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3 Insurance Stocks to Buy as Interest Rates Remain High
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The financial sector generally performs strongly in a rising interest rate environment or in one where the high rates simply refuse to budge. Investors in this predicament see solid returns in risk-free defensive sectors.
The financial sector as a whole has been having a decent 2024. The S&P 500 Financials Select Sector SPDR (XLF), a benchmark for the sector’s health, jumped 7.64% year to date as of Apr 30, 2024. Over the past 12 months, the sector has grown 23.84% as interest rates have remained high.
Inside the financial sector, insurance stocks, in particular, can flourish as rates stay high. As a matter of fact, interest rates and insurance companies have a linear relationship, which entails that the higher the rate, the greater the growth for the company. Also, insurers with steady cash flows hold lots of safe debt to support the insurance policies they write, making them inherently defensive in nature.
Insurance is also perceived to be a recession-resistant business. In 2022, when the talks of an impending recession were creating havoc in the markets, the S&P Insurance index outperformed the S&P 500 benchmark index by 13 percentage points through the first half of the year.
Currently, the Fed has been sending signals to the market that it would like to inspect inflation and other sectoral data even further before actually opting for rate cuts. The market, including retail investors, is thus pricing in the “higher for longer” mood. In fact, revised consumer sentiment for May came in last week at 69.1, significantly higher than the previously reported number of 67.4. Improving consumer sentiment means more car and home sales, which means more policy writing for the insurance sector.
It will be prudent, thus, to venture into the space and select three insurance stocks that are likely to gain ground in the ensuing months. The stocks below flaunt a Zacks Rank #1 (Strong Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
American Coastal Insurance Corporation (ACIC - Free Report) is a U.S.-based commercial and personal property and casualty insurance company.
ACIC’s expected earnings growth rate for the next year is 16.7%. The Zacks Consensus Estimate for its current-year earnings has improved 20% over the past 60 days. The company has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hamilton Insurance Group, Ltd. (HG - Free Report) underwrites specialty insurance and reinsurance risks.
HG’s expected earnings growth rate for the current year is 40.6%. The Zacks Consensus Estimate for its current-year earnings has improved 29.4% over the past 60 days. The company has a VGM Score of A.
Oscar Health, Inc. (OSCR - Free Report) is a U.S.-based health insurance company.
OSCR’s expected earnings growth rate for the current year is 96.7%. The Zacks Consensus Estimate for its current-year earnings has improved 82.6% over the past 60 days. The company has a VGM Score of B.
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3 Insurance Stocks to Buy as Interest Rates Remain High
The financial sector generally performs strongly in a rising interest rate environment or in one where the high rates simply refuse to budge. Investors in this predicament see solid returns in risk-free defensive sectors.
The financial sector as a whole has been having a decent 2024. The S&P 500 Financials Select Sector SPDR (XLF), a benchmark for the sector’s health, jumped 7.64% year to date as of Apr 30, 2024. Over the past 12 months, the sector has grown 23.84% as interest rates have remained high.
Inside the financial sector, insurance stocks, in particular, can flourish as rates stay high. As a matter of fact, interest rates and insurance companies have a linear relationship, which entails that the higher the rate, the greater the growth for the company. Also, insurers with steady cash flows hold lots of safe debt to support the insurance policies they write, making them inherently defensive in nature.
Insurance is also perceived to be a recession-resistant business. In 2022, when the talks of an impending recession were creating havoc in the markets, the S&P Insurance index outperformed the S&P 500 benchmark index by 13 percentage points through the first half of the year.
Currently, the Fed has been sending signals to the market that it would like to inspect inflation and other sectoral data even further before actually opting for rate cuts. The market, including retail investors, is thus pricing in the “higher for longer” mood. In fact, revised consumer sentiment for May came in last week at 69.1, significantly higher than the previously reported number of 67.4. Improving consumer sentiment means more car and home sales, which means more policy writing for the insurance sector.
It will be prudent, thus, to venture into the space and select three insurance stocks that are likely to gain ground in the ensuing months. The stocks below flaunt a Zacks Rank #1 (Strong Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
American Coastal Insurance Corporation (ACIC - Free Report) is a U.S.-based commercial and personal property and casualty insurance company.
ACIC’s expected earnings growth rate for the next year is 16.7%. The Zacks Consensus Estimate for its current-year earnings has improved 20% over the past 60 days. The company has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hamilton Insurance Group, Ltd. (HG - Free Report) underwrites specialty insurance and reinsurance risks.
HG’s expected earnings growth rate for the current year is 40.6%. The Zacks Consensus Estimate for its current-year earnings has improved 29.4% over the past 60 days. The company has a VGM Score of A.
Oscar Health, Inc. (OSCR - Free Report) is a U.S.-based health insurance company.
OSCR’s expected earnings growth rate for the current year is 96.7%. The Zacks Consensus Estimate for its current-year earnings has improved 82.6% over the past 60 days. The company has a VGM Score of B.