北美財(cái)產(chǎn)險(xiǎn)與經(jīng)紀(jì)人：管理團(tuán)隊(duì)問題

1、Credit SuisseP&C Insurance/Brokers 、RESEARCH ANALYSTSMike ZaremskiP&C Insurance Analyst +1 212.325.5061 Rob CoxP&C Insurance Associate +1 212.325.2776 DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE, AND THE STATUS OF NON

2、-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as onl

3、y a single factor in making their investment decision.Credit Suisse Equity ResearchAmericas/United StatesTime Saver - Upcoming P&C Conference Prep: Questions For Management TeamsFebruary 8, 2019UnderwritingMargins / GrowthCapitalManagement /Strategy & OtherCommercial policy in force PIF counts have

4、been flattish to down in recent years. Do you feel youre losing policy count share to other competitors - elaborate on how you think about this dynamic?HIGs distribution strategy in personal lines (home/auto) is now focused largely on AARP direct-to-consumer and AARP agencies. AARPs membership base

5、hasnt grown much in recent years. Whafs HIGs plan to better penetrate AARPs membership base?Reserve Releases: Can you talk about whats driving the improving work comp reserve release levels? And related, there was a $34m reserve increase in the other aka run-off line again this 4ql8-whats driving th

6、at? Is your goal to get into the top quartile in terms of reserve releases, which would imply over 3pts of reserve releases?In regards to the commercial P&C pricing environment, do you feel rates are biased upwards or downwards as we think about 2019s trend?Youve been taking a lot of P&C pricing in

7、both home and auto. Auto results have improved, while home results have not, but that could just be due to CA wildfire losses. Can you talk about your views of profitability and growth into 2019?In terms of net investment income, the average reinvestment rate increased 30bps- is that level or upward

8、s trend sustainable in 2019?Would most of HIGs over $1 billion DTA and AMT tax assets be lost in a merger?In early February, you announced an internal segment re-alignment taking into account the upcoming Navigators introduction. Is there anything significant we should be aware of under the new stru

9、cture?What are HIGs top two strategic priorities in 2019-2020 and do they differ from2018s?UnderwritingMargins / GrowthCapitalManagement /Strategy & OtherTravelers told investors on its 4Q18 eps call that they are placing more weight on their long-term average CAT load, which exceeded its internal e

10、xpectations in 7 of the past 10 years. Do 2017 and 2018/s higher than expected losses lead you to believe the trend is higher, not lower?Retro (i.e. reinsurance for reinsurers) pricing: Credit Suisses head of insurance linked securities recently said that one of the reasons he expects reinsurance pr

11、icing to rise throughout 2019 is because retro. Investors have lost a lot of money the past two years and retro pricing is therefore rising by close to 40%. Is there a way to estimate how much retro. RE purchased in pastyears?Management: CEO Dom Addesso will retire on 12/31/19. When in 2019 does RE

12、expect to announce the next leadership team?Capital: Should management deem the opportunity cost of its outlier low 7% debt-to-cap level to not make sense any longer given the rise of third-party reinsurance muting what has historically been more cyclical postcatastrophe event pricing cycles, could

13、it choose to boost its EPS power by levering up to a say 15% level?What are REs top two strategic priorities in 2019-2020 and do they differ from 2018s?UnderwritingMargins / GrowthCapitalManagement /Strategy & OtherRevenues: After growth of 11% in 2018, what does 2019 have in store in light of recen

14、t (modest) pricing gains and recently announced product exits? Related, What does RLIs ability to achieve this growth in a mostly flat rate environment suggest about competitor challenges ordislocation?Expenses: How did your incentive programs lead to a lower expense ratio in 2018?CATs: Were there a

15、ny particular lessons learned in the face of relatively large back-to-back catastrophe years?CAT*s continued: RLI added $100 million of limit to its catastrophe reinsurance program as of 1/1. What drove this increase? How and where are you seeing opportunity in this market?Commercial Auto Problems:

16、Where do you think RLI and the industry is at from a pricing and profitability perspective in Commercial Auto?.Why do you feel a select few such as PGR are making good money in commercial auto and most others arent?What would it take to get the Surety segment (with consistent sub-80 combined ratios)

