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Buy These 3 Insurance Stocks That Outperform the S&P 500 in a Year
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Better pricing, prudent underwriting and exposure growth have helped the insurance industry perform well. 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.
Price Performance
The insurance industry has outperformed the Zacks S&P 500 composite and the Finance sector in the past year. The insurance industry has rallied 34.3% in the past year compared with the Zacks S&P 500 composite’s return of 24.9% and the Finance sector’s growth of 28%.
Image Source: Zacks Investment Research
Here are three insurance stocks that have performed well over the past year, riding on strong fundamentals. Assurant, Inc. (AIZ - Free Report) , Reinsurance Group of America, Incorporated (RGA - Free Report) and Arch Capital Group Ltd. (ACGL - 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
Non-life insurers are exposed to catastrophe losses and their profitability is vulnerable to the same. According to Verisk’s Extreme Event Solutions group estimates, U.S. onshore wind property losses from Beryl were within $2-$3 billion. Per Allstate, estimated catastrophe losses were $587 million for July alone from 20 events.
Higher catastrophe losses continue to provide impetus to policy renewal rates. However, global commercial insurance rates were unchanged in the second quarter of 2024, per the Marsh Global Insurance Market Index. Price hikes, operational strength, higher retention, strong renewal and the appointment of retail agents should help write higher premiums. Per Deloitte Insights, gross premiums are estimated to increase six-fold to $722 billion by 2030.
Multiline insurers benefit from a diversified portfolio that lowers concentration risk. While higher demand for protection products benefits sales and premiums of life insurance operations, better pricing and increased exposure to intangibles and cyber threats support premium growth of non-life insurance operations. Per the 2024 global insurance outlook published in Financial Services, U.S. demand for catastrophe reinsurance is expected to grow, putting upward pressure on prices.
Life insurers have been redesigning products, focusing on protection products. Life insurers continue to roll out investment products that provide bundled covers of guaranteed retirement income, life and healthcare to cater to customers preferring policies with “living” benefits more than those with death benefits.
The insurance industry is rate-sensitive. An improving rate environment is a boon for insurers, especially long-tail insurers. The Fed held interest rates unchanged at 5.25-5.5% at the December FOMC meeting. With a large invested asset base, investment income should remain healthy, even if the Fed cuts rates later this year. Also, the insurance players are investing heavily in technology to improve scale and efficiency. This should help them generate higher margins and improve profitability.
Continued investments in technological advancements are likely to have saved costs and improved efficiency, leading to margin expansion. Share buybacks are expected to have provided an additional upside to the bottom line.
3 Insurers to Watch
With the help of the Zacks Stock Screener, we have selected three insurance stocks with an impressive Value Score of A or B. The stocks mentioned below either carry a Zacks Rank #1 (Strong Buy) or 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.
Assurant: Headquartered in Atlanta, GA, this insurer is a global provider of risk management solutions in the housing and lifestyle markets. A well-performing Global Lifestyle business, improvements in fee-based capital-light businesses and solid capital management poise the Zacks Rank #1 insurer well for growth. Assurant has a strong capital management policy and it has been utilizing 50% of its free cash flow to repurchase shares. A solid capital position supports effective capital deployment. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Assurant’s 2024 earnings per share indicates a year-over-year increase of 6.7%. The consensus estimate for revenues is pegged at $11.7 billion, implying a year-over-year improvement of 4.8%.
The consensus estimate for 2025 earnings per share and revenues indicates increases of 6.1% and 3.2%, respectively, from the 2024 estimates.
Each of the five analysts covering the stock has raised estimates for 2024, and four of five have raised the same for 2025 over the past 30 days. The consensus estimates for 2024 and 2025 have moved 3.3% and 4.5% north, respectively, in the past 30 days. The company’s earnings have improved 20.2% in the past five years, better than the industry average of 9%. Assurant delivered a four-quarter average earnings surprise of 33.56%. The insurer has an impressive Value Score of A, as well as a favorable VGM Score of B. AIZ shares have rallied 40.3% in the past year.
The company’s return on equity in the trailing 12 months was 19.6%, better than the industry average of 16.1%.
Reinsurance Group: Chesterfield, MO-based RGA is a leading global provider of traditional life and health reinsurance and financial solutions with operations in the United States, Latin America, Canada, Europe, the Middle East, Africa, Asia and Australia. The Zacks Rank #2 insurer is set to benefit from the changing life reinsurance pricing environment, expanding business in the pension risk transfer market and disciplined capital management.
