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5 Multiline Insurers to Watch as Exposure Rises, Pricing Moderates
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Product diversification has been helping 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 American International Group Inc. (AIG - Free Report) , Prudential Financial Inc. (PRU - Free Report) , The Hartford Financial Group (HIG - Free Report) , Radian Group (RDN - Free Report) and CNO Financial Group (CNO - Free Report) . Accelerated digitalization will help in the smooth functioning of the industry.
The solid capital level of multiline insurers will fuel merger and acquisition (M&A) activities. However, rate cuts by the Federal Reserve are a concern as insurers are direct beneficiaries of an improved rate environment. A lower rate will weigh on net investment income.
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 payments 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 of life insurance operations. An increase in exposure with customized products and services should support premium growth though moderating pricing keeps us cautious. Per Deloitte Insights, the transition to green energy and related insurance products, as well as exposure to intangible assets, offers growth opportunities. The increased adoption of artificial intelligence could increase potential cyber threats, thus fueling demand for cyber insurance. Per a report in Carrier Management, AM Best expects profitable commercial lines and improving personal lines in 2024. Swiss Re estimates high single-digit premium growth in 2024 and near mid-single-digit growth in 2025.
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. Consolidations that slowed down earlier due to inflation are expected to rise in 2024. Insurance technology companies are expected to top the list per media reports. The industry is undergoing accelerated digitalization.
Increased adoption of technology: Digitalization has increased by leaps and bounds. 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. 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 Bright Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects in the near term. The Zacks Multiline Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #63, which places it in the top 25% of 251 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 top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. The rosy outlook reflects that the industry’s earnings estimates have been revised upward by analysts for the current 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 Outperforms Sector but Slightly Underperforms S&P 500
The Multiline Insurance industry has outperformed the sector but slightly underperformed the Zacks S&P 500 composite year to date. The stocks in this industry have collectively gained 25.9% in the past year compared with the Finance sector’s increase of 22.7% and the Zacks S&P 500 composite's rise of 26% 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 2.44X compared with the S&P 500’s 8.76X and the sector’s 3.71X.
Over the past five years, the industry has traded as high as 2.74X, as low as 0.69X 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 two Zacks Rank #2 (Buy) stocks and three Zacks Rank #3 (Hold) stocks from the Multiline Insurance industry.
Radian Group: Headquartered in Philadelphia, PA, Radian Group is a credit enhancement company, which supports homebuyers, mortgage lenders, loan servicers and investors with a suite of private mortgage insurance and related risk-management products and services. Improving mortgage insurance portfolio, declining claims, a well-performing homegenius segment, a solid capital position and effective capital deployment poise this Zacks Rank #2 insurer well for growth. New business, combined with increasing annual persistency, should drive continued growth of the insurance-in-force portfolio. Radian’s mortgage insurance portfolio creates a strong foundation for future earnings.
The Zacks Consensus Estimate for 2024 earnings indicates a year-over-increase of 3.1%. RDN delivered a four-quarter average earnings surprise of 17.65%. The consensus estimate for 2024 and 2025 has moved 6.7% and 3.1% north, respectively, in the past 30 days. The expected long-term earnings growth rate is pegged at 5%.
Price and Consensus: RDN
CNO Financial Group: Headquartered in Carmel, IN, this Zacks Rank #2 company is a top-tier holding company for a group of insurance companies operating throughout the United States. It develops, administers and markets supplemental health insurance, annuity, individual life insurance and other insurance products.
The Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-increase of 20.7% and 0.6%, respectively. The consensus estimate for 2024 and 2025 earnings has moved 8.7% and 3% north in the past 30 days. It has a VGM Score of B.
Price and Consensus: CNO
American International Group: Headquartered in New York, AIG provides insurance products for commercial, institutional and individual customers in North America and internationally. Strategic business de-risking, acquisitions, cost-control efforts and accelerated capital deployment will drive this Zacks Rank #3 insurer’s growth.
The Zacks Consensus Estimate for 2025 earnings indicates a year-over-increase of 30.4%, respectively. The expected long-term earnings growth rate is pegged at 2%. AIG delivered a four-quarter average earnings surprise of 2.88%.
Price and Consensus: AIG
Prudential Financial: Headquartered in Newark, NJ, Prudential is a financial services leader offering an array of financial products and services. It carries a Zacks Rank #3. Its solid asset-based businesses, improved margins in the Group Insurance business, solid international operations, a high-performing asset management business and deeper reach in the pension risk transfer market are catalysts for long-term growth. A vast distribution network, a compelling product portfolio and a superior brand image give it a competitive edge. PRU is on track to become a higher-growth, less market-sensitive business.
The Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-increase of 14.9% and 10%, respectively. The expected long-term earnings growth rate is pegged at 10.4%. The consensus estimate for 2024 and 2025 earnings has moved 2 cents and 1 cent north, respectively, in the past seven days. It has a VGM Score of B.
Price and Consensus: PRU
Hartford Financial: Headquartered in Hartford, CT, The Hartford Financial Services Group is one of the major multi-line insurance and investment companies in the country, providing investment products, group life and group disability insurance, property and casualty (P&C) insurance and mutual funds in the United States. This Zacks Rank #3 insurer is poised to grow on improvement in the quality and size of mortgage insurance in force, a decline in claim payments, given the strong credit characteristics of the new loans insured, maintenance of capital in compliance with regulations and its solid capital position.
The Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-increase of 13.5% and 14.5%, respectively. Its expected long-term earnings growth rate is pegged at 12.1%. HIG delivered a four-quarter average earnings surprise of 9.14%. The consensus estimate for 2024 and 2025 earnings has moved 0.8% and 0.3% north, respectively, in the past 30 days.