17、 growing again?Capital: The 2018 special dividend of $1.00 was lower than previous years and brought your operating leverage up to about 1:1. What are your thoughts on capital management for 2019?How is Maui Jim (sunglasses minority shareholder) performing and what are the prospects for an exit?M&A:

18、 Are there capabilities RLI would like to improve or add and where M&A is therefore an option? Broader thoughts about industry M&A?What are RLIss top two strategic priorities in 2019-2020 and do they differ from 2018/s?UnderwritingMargins / GrowthSELECTIVEWhy has SIGI been able to achieve commercial

19、 P&C pricing at is nearly 2x larger peers such as Travelers (+2%) and has this dynamic always existed?SIGKs performance versus peers has measurably improved in recent years. Has there been one or two strategic actions (perhaps technology) that has been the main reason(s) underlying underwriting perf

20、ormance in the past say 4yrs has been much better than the previous 4yrs.or is it largely due to P&C pricing exceeding loss expense trends?CapitalManagement /Strategy & OtherOrganic growth initiatives: Can you elaborate on SIGI near and longer-term growth plans. Are there any larger states you likel

21、y will neverenter?Premium / Equity leverage: SIGKs leverage levels are higher than larger cap peers. Can you speak to why this dynamic exists?M&A: Are there capabilities SIGI would like to improve or add and where M&A is therefore an option? Broader thoughts about industry M&A?Link To Recent 4Q18 EP

22、S Report: Click HereWork. Comp: AJ Gallagher, which is a large work. comp, claims administrator, in addition to Hartford, which has a large work. comp. portfolio, have stated that accident frequencies have increased a bit over the past year. Has TRV seen a small uptick or is it not enough to move th

23、e needle in terms of loss-picks and thats why TRV is not speaking about this being an “issue JUnderwritingMargins / GrowthHistorically, do work. comp. bureaus who set certain pricing rates react to upticks in loss-cost trends in a realtime or lagged basis? For example, if industry frequencies are be

24、coming less negative, will pricing follow suit and become less negative?TRVs insurance brokerage distribution partners are consolidating at an increasing pace. How is this impacting TRV today and what are the long-term implications? Do you feel the brokers will gain pricing power if the trend contin

25、ues?Personal Lines: More and more profits are moving to few insurers in the personal lines space. Do you feel commercial-centric insurers who write personal lines are losing competitiveness? What is TRVs strategy to stay consistent with its personal lines risk-acceptance appetite rather than opening

26、 and closing the door to accepting risks at a more volatile rate than many distributor agencies prefer?CapitalManagement /Strategy & OtherTRV has put an increasing focus on adapting to the digital age. Can you give us examples of how digitization is impacting and will impact the industry?What are TR

27、Vs top two strategic priorities in 2019-2020 and do they differ from 2018s?Litigation finance: On earnings calls, WRB has spoken about an increase in severities + frequencies in certain commercial liability lines of insurance. Do you feel the rise of institutional 3rd party funding of lawsuits (liti

28、gation finance) is fueling this trend?UnderwritingMargins / GrowthLitigation finance continued: Is the insurance industry doing anything to combat litigation finance and/or require litigation funders to disclose their relationships to lawsuits?Other than top line growth, whats the one or two underpi

29、nning elements bringing WRBs expense ratio down over time? Related, is the brokerage commission portion of the expense ratio going up or down?Commercial auto: What was WRBs combined ratio in 2018- approximately and where does pricing need to go for WRB to make this a meaningfully larger line of busi

30、ness in the comingyears?CapitalManagement /Strategy & OtherWhat are WRBs top two strategic priorities in 2019-2020 and do they differ from 2018s?Has tax reform almost fully leveled the playing field or did it not go far enough? Are your competitors finding ways to circumvent tax reform?What percenta

31、ge of the non-plain vanilla investment portfolio is managed in-house and approx, how large in that team of managers? Related, does WRB own a real estate development company?Insurance Brok:CDITSUISSEArthur J. Gallagher & Co.Operating Margins /GrowthAJG is forecasting for healthy 6-7% organic growth i

32、n its smaller Risk Management (insurance claims outsourcing) segment; yet the outlook calls for no margin improvement. Why is that the case? How do we think about your expense growth in that segment?Main Brokerage Segment: In the past youve said organic growth above 3% leads to margin improvement. O

33、rganic growth has been trending at 5-6%, yet margins have only improved by 50bps p/year. Is your capex and expense inflation levels higher today than in the past? How much of your spend today is for initiatives that will cause margins to increase in the future or is it all necessary/ongoingspending?

