In life and property insurance, the different trends have continued so far: According to Morgan Stanley, the earnings of the former are exceeding expectations, while the growth of the latter is falling short of expectations.

In a recent update on the state of the life and property and casualty insurance industry, Morgan Stanley analysts said the personal lines segments are maintaining their better-than-most performance, with better results in the second quarter of 2024, but still split.

The quarter continued to be characterized by profitability and increasing growth. Morgan Stanley expects this trend to continue well into 2025, taking advantage of the cyclical environment.

“While reinsurers reported stable underwriting results, growth generally fell short of expectations as margin pricing weakened and the risk of an active hurricane season continues to serve as uncertainty for 2024. Nevertheless, we continue to see value in reinsurers given solid ROE performance, improved conditions and risk management,” analysts explained.

Brokers’ results were more stable, showing steady revenue growth. Morgan Stanley also noted that firms will continue to compete for talent and will therefore continue to keep an eye on spending.

According to the report, commercial airlines have held up better than expected amid uncertainty about social inflation. However, Morgan Stanley believes the long-term reserve leverage potential is still underestimated.

Market conditions and a favorable underwriting situation supported earnings in the life insurance segment, which exceeded expectations in the second quarter of 2024. However, analysts warn about the interest rate environment.

The relatively solid underwriting structure in the international, group and life insurance segments supported the result.

Morgan Stanley said: “While interest income was also supportive in the quarter, outlook commentary regarding spread compression and a potentially lower interest rate environment will likely be a headwind going forward.

“Headwinds to earnings this quarter included variable investment income, which was below plan as expected, and asset management, where fund flows remain challenging despite support for fee income from the equity market.”

The analysts concluded: “Despite the solid results, we are increasingly bearish on life insurers given the potential for compression in spread-based income products and the market volatility experienced in recent weeks.”