Price and Consensus: HIG
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5 Multiline Insurers to Watch as Exposure Rises, Pricing Moderates
Product diversification has been helping 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 American International Group Inc. (AIG - Free Report) , Prudential Financial Inc. (PRU - Free Report) , The Hartford Financial Group (HIG - Free Report) , Radian Group (RDN - Free Report) and CNO Financial Group (CNO - Free Report) . Accelerated digitalization will help in the smooth functioning of the industry.
The solid capital level of multiline insurers will fuel merger and acquisition (M&A) activities. However, rate cuts by the Federal Reserve are a concern as insurers are direct beneficiaries of an improved rate environment. A lower rate will weigh on net investment income.
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 payments 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 of life insurance operations. An increase in exposure with customized products and services should support premium growth though moderating pricing keeps us cautious. Per Deloitte Insights, the transition to green energy and related insurance products, as well as exposure to intangible assets, offers growth opportunities. The increased adoption of artificial intelligence could increase potential cyber threats, thus fueling demand for cyber insurance. Per a report in Carrier Management, AM Best expects profitable commercial lines and improving personal lines in 2024. Swiss Re estimates high single-digit premium growth in 2024 and near mid-single-digit growth in 2025.
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. Consolidations that slowed down earlier due to inflation are expected to rise in 2024. Insurance technology companies are expected to top the list per media reports. The industry is undergoing accelerated digitalization.
Increased adoption of technology: Digitalization has increased by leaps and bounds. 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. 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 Bright Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects in the near term. The Zacks Multiline Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #63, which places it in the top 25% of 251 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 top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. The rosy outlook reflects that the industry’s earnings estimates have been revised upward by analysts for the current 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 Outperforms Sector but Slightly Underperforms S&P 500
The Multiline Insurance industry has outperformed the sector but slightly underperformed the Zacks S&P 500 composite year to date. The stocks in this industry have collectively gained 25.9% in the past year compared with the Finance sector’s increase of 22.7% and the Zacks S&P 500 composite's rise of 26% 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 2.44X compared with the S&P 500’s 8.76X and the sector’s 3.71X.
Over the past five years, the industry has traded as high as 2.74X, as low as 0.69X and at the median of 1.63X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
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5 Multiline Insurance Stocks to Keep An Eye On
We are presenting two Zacks Rank #2 (Buy) stocks and three Zacks Rank #3 (Hold) stocks from the Multiline Insurance industry.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Radian Group: Headquartered in Philadelphia, PA, Radian Group is a credit enhancement company, which supports homebuyers, mortgage lenders, loan servicers and investors with a suite of private mortgage insurance and related risk-management products and services. Improving mortgage insurance portfolio, declining claims, a well-performing homegenius segment, a solid capital position and effective capital deployment poise this Zacks Rank #2 insurer well for growth. New business, combined with increasing annual persistency, should drive continued growth of the insurance-in-force portfolio. Radian’s mortgage insurance portfolio creates a strong foundation for future earnings.
The Zacks Consensus Estimate for 2024 earnings indicates a year-over-increase of 3.1%. RDN delivered a four-quarter average earnings surprise of 17.65%. The consensus estimate for 2024 and 2025 has moved 6.7% and 3.1% north, respectively, in the past 30 days. The expected long-term earnings growth rate is pegged at 5%.
Price and Consensus: RDN
CNO Financial Group: Headquartered in Carmel, IN, this Zacks Rank #2 company is a top-tier holding company for a group of insurance companies operating throughout the United States. It develops, administers and markets supplemental health insurance, annuity, individual life insurance and other insurance products.
The Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-increase of 20.7% and 0.6%, respectively. The consensus estimate for 2024 and 2025 earnings has moved 8.7% and 3% north in the past 30 days. It has a VGM Score of B.
Price and Consensus: CNO
American International Group: Headquartered in New York, AIG provides insurance products for commercial, institutional and individual customers in North America and internationally. Strategic business de-risking, acquisitions, cost-control efforts and accelerated capital deployment will drive this Zacks Rank #3 insurer’s growth.
The Zacks Consensus Estimate for 2025 earnings indicates a year-over-increase of 30.4%, respectively. The expected long-term earnings growth rate is pegged at 2%. AIG delivered a four-quarter average earnings surprise of 2.88%.
Price and Consensus: AIG
Prudential Financial: Headquartered in Newark, NJ, Prudential is a financial services leader offering an array of financial products and services. It carries a Zacks Rank #3. Its solid asset-based businesses, improved margins in the Group Insurance business, solid international operations, a high-performing asset management business and deeper reach in the pension risk transfer market are catalysts for long-term growth. A vast distribution network, a compelling product portfolio and a superior brand image give it a competitive edge. PRU is on track to become a higher-growth, less market-sensitive business.
The Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-increase of 14.9% and 10%, respectively. The expected long-term earnings growth rate is pegged at 10.4%. The consensus estimate for 2024 and 2025 earnings has moved 2 cents and 1 cent north, respectively, in the past seven days. It has a VGM Score of B.
Price and Consensus: PRU
Hartford Financial: Headquartered in Hartford, CT, The Hartford Financial Services Group is one of the major multi-line insurance and investment companies in the country, providing investment products, group life and group disability insurance, property and casualty (P&C) insurance and mutual funds in the United States. This Zacks Rank #3 insurer is poised to grow on improvement in the quality and size of mortgage insurance in force, a decline in claim payments, given the strong credit characteristics of the new loans insured, maintenance of capital in compliance with regulations and its solid capital position.
The Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-increase of 13.5% and 14.5%, respectively. Its expected long-term earnings growth rate is pegged at 12.1%. HIG delivered a four-quarter average earnings surprise of 9.14%. The consensus estimate for 2024 and 2025 earnings has moved 0.8% and 0.3% north, respectively, in the past 30 days.
Price and Consensus: HIG
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