The Zacks Consensus Estimate for Reinsurance Group’s 2024 earnings per share indicates a year-over-year increase of 8.1%. The consensus estimate for revenues is pegged at $21.74 billion, implying a year-over-year improvement of 14.1%.The consensus estimate for 2025 earnings per share indicates an increase of 3.8% from the 2024 estimate.
Four of the five analysts covering the stock have raised estimates for 2024, and three of the five have raised the same for 2025 over the past 30 days. The consensus estimates for 2024 and 2025 have moved 1.8% and 1.4% north, respectively, in the past 30 days. Earnings have grown 10.4% in the past five years, better than the industry average of 4.6%. RGA delivered a four-quarter average earnings surprise of 20.5%. The insurer has an impressive Value Score of A and a favorable VGM Score of B. RGA shares have rallied 58.9% in the past year.
The company’s return on equity in the trailing 12 months was 15.8%, better than the industry average of 15.5%.
Arch Capital Group: Pembroke, Bermuda-based Arch Capital is a leading specialty P&C and mortgage insurer and is poised to gain from business opportunities, rate improvement, growth in existing accounts and a solid capital position. Widespread operations, coupled with a compelling product portfolio, provide diversification opportunities and earnings stability to this insurer. The Zacks Rank #2 insurer’s international expansion strengthens operational capabilities while diversifying its business at attractive risk-adjusted returns.
The Zacks Consensus Estimate for Arch Capital’s 2024 earnings per share indicates a year-over-year increase of 6.6%. The consensus estimate for revenues is pegged at $15.56 billion, implying a year-over-year improvement of 15.3%.The consensus estimate for 2025 earnings per share and revenues indicates increases of 2.4% and 9.1%, respectively, from the 2024 estimates.
Three of the eight analysts covering the stock have raised estimates for 2024, and three of the eight have raised the same for 2025 over the past 30 days. The consensus estimate for 2024 and 2025 has moved 2.1% and 0.8% north, respectively, in the past 30 days. Earnings have grown 32.3% in the past five years, better than the industry average of 10.5%. ACGL delivered a four-quarter average earnings surprise of 28.93%. The insurer has an impressive Value Score of A. ACGL shares have rallied 46.9% in the past year.
Arch Capital’s return on equity in the trailing 12 months was 21.4%, better than the industry average of 7.9%.
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Buy These 3 Insurance Stocks That Outperform the S&P 500 in a Year
Better pricing, prudent underwriting and exposure growth have helped the insurance industry perform well. 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.
Price Performance
The insurance industry has outperformed the Zacks S&P 500 composite and the Finance sector in the past year. The insurance industry has rallied 34.3% in the past year compared with the Zacks S&P 500 composite’s return of 24.9% and the Finance sector’s growth of 28%.
Image Source: Zacks Investment Research
Here are three insurance stocks that have performed well over the past year, riding on strong fundamentals. Assurant, Inc. (AIZ - Free Report) , Reinsurance Group of America, Incorporated (RGA - Free Report) and Arch Capital Group Ltd. (ACGL - 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
Non-life insurers are exposed to catastrophe losses and their profitability is vulnerable to the same. According to Verisk’s Extreme Event Solutions group estimates, U.S. onshore wind property losses from Beryl were within $2-$3 billion. Per Allstate, estimated catastrophe losses were $587 million for July alone from 20 events.
Higher catastrophe losses continue to provide impetus to policy renewal rates. However, global commercial insurance rates were unchanged in the second quarter of 2024, per the Marsh Global Insurance Market Index. Price hikes, operational strength, higher retention, strong renewal and the appointment of retail agents should help write higher premiums. Per Deloitte Insights, gross premiums are estimated to increase six-fold to $722 billion by 2030.
Multiline insurers benefit from a diversified portfolio that lowers concentration risk. While higher demand for protection products benefits sales and premiums of life insurance operations, better pricing and increased exposure to intangibles and cyber threats support premium growth of non-life insurance operations. Per the 2024 global insurance outlook published in Financial Services, U.S. demand for catastrophe reinsurance is expected to grow, putting upward pressure on prices.
Life insurers have been redesigning products, focusing on protection products. Life insurers continue to roll out investment products that provide bundled covers of guaranteed retirement income, life and healthcare to cater to customers preferring policies with “living” benefits more than those with death benefits.
The insurance industry is rate-sensitive. An improving rate environment is a boon for insurers, especially long-tail insurers. The Fed held interest rates unchanged at 5.25-5.5% at the December FOMC meeting. With a large invested asset base, investment income should remain healthy, even if the Fed cuts rates later this year. Also, the insurance players are investing heavily in technology to improve scale and efficiency. This should help them generate higher margins and improve profitability.
