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Top 4 Insurers That Have Outperformed the S&P 500 in a Year
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The insurance industry has benefited from better pricing, prudent underwriting and exposure growth. Redesigning and repricing of products and services to maintain sales and profitability, increased automation, prudent underwriting standards, and an improving rate environment are expected to drive premium growth and boost the industry’s efficiency.
The insurance industry has outperformed the Zacks S&P 500 composite and the Finance sector in the past year. The insurance industry has rallied 30.7% in the past year compared with the Zacks S&P 500 composite’s growth of 25.2% and the Finance sector’s rise of 25.3%.
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Here are four insurance stocks that have performed well over the past year, riding on strong fundamentals. Assurant, Inc. (AIZ - Free Report) , W.R. Berkley Corporation (WRB - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and Manulife Financial Corp (MFC - Free Report) have outperformed the industry, the sector and the S&P 500 composite in the past year. These stocks are poised to maintain the rally, given their solid prospects.
Driving Forces
Global commercial insurance prices rose for 25 straight quarters, per the Marsh Global Insurance Market Index. Better pricing will help insurers write higher premiums and address claim payments prudently. Per Fitch Ratings, personal auto is likely to deliver better performance in 2024. This, coupled with better investment results and lower claims, should fuel insurers' performance, per Fitch Ratings. According to Deloitte Insights, gross premiums are estimated to increase sixfold to $722 billion by 2030. Analysts at Swiss Re Institute predict year-over-year premium growth of 5.5% for 2024.
However, catastrophes and non-life insurers’ profitability are inversely related. Per reports in Aon, total economic losses were $380 billion in 2023, whereas insured losses were $118 million. According to AM Best, the total net underwriting loss was $38 billion in 2023, a 10-year high, largely attributable to weather-related losses, high inflation and reinsurance pricing pressure. Underwriting losses are expected to primarily result from the soft performance in personal lines, which are expected to witness higher catastrophe losses, per Insurance Information Institute and Milliman.
However, exposure growth, better pricing, prudent underwriting and favorable reserve development will help withstand the blow. Also, frequent occurrences of natural disasters should accelerate the policy renewal rate.
The insurance industry is rate-sensitive. The Fed made four hikes in 2023, taking the rate to 11 since March 2022. An improving rate environment is a boon for insurers, especially long-tail insurers. The Fed has held interest rates unchanged at 5.25-5.5% at the December FOMC meeting. An improving rate environment is a boon for insurers, especially long-tail insurers. Also, investment income is an essential component of insurers’ top lines.
Product diversification helps industry players lower concentration risks, ensure uninterrupted revenue generation and improve retention ratio. Increased awareness, driving higher demand for protection products, should benefit sales and premiums of life insurance operations. Also, per Deloitte Insights, the transition to green energy and related insurance products, as well as exposure to intangible assets, offers growth opportunities. Per a report in Carrier Management, AM Best expects profitable commercial lines and improving personal lines for 2024.
Increased awareness, driving higher demand for protection products, should benefit sales and premiums for life insurance operations. Continued improvements in pricing and an increase in exposure should support premium growth. A compelling product portfolio will enhance sales of life insurers. Per a report published in ReporterLinker, global life insurance gross written premium is expected to be $2.5 trillion by 2026. Per a Statista report, the gross written premium is expected to see an annual growth rate (CAGR 2024-2028) of 1.7%.
Players are investing heavily in technology to improve basis points, scale and efficiencies. While a solid policyholder surplus will help the property and casualty insurance industry absorb losses, a sturdy capital level continues to aid insurers in pursuing strategic mergers and acquisitions, investing in growth initiatives, engaging in share buybacks, and increasing dividends or paying out special dividends.
4 Insurers to Watch
With the help of the Zacks Stock Screener, we have selected four insurance stocks with an impressive Value Score of A or B. All these stocks mentioned below carry a Zacks Rank #2 (Buy) at present. Back-tested results have shown that for stocks with a solid Value Score and a favorable Zacks Rank, the returns are even better. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Atlanta, GA-based Assurant is a global provider of risk management solutions in the housing and lifestyle markets. The well-performing Global Lifestyle business, growth in fee-based capital-light businesses and solid capital management augur well for this insurer. AIZ’s focus on growing fee-based capital-light businesses, which presently constitute more than 50% of segmental revenues, bodes well. Management estimates that contribution from the same will continue to grow in the double-digits over the longer term.
