🛡️How US Insurers Aim to Recoup Billions Lost During the Pandemic😷

Happy Friday, Bullseye Traders! 

In life’s highway, you're either cruising as the windshield or squished as the bug. But after years of playing the splattered role, insurance companies are revving up for a more resilient ride. 🚗 In 2023, global insurance losses hit a staggering $123B, marking the fourth consecutive year of financial fender benders. With this trend looking as stubborn as a traffic jam, insurers are determined to steer themselves into the driver’s seat in 2024.

The insurer’s grand comeback: Catastrophe losses went off the charts from 2019 to 2022, thanks to Mother Nature's wrath and skyrocketing prices, giving domestic insurers a rough ride. Last year, property and casualty policies got rear-ended with a $21B loss— a tad better than in 2022. But don’t pop the champagne yet, this modest improvement was fueled by insurers jacking up premiums like they’re going out of style—a strategy they plan to stick with this year, turning 2024 into a potential comeback tour. However, this success might just come at the expense of policyholders. 💸

Home insurance premiums took flight by 8.6% last year, hitting record altitudes, while auto insurance rates saw a double-digit rocket launch, reminiscent of the groovy 1970s. 🚀 This surge helped insurers like Progressive ($PGR) and Allstate ($ALL) shake off their losses—rocketing their stocks up 34% and 25% respectively, making them the rockstars of the S&P 500.

Your loss is their (premium) gain.

 📈 Some insurers argue that these price hikes are like emergency exits to cover the mounting losses from increasingly catastrophic disasters—plus, to make up for the discount party they threw during COVID. Either way, these premium hikes have sent insurer profits soaring higher than a hang-glider caught in an updraft, with Progressive’s earnings in the latest quarter more than doubling from the previous year. And with prices expected to keep climbing and insurers threatening to ghost entire states, profits could hit stratospheric levels.

Insurers took some bold moves last year, pulling coverage from disaster-prone states like California and Florida—leaving many high and dry, and making the affordability crisis even stickier than gum on a summer sidewalk. 😓 However, Allstate recently broke the ice by resuming new insurance sales in California after regulators gave them the green light to jack up prices by an average of 30%.

Return of reinsurance: Reinsurance firms, the guardians of the guardians, have also made a comeback—with Arch Capital Group ($ACGL) and Renaissancere ($RNR) seeing gains of 23.4% and 9.8% respectively this year. Last year, they flexed their muscles with significant increases in return on equity as investors rushed back into the insurance business—potentially easing some of the pressure on insurance inflation in the long run. 🛡️

SHAKERS AND MOVERS

LUV (-7%) Southwest Airlines is tightening its flight belt, bidding adieu to four airports amidst Boeing brouhaha and bottom-line blues (CNN).

VSCO (-3%) Victoria's Secret gets a chilly reception from Goldman Sachs, who's not buying into the glam amidst macro woes and fierce competition (Investing.com).

IBM (-8%) Big Blue's big plans include a $6.4 billion flirtation with HashiCorp, but quarterly revenue falls short, leaving investors feeling a bit blue themselves (Investopedia).

MNST (-2%) JPMorgan takes the fizz out of Monster Beverage, dialing back from overweight to neutral as costs bubble up (CNBC).

NVDA (+4%) Nvidia rides high on the AI wave as Meta ramps up its tech game, proving once again that in the chip world, it's all about who's got the smartest moves (Barron’s).

STREET SCOOPS: The Buzz Around Town

Bloomberg: Apparently, 10% of credit card holders are playing a real-life game of "How High Can You Go?" with their balances, and it's not Monopoly money.

WSJ: Looks like the US GDP is pulling a classic underachiever move, disappointing forecasts like a movie with great trailers but a lackluster plot.

Bloomberg: The US economy seems to be taking a leisurely stroll downhill while inflation is sprinting up a steep incline. It's like trying to land softly on a trampoline that's suddenly turned into a hot potato.

BI: Henrik Fisker's got more suitors than a reality TV star at a speed-dating event. Looks like Fisker's playing hard to get, or maybe just playing the field.

FT: Micron Technology's getting more government dough than a bakery on payday. With that kind of cash influx, they'll be churning out memory chips faster than we can forget our passwords.

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