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5 Stocks to Watch From the Soft Multiline Insurance Industry
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Product diversification helps Zacks Multiline Insurance industry players lower concentration risk, ensure uninterrupted revenue generation and improve retention ratio. Better pricing, prudent underwriting, increased exposure, faster economic recovery on the receding impact of the pandemic and increased vaccinations should benefit MetLife Inc. (MET - Free Report) , American International Group Inc. (AIG - Free Report) , Prudential Financial Inc. (PRU - Free Report) , Assurant Inc. (AIZ - Free Report) and Corebridge Financial, Inc. (CRBG - Free Report) . Accelerated digitalization will help in the smooth functioning of the industry.
The solid capital level of the multiline insurers will fuel merger and acquisition (M&A) activities. Though the Fed has paused rate hikes currently, it has hinted at more hikes this year. Investment income should improve further as insurers are beneficiaries of a better rate environment.
About the Industry
The Zacks Multiline Insurance industry comprises companies that provide single insurance coverage, bundling automobile, homeowner, long-term care, and life and health insurance to individuals and businesses. The insured pays a single premium and is covered for many things through a single contract. These companies cover commercial and personal properties, automobiles, marine, livestock, aviation, personal accident, life, including permanent and term insurance, supplemental accident and health insurance, workers’ compensation, annuity products, private mortgage insurance, et al. The players also provide risk management services. Since the companies offer single insurance coverage for multiple products, customer retention improves. The insured stands to benefit from lower premium payment compared to paying individual premiums for insuring varied products.
3 Trends Shaping the Future of the Multiline Insurance Industry
Diversified portfolio lowers concentration risk: Given the nature of the business, multiline insurers’ product and service portfolios are diversified. This lowers concentration risk. Increased awareness, driving higher demand for protection products, should benefit sales and premiums for life insurance operations. Continued improvement in pricing and an increase in exposure should support premium growth. Also, per Deloitte Insights, the transition to green energy and related insurance products, as well as exposure to intangible assets, offers growth opportunities. Per Deloitte Insights, life insurance premium is estimated to increase 1.9% in 2023 while non-life premiums are expected to increase 2.2%. The report also stated that trends like commercial lines witnessing growth at a faster pace than personal lines and homeowners’ premiums improving at a better rate than personal auto are likely to continue in 2023.
Merger and acquisitions: Consolidation in the multi-line insurance industry is expected to continue as players look to diversify their operations into new business lines and geographies. Buying businesses along the same lines is driven by the players’ need to gain a fair market share and grow in their niche areas. However, with high inflation and a rise in interest rate (the Fed has already made one rate hike this year), momentum in the M&A environment is likely to slow down. The first half of 2022 witnessed 427 deals per Deloitte.
Increased adoption of technology: Digitalization has increased by leaps and bounds, especially amid pandemic-induced restrictions. The industry is witnessing greater use of technology like blockchain, AI, advanced analytics, telematics, cloud computing and robotic process automation to expedite business operations and save costs. Many life insurers have started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data is making premium calculation easier and reducing risk. The P&C industry, in particular, also witnessed the emergence of insurtech — technology-led insurers — sparking competition for incumbent players. Insurers remain focused on ramping up data and analytics capabilities as well as realizing the benefit of the technological infrastructure per Deloitte Insights. Moreover, the adoption of technology has helped in seamless underwriting and claims processing. However, the adoption of technology comes with the risk of cyber threats.
Zacks Industry Rank Indicates Weak Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dismal prospects in the near term. The Zacks Multiline Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #179, which places it in the bottom 29% of 255 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. The bleak outlook reflects that the industry’s earnings estimates have been revised downward by analysts for the current year. Earnings estimate for the current year have moved 8.9% south in the past year.
Before we present a few multiline insurance stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms Sector and S&P 500
The Multiline Insurance industry has underperformed both the Zacks S&P 500 composite and its sector over the past six months. The stocks in this industry have collectively gained 1.5% in the past year compared with the Finance sector’s increase of 10.2%. The Zacks S&P 500 composite has gained 17.8% in the same time frame.
One-Year Price Performance
Current Valuation
On the basis of its trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 2.27X compared with the S&P 500’s 6.06X and the sector’s 3.29X.
Over the past five years, the industry has traded as high as 3.09X, as low as 0.84X and at the median of 1.63X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM
5 Multiline Insurance Stocks to Keep an Eye on
We are presenting one Zacks Rank #1 (Strong Buy) stock and four Zacks Rank #3 (Hold) stocks from the Multiline Insurance industry.
Corebridge Financial: Headquartered in Houston, TX, Corebridge Financial operates as a subsidiary of American International Group and provides retirement solutions and insurance products in the United States. Strong sales with attractive margins, solid investment results, its modernization program aiding expense reduction and efficiency as well as effective capital deployment augur well for the growth of this Zacks Rank #1 insurer.