Continued investments in technological advancements are likely to have saved costs and improved efficiency, leading to margin expansion. Share buybacks are expected to have provided an additional upside to the bottom line.
3 Insurers to Watch
With the help of the Zacks Stock Screener, we have selected three insurance stocks with an impressive Value Score of A or B. The stocks mentioned below either carry a Zacks Rank #1 (Strong Buy) or 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.
Assurant: Headquartered in Atlanta, GA, this insurer is a global provider of risk management solutions in the housing and lifestyle markets. A well-performing Global Lifestyle business, improvements in fee-based capital-light businesses and solid capital management poise the Zacks Rank #1 insurer well for growth. Assurant has a strong capital management policy and it has been utilizing 50% of its free cash flow to repurchase shares. A solid capital position supports effective capital deployment. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Assurant’s 2024 earnings per share indicates a year-over-year increase of 6.7%. The consensus estimate for revenues is pegged at $11.7 billion, implying a year-over-year improvement of 4.8%.
The consensus estimate for 2025 earnings per share and revenues indicates increases of 6.1% and 3.2%, respectively, from the 2024 estimates.
Each of the five analysts covering the stock has raised estimates for 2024, and four of five have raised the same for 2025 over the past 30 days. The consensus estimates for 2024 and 2025 have moved 3.3% and 4.5% north, respectively, in the past 30 days. The company’s earnings have improved 20.2% in the past five years, better than the industry average of 9%. Assurant delivered a four-quarter average earnings surprise of 33.56%. The insurer has an impressive Value Score of A, as well as a favorable VGM Score of B. AIZ shares have rallied 40.3% in the past year.
The company’s return on equity in the trailing 12 months was 19.6%, better than the industry average of 16.1%.
Reinsurance Group: Chesterfield, MO-based RGA is a leading global provider of traditional life and health reinsurance and financial solutions with operations in the United States, Latin America, Canada, Europe, the Middle East, Africa, Asia and Australia. The Zacks Rank #2 insurer is set to benefit from the changing life reinsurance pricing environment, expanding business in the pension risk transfer market and disciplined capital management.
The Zacks Consensus Estimate for Reinsurance Group’s 2024 earnings per share indicates a year-over-year increase of 8.1%. The consensus estimate for revenues is pegged at $21.74 billion, implying a year-over-year improvement of 14.1%.The consensus estimate for 2025 earnings per share indicates an increase of 3.8% from the 2024 estimate.
Four of the five analysts covering the stock have raised estimates for 2024, and three of the five have raised the same for 2025 over the past 30 days. The consensus estimates for 2024 and 2025 have moved 1.8% and 1.4% north, respectively, in the past 30 days. Earnings have grown 10.4% in the past five years, better than the industry average of 4.6%. RGA delivered a four-quarter average earnings surprise of 20.5%. The insurer has an impressive Value Score of A and a favorable VGM Score of B. RGA shares have rallied 58.9% in the past year.
The company’s return on equity in the trailing 12 months was 15.8%, better than the industry average of 15.5%.
Arch Capital Group: Pembroke, Bermuda-based Arch Capital is a leading specialty P&C and mortgage insurer and is poised to gain from business opportunities, rate improvement, growth in existing accounts and a solid capital position. Widespread operations, coupled with a compelling product portfolio, provide diversification opportunities and earnings stability to this insurer. The Zacks Rank #2 insurer’s international expansion strengthens operational capabilities while diversifying its business at attractive risk-adjusted returns.
The Zacks Consensus Estimate for Arch Capital’s 2024 earnings per share indicates a year-over-year increase of 6.6%. The consensus estimate for revenues is pegged at $15.56 billion, implying a year-over-year improvement of 15.3%.The consensus estimate for 2025 earnings per share and revenues indicates increases of 2.4% and 9.1%, respectively, from the 2024 estimates.
Three of the eight analysts covering the stock have raised estimates for 2024, and three of the eight have raised the same for 2025 over the past 30 days.
The consensus estimate for 2024 and 2025 has moved 2.1% and 0.8% north, respectively, in the past 30 days. Earnings have grown 32.3% in the past five years, better than the industry average of 10.5%. ACGL delivered a four-quarter average earnings surprise of 28.93%. The insurer has an impressive Value Score of A. ACGL shares have rallied 46.9% in the past year.
Arch Capital’s return on equity in the trailing 12 months was 21.4%, better than the industry average of 7.9%.