The Zacks Consensus Estimate for Assurant’s 2024 earnings per share indicates a year-over-year increase of 3.4%. The consensus estimate for revenues is pegged at $11.66 billion, implying a year-over-year improvement of 4.1%.
The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 7.7%. The consensus estimate for 2025 revenues is pinned at $12.07 billion, implying a year-over-year improvement of 3.4%.
The consensus estimate for 2024 and 2025 has moved 6% and 6.5% north, respectively, in the past 60 days. The expected long-term earnings growth rate is pegged at 5.1%. AIZ delivered a four-quarter average earnings surprise of 42.15%. The insurer has an impressive Value Score of A, reflecting an attractive stock valuation. AIZ shares have rallied 55.8% in the past year.
The company’s return on equity in the trailing 12 months was 18.3%, better than the industry average of 13.2%.
Greenwich, CT-based W.R. Berkley is one of the nation’s largest commercial lines property casualty insurance providers. The company offers a variety of insurance services, from reinsurance to workers comp third-party administrators.
WRB has consistently benefited from its insurance business, performing well on the increase in premiums written over the past many years. WRB has been investing in numerous startups since 2006 and establishing new units in growing international markets. WRB’s international business is poised for growth, supported by emerging markets. A solid capital position enables capital deployment. Investment in alternative assets should help improve investment income.
The Zacks Consensus Estimate for W.R. Berkley’s 2024 earnings per share indicates a year-over-year increase of 21.9%. The consensus estimate for revenues is pegged at $13.27 billion, implying a year-over-year improvement of 9.7%.
The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 9.2%. The consensus estimate for 2025 revenues is pinned at $14.06 billion, implying a year-over-year improvement of 5.9%.
The consensus estimate for 2024 and 2025 has moved 1% and 0.3% north, respectively, in the past 60 days. The expected long-term earnings growth rate is pegged at 9%. WRB earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 4.10%. The insurer has an impressive Value Score of B, reflecting an attractive stock valuation.
Shares of the property and casualty insurer have rallied 38.9% in the past year. The company’s return on equity in the trailing 12 months was 19%, better than the industry average of 7.3%.
Based in New York, The Travelers provides a wide variety of property and casualty insurance, and surety products and services to businesses, organizations and individuals in the United States and select international markets. Strong renewal rate change, retention and increased new businesses, supported by a compelling portfolio and a solid capital position, poise TRV well for growth. The company raised its dividend for the 19th consecutive year at a compound annual growth rate of 8% over that period.
The Zacks Consensus Estimate for TRV’s 2024 earnings per share indicates a year-over-year increase of 34.8%. The consensus estimate for revenues is pegged at $46.35 billion, implying a year-over-year improvement of 11.7%. The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 13.6%. The consensus estimate for 2025 revenues is pinned at $50.20 billion, implying a year-over-year improvement of 8.3%.
The consensus estimate for 2024 and 2025 has moved 0.1% and 0.04% north, respectively, in the past seven days. The expected long-term earnings growth rate is pegged at 10.8%. This insurer has an impressive Value Score of A, reflecting an attractive stock valuation. The insurer also has a favorable VGM Score of B.
The company’s return on equity in the trailing 12 months was 13.6%, better than the industry average of 7.3%. Shares of TRV have rallied 34.5% in the past year.
Headquartered in Toronto, Canada, Manulife Financial is one of the three dominant life insurers within its domestic market and possesses rapidly growing operations in the United States and several countries in Asia. A strong Asia business, an expanding wealth and asset management business, investments to ramp up digital capabilities, and a solid capital position poise this life insurer well for growth.
MFC boasts a long-term earnings growth rate of 10%. The Zacks Consensus Estimate for Manulife Financial’s 2024 and 2025 earnings implies year-over-year growth of 5.4% and 9.7%, respectively.
The Zacks Consensus Estimate for MFC’s 2024 earnings has increased 2.3% in the past 60 days. MFC delivered a four-quarter average earnings surprise of 7.01%. The life insurer has an impressive Value Score of B. The company’s return on equity in the trailing 12 months was 15.9%, better than the industry average of 15.4%. MFC shares have rallied 32.3% in the past year.
