3Q26 Preview: Expect Mixed Results as The Cycle Softens Further

Over the course of 3Q26, P&C insurers (-2%) and insurance brokers (-2%) underperformed the S&P 500 (+3%) amidst continued softening insurance cycle data points and at least partially renewed agentic/AI related disruption fears. That said, the group enters 3Q with some built-in earnings tailwinds from overall lighter catastrophe activity, higher interest rates, and a favorable sequential mix shift towards faster growing casualty products. Growth has softened to more normal levels for the industry, yet ROEs remain better than long-term averages. Investor focus is likely to be centered on 1) the magnitude and duration of softer insurance cycle conditions, 2) AI risks and opportunities, 3) capital deployment, 4) insight into macroeconomic conditions, and 5) stability of casualty reserves from recent accident years. By sub-sector we have a favorable bias towards brokers where we think in-line or slightly favorable results relative to expectations could result in solid stock reactions, given