughonthecuspoftighteningthebythemostinfiveyears,inourview,followingrecord-levelglobalinsuredcatastrophelossesin2017-18.AlthoughpropertycatastrophereinsurancerateswereflatinJanuary’19,thissituationmaytightenastheyearprogressesandwilllikelybeakeyfocusareaforinvestors.Separately,personallinesresultsremainstrongwithPGRgainingthemostmarketsharealthoughautoinsurancerategainsaremoderating.WeexpectACGLandALLtobethemostupbeatP&CcompaniesatAIFA.Meanwhile,weexpectinvestorstoremainskepticalthatAIGcansubstantiallyimproveitsP&Cunderwritingresultsin1H2019;perhapsitsinvestormeetingscouldhelpshiftthisview.OurOW-ratedP&CstocksincludeBerkshireHathaway(favorablepositioningtohighershort-termrates,andpotentialforaccretiveacquisitionsaswellassharebuybacks),AllstateandProgressive(strongearningstrendsinautoandhomeinsurance),Chubb(coreglobalP&Choldingwithsuperiorfranchisevalue),andArchCapital(tailwindsfrommortgageinsuranceaswellastop-tierP&Cfranchise).LifeInsuranceearnings(aswellasvaluations)areunlikelytorisemuchfurtherinachallengedmacroenvironment,althoughbellwetherlifeinsurerval...