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Top 4 Insurers That Have Outperformed the S&P 500 in a Year
The insurance industry has benefited from better pricing, prudent underwriting and exposure growth. Redesigning and repricing of products and services to maintain sales and profitability, increased automation, prudent underwriting standards, and an improving rate environment are expected to drive premium growth and boost the industry’s efficiency.
The insurance industry has outperformed the Zacks S&P 500 composite and the Finance sector in the past year. The insurance industry has rallied 30.7% in the past year compared with the Zacks S&P 500 composite’s growth of 25.2% and the Finance sector’s rise of 25.3%.
Image Source: Zacks Investment Research
Here are four insurance stocks that have performed well over the past year, riding on strong fundamentals. Assurant, Inc. (AIZ - Free Report) , W.R. Berkley Corporation (WRB - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and Manulife Financial Corp (MFC - Free Report) have outperformed the industry, the sector and the S&P 500 composite in the past year. These stocks are poised to maintain the rally, given their solid prospects.
Driving Forces
Global commercial insurance prices rose for 25 straight quarters, per the Marsh Global Insurance Market Index. Better pricing will help insurers write higher premiums and address claim payments prudently. Per Fitch Ratings, personal auto is likely to deliver better performance in 2024. This, coupled with better investment results and lower claims, should fuel insurers' performance, per Fitch Ratings. According to Deloitte Insights, gross premiums are estimated to increase sixfold to $722 billion by 2030. Analysts at Swiss Re Institute predict year-over-year premium growth of 5.5% for 2024.
However, catastrophes and non-life insurers’ profitability are inversely related. Per reports in Aon, total economic losses were $380 billion in 2023, whereas insured losses were $118 million. According to AM Best, the total net underwriting loss was $38 billion in 2023, a 10-year high, largely attributable to weather-related losses, high inflation and reinsurance pricing pressure. Underwriting losses are expected to primarily result from the soft performance in personal lines, which are expected to witness higher catastrophe losses, per Insurance Information Institute and Milliman.
However, exposure growth, better pricing, prudent underwriting and favorable reserve development will help withstand the blow. Also, frequent occurrences of natural disasters should accelerate the policy renewal rate.
The insurance industry is rate-sensitive. The Fed made four hikes in 2023, taking the rate to 11 since March 2022. An improving rate environment is a boon for insurers, especially long-tail insurers. The Fed has held interest rates unchanged at 5.25-5.5% at the December FOMC meeting. An improving rate environment is a boon for insurers, especially long-tail insurers. Also, investment income is an essential component of insurers’ top lines.
Product diversification helps industry players lower concentration risks, ensure uninterrupted revenue generation and improve retention ratio. Increased awareness, driving higher demand for protection products, should benefit sales and premiums of life insurance operations. Also, per Deloitte Insights, the transition to green energy and related insurance products, as well as exposure to intangible assets, offers growth opportunities. Per a report in Carrier Management, AM Best expects profitable commercial lines and improving personal lines for 2024.
Increased awareness, driving higher demand for protection products, should benefit sales and premiums for life insurance operations. Continued improvements in pricing and an increase in exposure should support premium growth. A compelling product portfolio will enhance sales of life insurers. Per a report published in ReporterLinker, global life insurance gross written premium is expected to be $2.5 trillion by 2026. Per a Statista report, the gross written premium is expected to see an annual growth rate (CAGR 2024-2028) of 1.7%.
Players are investing heavily in technology to improve basis points, scale and efficiencies. While a solid policyholder surplus will help the property and casualty insurance industry absorb losses, a sturdy capital level continues to aid insurers in pursuing strategic mergers and acquisitions, investing in growth initiatives, engaging in share buybacks, and increasing dividends or paying out special dividends.
4 Insurers to Watch
With the help of the Zacks Stock Screener, we have selected four insurance stocks with an impressive Value Score of A or B. All these stocks mentioned below carry a Zacks Rank #2 (Buy) at present. Back-tested results have shown that for stocks with a solid Value Score and a favorable Zacks Rank, the returns are even better. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Atlanta, GA-based Assurant is a global provider of risk management solutions in the housing and lifestyle markets. The well-performing Global Lifestyle business, growth in fee-based capital-light businesses and solid capital management augur well for this insurer. AIZ’s focus on growing fee-based capital-light businesses, which presently constitute more than 50% of segmental revenues, bodes well. Management estimates that contribution from the same will continue to grow in the double-digits over the longer term.