34、What do you feel is AJGs long term revenue growth profile. What do you feel is AJGs long term EPS growth profile? What do you feel is AJGs long term FCF growth profile?Smart Market is AJGs proprietary platform that offers corporate buyers unique coverages tailored to their needs. Can you discuss thi

35、s offering and also how much more profitable it is for AJG?AON/MMC/WLTW have been building out data & analystics platforms to help them advise their clients and insurers. They have been able to monetize data & analytics by having insurers and some corporations pay them to access the data and in some

36、 cases, to do the underwriting for the insurers. Can AJG mimic this strategy?CapitalManagement /Strategy & OtherM&A: In 2018 you engaged in more M&A than your free cash flow levels and therefore increased your leverage levels to complete the deals. On the 4Q18 EPS call you said your leverage levels

37、would not increase. Does that mean youll start issuing more stock to get deals done? If yes, does that make deals less financially accretive versus debt financing?M&A: Will brokerage consolidation allow brokers to charge higher commission rates to insurers over the long run?P&C Claim Frequency Level

38、s: On the 4Q18 EPS call, you said claim frequencies for work comp and general liability insurance were +3%. Do you feel this is why P&C pricing is biased upwards - due to higher claims inflation?AJG has a clean coal segment which allows AJG to lower its tax rate. Its been a phenomenal investment. Is

39、 AJG worried the loss of this decade in 2025 will cause certain shareholders to leave the stock because EPS growth will slow or go negative?What are mgts top two strategic priorities in 2019-2020?Link To Recent Insurance Brokerage M&A Report: Click HereAonIn regards to the goal of operating at a hig

40、her level of organic growth in 2019 and beyond versus the previous three years, what are the main drivers, in order of importance. Aon has cited initiatives such as “Aon United (flatter structure/more cross-sell opps), pioneering new risks such as mortgage and cyber, etc.What percentage of Aons insu

41、rance related data & analytics revenues within the Inpoint and ReView segments (the third segment is (Affinity) are derived directly from corporations who purchase insurance rather than from insurance carrier partners? Can you elaborate on how to think about this segments 1) growth prospects and 2)

42、margins?Operating Margins /GrowthAons peers have been achieving slightly higher levels of organic growth; however, margin improvement has slowed. Does Aon believe margin improvement going forward will be slower than its achieved in the past given margins are at healthy levels today or will the new h

43、igher level of organic growth Aon wishes to achieve mean margins will be able to rise at a similar or even faster pace?Investment Delegated Solutions (consulting): Aon has said this segment can grow at a double digit rate over the long-run, partly due to the trend of corporations outsourcing more re

44、sponsibilities to Aon rather than doing them in-house. Can you elaborate and help us size up what percentage of clients perform a lot of these activities in house? How can investors size up the growth potential of this faster growing business line for Aon?How much has new pension accounting and/or l

45、ower pension expenses boosted profit margins over the past few years?CapitalManagement /Strategy & OtherWhy did Aon choose not to give 2019 tax rate guidance? Waiting on further clarifications from the Treasury and/or IRS?Within Aons proxy statement, the peers which Aon are benchmarked against have

46、changed considerably in recent years. Why is that and does this point to a shift in strategy and potentially M&A in the decade to come?What are Aons top two strategic priorities in 2019-2020 and do they differ from 2018s?INSURANCEOperating Margins /GrowthOperating Margins /GrowthCapitalManagement /S