The Zacks Consensus Estimate for 2023 and 2024 indicates a year-over-increase of 40.4% and 22.8%, respectively. The consensus estimate has moved 1.3% and 0.6% north in the past seven days. The expected long-term earnings growth rate is pegged at 23.2%, better than the industry average of 12.3%. CRBG delivered a three-quarter average earnings surprise of 16.35%.
Price and Consensus: CRBG
Assurant: Headquartered in New York, Assurant is a global provider of risk management solutions in the housing and lifestyle markets. Increased mobile subscribers in North America, inorganic and organic growth strategies, higher average insured values, and effective capital deployment bode well for the growth of this Zacks Rank #3 insurer.
The Zacks Consensus Estimate for 2024 indicates a year-over-increase of 24.7% and has moved 1.7% north in the past 30 days. The expected long-term earnings growth rate is pegged at 11.4%. AIZ delivered a four-quarter average earnings surprise of 9.96%.
Price and Consensus: AIZ
American International Group: Headquartered in New York, this Zacks Rank #3 insurer provides insurance products for commercial, institutional, and individual customers in North America and internationally. Strategic business de-risking and acquisitions, cost-control efforts, and accelerated capital deployment will drive American International’s growth.
The Zacks Consensus Estimate for 2023 and 2024 indicates a year-over-increase of 40.9% and 22.1%, respectively. The expected long-term earnings growth rate is pegged at 10%. AIG delivered a four-quarter average earnings surprise of 9.22%.
Price and Consensus: AIG
MetLife: This New York-based insurance-based global financial services company provides protection and investment products to a range of individual and institutional customers. MetLife’s focus on businesses with growth potential and strategies to control cost and increase efficiency bodes well for growth. MET carries a Zacks Rank #3.
The Zacks Consensus Estimate for 2023 and 2024 indicates a year-over-increase of 11.8% and 19.7%, respectively. Its expected long-term earnings growth rate is pegged at 11.8%. MetLife delivered a four-quarter average earnings surprise of 0.70%.
Price and Consensus: MET
Prudential Financial: This Newark, NJ, headquartered Zacks Rank #3 company is a financial services leader with a leading position in universal, term and variable life insurance and an expanding Retirement business. Prudential Financial’s high-performing asset management business, deeper reach in the pension risk transfer market, improved margins and international operations bode well. PRU is rearranging its operations to become a higher-growth, less market-sensitive business.
The Zacks Consensus Estimate for 2023 and 2024 indicates a year-over-increase of 25.8% and 8.6%, respectively. Its expected long-term earnings growth rate is pegged at 10.7%.
Price and Consensus: PRU
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5 Stocks to Watch From the Soft Multiline Insurance Industry
Product diversification helps Zacks Multiline Insurance industry players lower concentration risk, ensure uninterrupted revenue generation and improve retention ratio. Better pricing, prudent underwriting, increased exposure, faster economic recovery on the receding impact of the pandemic and increased vaccinations should benefit MetLife Inc. (MET - Free Report) , American International Group Inc. (AIG - Free Report) , Prudential Financial Inc. (PRU - Free Report) , Assurant Inc. (AIZ - Free Report) and Corebridge Financial, Inc. (CRBG - Free Report) . Accelerated digitalization will help in the smooth functioning of the industry.
The solid capital level of the multiline insurers will fuel merger and acquisition (M&A) activities. Though the Fed has paused rate hikes currently, it has hinted at more hikes this year. Investment income should improve further as insurers are beneficiaries of a better rate environment.
About the Industry
The Zacks Multiline Insurance industry comprises companies that provide single insurance coverage, bundling automobile, homeowner, long-term care, and life and health insurance to individuals and businesses. The insured pays a single premium and is covered for many things through a single contract. These companies cover commercial and personal properties, automobiles, marine, livestock, aviation, personal accident, life, including permanent and term insurance, supplemental accident and health insurance, workers’ compensation, annuity products, private mortgage insurance, et al. The players also provide risk management services. Since the companies offer single insurance coverage for multiple products, customer retention improves. The insured stands to benefit from lower premium payment compared to paying individual premiums for insuring varied products.
3 Trends Shaping the Future of the Multiline Insurance Industry
Diversified portfolio lowers concentration risk: Given the nature of the business, multiline insurers’ product and service portfolios are diversified. This lowers concentration risk. Increased awareness, driving higher demand for protection products, should benefit sales and premiums for life insurance operations. Continued improvement in pricing and an increase in exposure should support premium growth. Also, per Deloitte Insights, the transition to green energy and related insurance products, as well as exposure to intangible assets, offers growth opportunities. Per Deloitte Insights, life insurance premium is estimated to increase 1.9% in 2023 while non-life premiums are expected to increase 2.2%. The report also stated that trends like commercial lines witnessing growth at a faster pace than personal lines and homeowners’ premiums improving at a better rate than personal auto are likely to continue in 2023.
