Wednesday, FBR Capital Markets downgraded Chubb Corp. (CB), Travelers Companies Inc. (TRV), Argo Group International Holdings, Ltd. (AGII), and SeaBright Insurance Holdings, Inc. (SBX) shares to Market Perform from Outperform. The brokerage lowered its price target on CB to $60 from $65, on TRV to $62 from $65, on AGII to $36 from $44, and on SBX to $11 from $14.
However, the brokerage upgraded Marsh & McLennan Companies Inc. (MMC) shares to Outperform from Market Perform and increased its price target to $27 from $22.
Analyst Bijan Moazami said he is concerned about the long-term outlook for the commercial lines segment of the property/casualty insurance industry. The two main drivers of earnings are underwriting and investment income, both of which the analyst believes would be challenged in 2010 and beyond.
The analyst said that the economic slowdown has decreased the demand for P/C insurance products, while the massive rally in the fixed-income markets in 2009 has increased capital dramatically, which is effectively the supply of insurance. This dynamic, combined with moderate catastrophe losses and a generally benign loss cost environment, means that broad-based rate hardening remains unlikely in the near and medium term, barring a major industry event.
The analyst noted that adding insult to injury, investment income, which accounts for 54% of pretax revenue for property/casualty insurers on average, is under pressure, as reinvestment rates have plummeted. The analyst downgraded several commercial insurers given his concerns about the unfavorable headwinds facing the property/casualty insurance industry.
While the analyst is lowering the price targets for the insurers that he is downgrading, he should note that there is still 20%+ upside to many of his reduced targets. Although this level of potential return historically has provided enough upside for an Outperform rating, the analyst believes that there could be downward revision to forward earnings, while forward book value estimates could be over-stated if inflation takes hold and the Fed begins to raise interest rates.
The analyst continues to like the personal lines space, particularly Allstate, as rates are increasing in the personal lines segment of the insurance market. Meanwhile, the analyst is turning more positive on the insurance brokerage industry, as he believes the outlook is improving.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.