47、trategy & OtherEmployee Benefits pricing moving north: In 2H18, you cited insurance prices moving meaningfully higher for only two lines of business, 1) commercial auto insurance and 2) employee benefits. How does the latter impact your margins? Whafs been the trend in terms of employee benefits mar

48、gins over the past couple years?M&A as a growth driver: In 2018, BRO successfully deployed all its FCF, plus some (increased leverage). In the few years prior to 2018, that was not the case. CEO Powell Brown recently said the pipeline was strong. Do you feel prices are going higher? We recently atte

49、nded an insurance brokerage M&A conference and private equity firms were said to be bidding at lower valuations, partly due to new 2018 tax laws which will limit their ability to deduct interest expense starting in 2022.Related to the prior question, there are 25 private equity shops rolling up brok

50、erage firms. Would BRO be interested in purchasing those P.E. owned brokers once they need to monetize themselves for investors?Investing in data & analytics: BRO has been undergoing a major IT upgrade initiative. Do you plan on investing in capabilities that would allow your insurance carrier partn

51、ers and corporations to use data & analytics, similar to what the larger brokers have been doing in the Fortune 1000 space (AON has even recently broken out a new segment called data & analytics)? Peer AJ Gallagher has been talking about slowly going down this investment path.Long term M&A: Does BRO

52、 see itself one day (down the road) starting to offer the consulting services that larger brokers AON/MMC/WLTW offer to their larger clients?What are BROs top two strategic priorities in 2019-2020 and do they differ from 2018s?Link To Recent 4Q18 EPS Report: Click HereLink To Recent Insurance Broker

53、age M&A Report: Click Here. Coverage Comp Sheet. Management Questions P&C Insurers:Arch Capital (ACGL)Allstate (ALL)ARGO Group (ARGO)Cincinnati Financial (CINF)Hartford Financial Services (HIG)Everest Re (RE)RLI Corp (RLI)Selective Insurance (SIGI)Travelers (TRV)W R. Berkley (WRB)Key Recent Reports:

54、Insurance Brokers:Arthur J Gallagher & Co. (AJG)AON PLC (AON)Brown & Brown Insurance (BRO)Marsh & McLennan (MMC)WiUis Towers Watson (WLTW)(Slides) Our Top Three Predictions For P&C Insurance In 2019P&C Insurance: Catastrophe Load Confession: Most P&C Insurers Earnings Power Appears OverstatedKey Ins

55、ights From Lunch With CSs Corporate Insurance BuyersSizing Up HIGs Sensitivity To The Economy + A Preview Of The 2019 OutlookWLTW: Positive Brokerage Industry Backdrop. WLTW Too Disliked-Upgrading to OutperformCourt Is Ir Session: Evolving Lawsuit Funding Landscape HoldsRisks For P&C StocksInsurance

56、 Brokers: M&A Arbitrage Benefit To Continue - PositiveCatalyst For AJG And BROIncreasing Insurance Broker Value Proposition Apparent in Recent M&AWhy Every P&C Investor Needs To Know P&C Pricing Doesnt Tell The Full StoryP&C Initiation - Change Is Coming + Slides: Auto Insurance 2.0 Is Here; Adopt t

57、o the Digital Age or Fall Victim to Adverse Selection: Initiating CoverageCreditSuissf.MARSH & MCLENNAN COMPANIESOperating Margins /GrowthOperating Margins /GrowthInvestment Delegated Solutions (consulting): Peer Aon has said this segment can grow at a double digit rate over the long-run, partly due

58、 to the trend of corporations outsourcing more responsibilities to consultants rather than doing them in-house. Can you elaborate and help us size up what percentage of clients perform a lot of these activities in house? How can investors size up the growth potential of this faster growing business

59、line for MMC?How much has new pension accounting and/or lower pension expenses boosted profit margins over the past few years?Brokerage peers have spoken about consolidating real estate and creating more collaborative environments to boost margins. Has this been a lever helping MMCand if yes, can it

60、 continue?CapitalManagement /Strategy & OtherJLT pending acquisition: When a sales organization is purchased, in the early days, a lot of employee time has to be spent on integrating/learning new processes, potentially leading to a temporary slowdown in sales. Thoughts on that statement?What are MMC