Piper Sandler revamps insurance playbook, upgrades Gallagher, cuts five ratings

Investing.com -- Piper Sandler on Tuesday outlined a new investment strategy for a softening U.S. property and casualty insurance market, arguing investors should rotate within the sector rather than exit it as commercial insurance pricing weakens.

The brokerage upgraded Arthur J. Gallagher to Overweight while downgrading Aon, American International Group, Hartford, Hanover and Universal Insurance Holdings to Neutral, alongside price target revisions for 21 companies.

The brokerage said commercial insurance pricing has entered a new phase, with first-quarter 2026 data showing the first overall decline in commercial property and casualty premiums since 2017. It expects the market to shift away from broad rate-driven earnings growth toward greater emphasis on underwriting discipline, expense control and capital allocation.

Piper Sandler upgraded Arthur J. Gallagher, saying its nearly 20% share price decline over the past year has created a more attractive entry point despite resilient execution and a strong acquisition pipeline. By contrast, it downgraded Aon, arguing its operational strength is already reflected in its valuation and that slowing fiduciary income and higher interest costs leave limited room for further upside.

The brokerage also downgraded AIG, Hartford and Hanover, saying large diversified commercial insurers are losing the defensive advantage they enjoyed as pricing softness spreads across more insurance lines. Universal Insurance was downgraded after a roughly 71% rally over the past year, with Piper saying benefits from recent benign hurricane seasons are now fully reflected in the stock price.

As part of its broader strategy, Piper Sandler recommends investors initially favor large diversified insurers before rotating into smaller specialty insurers, then personal-lines-focused carriers and, over the longer term, insurance brokers once organic growth stabilizes. It believes the market is now transitioning into the second phase, where agile specialty insurers may offer the best opportunities despite the softer pricing environment.

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