Tuttle Capital Launches ETF Targeting Underwriting Profitability

Tuttle Capital Management announced the debut of the Porter & Company Property & Casualty Index ETF (PCPC). Tracking the Porter & Co. P&C Insurance Index (the “Index”), PCPC provides systematic exposure to leading U.S.-listed property and casualty (P&C) insurers and reinsurers. The launch builds on Tuttle Capital’s ongoing partnership with Porter & Company, following the debut of the multi-asset Porter & Company Porter Portfolio Index ETF (PCPP) earlier this year. However, unlike traditional sector funds that weight holdings according to market capitalization, PCPC selects and weights its portfolio based on underwriting profitability. PCPC provides systematic exposure to U.S.-listed property and casualty insurers and reinsurers by selecting and weighting holdings based on underwriting profitability rather than market capitalization. Tracking an index calculated by VettaFi, PCPC selects up to 20 qualifying companies that meet strict market cap, revenue, return on equity (ROE), and combined ratio threshold metrics. By targeting highly efficient underwriters that generate float and collect investment income on underlying bond portfolios, PCPC offers advisors an alternative or partial substitute for traditional bond allocations to help mitigate inflation and interest rate risks. See More: Tuttle Capital Launches “Permanent Portfolio”-Focused, Multi-Asset ETFThe Math Behind the Combined RatioIn the property and casualty insurance business model, companies typically collect premiums upfront and pay out claims later. What separates high-performing insurers from average operators is the combined ratio or the sum of claims, claims expenses, and underwriting costs divided by total premiums collected. A combined ratio below 100% indicates that an insurer generates profit purely on underwriting operations before accounting for investment income. Standard market-cap-weighted indexes often allocate heavily to the largest insurers regardless of operational efficiency. In effect, this creates outsized exposure to less profitable underwriters. PCPC disrupts this model by systematically filtering for underwriters that demonstrate disciplined pricing and cost controls, which references the underwriting-first philosophy long championed by famed value investor Warren Buffett. “Insurance is a simple business that most investors overcomplicate. Collect the premium, pay the claim, see what’s left over,” said Matthew Tuttle, CEO, Tuttle Capital Management. “The combined ratio tells you everything: who’s actually good at this and who’s just big. PCPC buys the insurers who are good at it and sizes the position to match. No story, no forecast, just the math.”How PCPC Constructs Its PortfolioCalculated by VettaFi and sponsored by Porter & Company, the Index selects up to 20 qualifying U.S.-listed P&C insurers annually. To be eligible for inclusion, a company must meet the following criteria: Maintain a market capitalization of at least $1.5 billion. Derive at least 51% of its revenue from P&C insurance. Post a three-year average return on equity (ROE) of 5% or higher. Maintain a combined ratio strictly below 99%. Eligible constituents are then weighted by the inverse of their combined ratio, which tilts the portfolio toward the most disciplined underwriters. To ensure diversification across its individual holdings, allocations to companies are capped at 10%. Additionally, the Index undergoes an annual reconstitution in June.A Bond Alternative for PortfoliosBonds play a significant role in P&C companies. The most operationally efficient P&C insurers hold large bond portfolios funded by upfront premiums, which effectively layers an underwriting profit margin on top of income derived from its bond holdings. Research from Porter & Company revealed that high-quality P&C insurers can serve as an alternative to government bonds in a diversified portfolio, as underwriting profits and active duration management may help offset the inflation and interest rate risks associated with long-duration Treasuries. Consequently, PCPC offers advisors a unique tool that can serve as a complement or partial substitute for traditional bond allocations, thereby helping to mitigate inflation and duration risks. This is especially relevant with today’s uncertainty in the fixed income market as the U.S. Federal Reserve continues to mull over the direction of interest rates amid a higher-for-longer inflationary environment. PCPC trades on the Cboe BZX exchange with a net expense ratio of 0.65%. For more news, information, and strategy, visit ETFDB. VettaFi LLC (“VettaFi”) is the index provider for PCPP and PCPC, for which it receives an index licensing fee. However, PCPP and PCPC are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of PCPP and PCPC.