The Zacks Consensus Estimate for Assurant’s 2024 earnings per share indicates a year-over-year increase of 3.4%. The consensus estimate for revenues is pegged at $11.66 billion, implying a year-over-year improvement of 4.1%.
The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 7.7%. The consensus estimate for 2025 revenues is pinned at $12.07 billion, implying a year-over-year improvement of 3.4%.
The consensus estimate for 2024 and 2025 has moved 6% and 6.5% north, respectively, in the past 60 days. The expected long-term earnings growth rate is pegged at 5.1%. AIZ delivered a four-quarter average earnings surprise of 42.15%. The insurer has an impressive Value Score of A, reflecting an attractive stock valuation. AIZ shares have rallied 55.8% in the past year.
The company’s return on equity in the trailing 12 months was 18.3%, better than the industry average of 13.2%.
Greenwich, CT-based W.R. Berkley is one of the nation’s largest commercial lines property casualty insurance providers. The company offers a variety of insurance services, from reinsurance to workers comp third-party administrators.
WRB has consistently benefited from its insurance business, performing well on the increase in premiums written over the past many years. WRB has been investing in numerous startups since 2006 and establishing new units in growing international markets. WRB’s international business is poised for growth, supported by emerging markets. A solid capital position enables capital deployment. Investment in alternative assets should help improve investment income.
The Zacks Consensus Estimate for W.R. Berkley’s 2024 earnings per share indicates a year-over-year increase of 21.9%. The consensus estimate for revenues is pegged at $13.27 billion, implying a year-over-year improvement of 9.7%.
The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 9.2%. The consensus estimate for 2025 revenues is pinned at $14.06 billion, implying a year-over-year improvement of 5.9%.
The consensus estimate for 2024 and 2025 has moved 1% and 0.3% north, respectively, in the past 60 days. The expected long-term earnings growth rate is pegged at 9%. WRB earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 4.10%. The insurer has an impressive Value Score of B, reflecting an attractive stock valuation.
Shares of the property and casualty insurer have rallied 38.9% in the past year.
The company’s return on equity in the trailing 12 months was 19%, better than the industry average of 7.3%.
Based in New York, The Travelers provides a wide variety of property and casualty insurance, and surety products and services to businesses, organizations and individuals in the United States and select international markets. Strong renewal rate change, retention and increased new businesses, supported by a compelling portfolio and a solid capital position, poise TRV well for growth. The company raised its dividend for the 19th consecutive year at a compound annual growth rate of 8% over that period.
The Zacks Consensus Estimate for TRV’s 2024 earnings per share indicates a year-over-year increase of 34.8%. The consensus estimate for revenues is pegged at $46.35 billion, implying a year-over-year improvement of 11.7%.
The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 13.6%. The consensus estimate for 2025 revenues is pinned at $50.20 billion, implying a year-over-year improvement of 8.3%.
The consensus estimate for 2024 and 2025 has moved 0.1% and 0.04% north, respectively, in the past seven days. The expected long-term earnings growth rate is pegged at 10.8%. This insurer has an impressive Value Score of A, reflecting an attractive stock valuation. The insurer also has a favorable VGM Score of B.
The company’s return on equity in the trailing 12 months was 13.6%, better than the industry average of 7.3%. Shares of TRV have rallied 34.5% in the past year.
Headquartered in Toronto, Canada, Manulife Financial is one of the three dominant life insurers within its domestic market and possesses rapidly growing operations in the United States and several countries in Asia. A strong Asia business, an expanding wealth and asset management business, investments to ramp up digital capabilities, and a solid capital position poise this life insurer well for growth.
MFC boasts a long-term earnings growth rate of 10%. The Zacks Consensus Estimate for Manulife Financial’s 2024 and 2025 earnings implies year-over-year growth of 5.4% and 9.7%, respectively.
The Zacks Consensus Estimate for MFC’s 2024 earnings has increased 2.3% in the past 60 days. MFC delivered a four-quarter average earnings surprise of 7.01%. The life insurer has an impressive Value Score of B. The company’s return on equity in the trailing 12 months was 15.9%, better than the industry average of 15.4%. MFC shares have rallied 32.3% in the past year.