S&P 500 Industry Briefing: Property & Casualty Insurance Yardeni Research, Inc. October 27, 2014 Dr. Ed Yardeni 516-972-7683 eyardeni@yardeni.com Joe Abbott 732-497-5306 jabbott@yardeni.com Please visit our sites at www.yardeni.com blog.yardeni.com thinking outside the box Table Of Contents Table Of Contents S&P 500 Property & Casualty Insurance Stock Price Index Earnings Revenues & Margins Earnings Growth & Valuation October 27, 2014 / S&P 500 Industry Briefing: Property & Casualty Insurance 1 2 3 4 Yardeni Research, Inc. www.yardeni.com Stock Price Index Figure 1. 385 335 385 S&P 500 PROPERTY & CASUALTY INSURANCE INDEX* 10/27 (ACE ALL CB CINF PGR TRV XL) 335 285 285 235 235 185 185 135 135 yardeni.com 85 85 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 200-day moving average. * Ratio scale. Source: Standard & Poor’s Corporation and Haver Analytics. Figure 2. 550 S&P 500 PROPERTY & CASUALTY INSURANCE INDEX, FORWARD EARNINGS, & VALUATION 550 Property & Casualty Insurance Index 10/27/14 450 x15 Blue Angels Implied Price Index* 10/16/14 450 350 350 x10 250 250 x5 150 150 yardeni.com 50 2007 2008 2009 2010 2011 2012 2013 2014 50 2015 * Implied price index calculated using forward earnings times forward P/Es. Source: Standard & Poor’s Corporation and Thomson Reuters I/B/E/S. Page 1 / October 27, 2014 / S&P 500 Industry Briefing: Property & Casualty Insurance Yardeni Research, Inc. www.yardeni.com Earnings Figure 3. 36 32 36 S&P 500 PROPERTY & CASUALTY INSURANCE OPERATING EPS (analysts’ average forecasts, ratio scale) 32 10/16 28 15 Consensus Forecasts 28 Annual estimates 24 Forward earnings* 20 24 13 20 14 16 16 12 12 yardeni.com 8 8 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * Time-weighted average of the consensus estimates for current and next year. Monthly through December 2005, weekly thereafter. Source: Thomson Reuters I/B/E/S. Figure 4. 40 40 S&P 500 PROPERTY & CASUALTY INSURANCE NET EARNINGS REVISIONS* 30 30 20 20 10 10 Oct 0 0 -10 -10 -20 -20 -30 -30 yardeni.com -40 -40 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * Three-month moving average of the number of forward earnings estimates up less number of estimates down, expressed as a percentage of the total number of estimates. Source: Thomson Reuters I/B/E/S. Page 2 / October 27, 2014 / S&P 500 Industry Briefing: Property & Casualty Insurance Yardeni Research, Inc. www.yardeni.com Revenues & Margins Figure 5. 275 275 S&P 500 PROPERTY & CASUALTY INSURANCE REVENUES PER SHARE 10/16 (analysts’ average forecasts, ratio scale) 15 250 250 225 225 13 14 200 200 Consensus Forecasts 175 175 Annual estimates Forward revenues* 150 150 yardeni.com 125 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 125 2015 * Time-weighted average of the consensus estimates for current and next year. Monthly through December 2005, weekly thereafter. Source: Thomson Reuters I/B/E/S. Figure 6. 18 18 S&P 500 PROPERTY & CASUALTY INSURANCE PROJECTED PROFIT MARGIN (using analysts’ average earnings and revenues forecasts) 16 16 Consensus Forecasts 14 14 Annual estimates Forward profit margin* 12 12 10/16 15 13 10 10 14 8 8 yardeni.com 6 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 6 2015 * Time-weighted average of the consensus estimates for current and next year. Monthly through December 2005, weekly thereafter. Source: Thomson Reuters I/B/E/S. Page 3 / October 27, 2014 / S&P 500 Industry Briefing: Property & Casualty Insurance Yardeni Research, Inc. www.yardeni.com Earnings Growth & Valuation Figure 7. 60 60 S&P 500 PROPERTY & CASUALTY INSURANCE LTEG VS STEG (percent) 50 STEG capped at 50% 50 LTEG* STEG* 40 40 30 30 20 20 10 10 10/16 0 -10 0 -10 yardeni.com -20 -20 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * STEG: 12- month (52-week) forward consensus expected earnings growth. LTEG: 5-year forward consensus expected earnings growth. Monthly data through 2005, weekly thereafter. Source: Thomson Reuters I/B/E/S. Figure 8. 20 15 20 S&P 500 PROPERTY & CASUALTY INSURANCE VALUATION 15 Forward P/E* 10/16 10 10 5 2.5 5 2.5 2.0 Relative P/E** 2.0 PEG Ratio*** 1.5 1.5 1.0 1.0 10/16 .5 .5 yardeni.com .0 .0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * Price divided by 12-month forward consensus expected operating earnings per share. ** Sector or industry forward P/E relative to S&P 500 forward P/E. *** Sector or industry forward P/E relative to sector or industry consensus 5-year LTEG forecast. Source: Thomson Reuters I/B/E/S. Page 4 / October 27, 2014 / S&P 500 Industry Briefing: Property & Casualty Insurance Yardeni Research, Inc. www.yardeni.com Copyright (c) Yardeni Research, Inc. 2014. All rights reserved. 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