Merger and acquisitions: Consolidation in the multi-line insurance industry is expected to continue as players look to diversify their operations into new business lines and geographies. Buying businesses along the same lines is driven by the players’ need to gain a fair market share and grow in their niche areas. However, with high inflation and a rise in interest rate (the Fed has already made one rate hike this year), momentum in the M&A environment is likely to slow down. The first half of 2022 witnessed 427 deals per Deloitte.
Increased adoption of technology: Digitalization has increased by leaps and bounds, especially amid pandemic-induced restrictions. The industry is witnessing greater use of technology like blockchain, AI, advanced analytics, telematics, cloud computing and robotic process automation to expedite business operations and save costs. Many life insurers have started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data is making premium calculation easier and reducing risk. The P&C industry, in particular, also witnessed the emergence of insurtech — technology-led insurers — sparking competition for incumbent players. Insurers remain focused on ramping up data and analytics capabilities as well as realizing the benefit of the technological infrastructure per Deloitte Insights. Moreover, the adoption of technology has helped in seamless underwriting and claims processing. However, the adoption of technology comes with the risk of cyber threats.
Zacks Industry Rank Indicates Weak Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dismal prospects in the near term. The Zacks Multiline Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #179, which places it in the bottom 29% of 255 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. The bleak outlook reflects that the industry’s earnings estimates have been revised downward by analysts for the current year. Earnings estimate for the current year have moved 8.9% south in the past year.
Before we present a few multiline insurance stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms Sector and S&P 500
The Multiline Insurance industry has underperformed both the Zacks S&P 500 composite and its sector over the past six months. The stocks in this industry have collectively gained 1.5% in the past year compared with the Finance sector’s increase of 10.2%. The Zacks S&P 500 composite has gained 17.8% in the same time frame.
One-Year Price Performance
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Current Valuation
On the basis of its trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 2.27X compared with the S&P 500’s 6.06X and the sector’s 3.29X.
Over the past five years, the industry has traded as high as 3.09X, as low as 0.84X and at the median of 1.63X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM
5 Multiline Insurance Stocks to Keep an Eye on
We are presenting one Zacks Rank #1 (Strong Buy) stock and four Zacks Rank #3 (Hold) stocks from the Multiline Insurance industry.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Corebridge Financial: Headquartered in Houston, TX, Corebridge Financial operates as a subsidiary of American International Group and provides retirement solutions and insurance products in the United States. Strong sales with attractive margins, solid investment results, its modernization program aiding expense reduction and efficiency as well as effective capital deployment augur well for the growth of this Zacks Rank #1 insurer.
The Zacks Consensus Estimate for 2023 and 2024 indicates a year-over-increase of 40.4% and 22.8%, respectively. The consensus estimate has moved 1.3% and 0.6% north in the past seven days. The expected long-term earnings growth rate is pegged at 23.2%, better than the industry average of 12.3%. CRBG delivered a three-quarter average earnings surprise of 16.35%.
Price and Consensus: CRBG
Assurant: Headquartered in New York, Assurant is a global provider of risk management solutions in the housing and lifestyle markets. Increased mobile subscribers in North America, inorganic and organic growth strategies, higher average insured values, and effective capital deployment bode well for the growth of this Zacks Rank #3 insurer.
The Zacks Consensus Estimate for 2024 indicates a year-over-increase of 24.7% and has moved 1.7% north in the past 30 days. The expected long-term earnings growth rate is pegged at 11.4%. AIZ delivered a four-quarter average earnings surprise of 9.96%.
Price and Consensus: AIZ
American International Group: Headquartered in New York, this Zacks Rank #3 insurer provides insurance products for commercial, institutional, and individual customers in North America and internationally. Strategic business de-risking and acquisitions, cost-control efforts, and accelerated capital deployment will drive American International’s growth.
The Zacks Consensus Estimate for 2023 and 2024 indicates a year-over-increase of 40.9% and 22.1%, respectively. The expected long-term earnings growth rate is pegged at 10%. AIG delivered a four-quarter average earnings surprise of 9.22%.
Price and Consensus: AIG
MetLife: This New York-based insurance-based global financial services company provides protection and investment products to a range of individual and institutional customers. MetLife’s focus on businesses with growth potential and strategies to control cost and increase efficiency bodes well for growth. MET carries a Zacks Rank #3.
The Zacks Consensus Estimate for 2023 and 2024 indicates a year-over-increase of 11.8% and 19.7%, respectively. Its expected long-term earnings growth rate is pegged at 11.8%. MetLife delivered a four-quarter average earnings surprise of 0.70%.
Price and Consensus: MET
Prudential Financial: This Newark, NJ, headquartered Zacks Rank #3 company is a financial services leader with a leading position in universal, term and variable life insurance and an expanding Retirement business. Prudential Financial’s high-performing asset management business, deeper reach in the pension risk transfer market, improved margins and international operations bode well. PRU is rearranging its operations to become a higher-growth, less market-sensitive business.
The Zacks Consensus Estimate for 2023 and 2024 indicates a year-over-increase of 25.8% and 8.6%, respectively. Its expected long-term earnings growth rate is pegged at 10.7%.
Price and Consensus: PRU