Keefe, Bruyette & Woods sees buy opportunities in P&C stocks

On Monday, following a significant selloff last Friday, Keefe, Bruyette & Woods highlighted three property and casualty (P&C) insurance stocks as potential buys. The market experienced a downturn with the S&P 500 dropping by 6.0%, the equal-weighted S&P 500 falling by 5.7%, and the KBW Insurance Index plunging by 8.0%. This sell-off was in response to new tariffs announced by President Trump which are expected to impact the economy and financial markets in several ways, including slower economic growth and lower share prices for P&C insurance companies.

Progressive Corporation (NYSE:PGR) shares fell by 10.2% on Friday. The analyst from Keefe, Bruyette & Woods pointed out that despite the vulnerability of auto physical damage coverage to tariff-related loss cost inflation, exemptions for Canada and Mexico should mitigate near-term exposure. The firm also noted Progressive's low-cost pricing strategy and its ability to recalibrate rates quickly, which could lead to market share gains if competitors raise their rates later.

American International Group, Inc. (NYSE:AIG) saw its shares drop by 8.4% during the same sell-off. The analyst mentioned AIG's strong parent company liquidity, which stood at $7.7 billion at the end of 2024. This financial strength, coupled with expected dividends from its P&C operations, is projected to support continued share repurchases. AIG recently increased its repurchase authorization to $7.5 billion after buying back $2 billion worth of shares in the first quarter of 2025.

RenaissanceRe Holdings Ltd . (NYSE:RNR) experienced a 5.2% decline in its stock price on Friday, bringing it close to its 52-week low of $208.98. According to InvestingPro data, RNR maintains robust financials with a "GREAT" overall health score of 3.36 and an attractive P/E ratio of 6.63. The firm's analysis suggests that the statistical independence of property catastrophe risk and broader financial market risk should limit RNR's exposure to tariff-related economic weakness. The company has demonstrated strong performance with 28.28% revenue growth over the last twelve months and has maintained dividend payments for 31 consecutive years. Keefe, Bruyette & Woods views RNR's stock as having above-average 'defensiveness' within the sector, which is further supported by solid expected underwriting returns within current property catastrophe reinsurance pricing.

The tariffs introduced are anticipated to have several consequences for the P&C insurance sector, including higher insurance rates due to increased loss cost inflation and lower interest rates. Despite these challenges, Keefe, Bruyette & Woods sees the Friday market sell-off as creating attractive trading opportunities for investors in selected P&C stocks.

In other recent news, RenaissanceRe Holdings has made several notable announcements and adjustments. The company reported a fourth-quarter earnings per share (EPS) of $8.06, exceeding both CFRA's estimate of $7.25 and the consensus estimate of $7.00. This was part of a strong performance in 2024, with a 34% increase in operating revenue. Additionally, RenaissanceRe has raised its quarterly dividend to $0.40 per share and renewed its $750 million share repurchase program, underscoring its commitment to returning value to shareholders.

In analyst activity, JPMorgan upgraded RenaissanceRe's stock rating from Neutral to Overweight, setting a price target of $284, citing resilient reinsurance pricing. BMO Capital Markets maintained its Outperform rating with a $292 target, highlighting an increase in their 2026 earnings estimate by 5% due to strong share repurchase activity. Keefe, Bruyette & Woods adjusted their price target to $294 from $318, maintaining an Outperform rating despite revised earnings estimates due to expected higher catastrophe losses.

CFRA also revised its price target to $275 from $305, maintaining a Buy rating. This revision reflects an anticipated impact from the California wildfires, with expected claims affecting earnings estimates. Despite these challenges, CFRA noted that the increased wildfire claims might lead to stronger reinsurance pricing, potentially benefiting RenaissanceRe in the future. These developments reflect a dynamic period for RenaissanceRe, with varying analyst perspectives on the company's financial prospects and market conditions.

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