Macroeconomic headwinds, which include interest rate cuts, ongoing inflationary pressures, poor economic growth and continuing wars across several parts of the world, are some factors that have been inducing market volatility. Also, potential volatility from natural catastrophe losses, as well as higher reinsurance costs, raises a concern.

The major U.S. stock market indices like the Nasdaq Composite and S&P 500 have declined in the last trading season.

Despite such negatives, the Zacks Property and Casualty (P&C) Insurance industry has outperformed the Zacks S&P 500 composite and the Finance sector year to date, riding on its inherent strength. The insurance industry has advanced 28% year to date compared with the Zacks S&P 500 composite’s return of 20.3% and the Finance sector’s growth of 15.1%.

Industry Outperforms Sector and S&P 500

Image Source: Zacks Investment Research

Investors always look for a safe portfolio of stocks that will give them solid returns despite market turmoil. The Allstate Corporation (ALL Quick QuoteALL - Free Report) , Axis Capital Holdings Limited (AXS Quick QuoteAXS - Free Report) , The Progressive Corporation (PGR Quick QuotePGR - Free Report) and W.R. Berkley Corporation (WRB Quick QuoteWRB - Free Report) have the potential to make investors happy, courtesy of their fundamental strength.

Factors Driving the Industry

Improved pricing will help insurers write higher premiums and address claims payment prudently. Global commercial insurance rates remained unchanged in the second quarter of 2024, per the Marsh Global Insurance Market Index. Analysts at Swiss Re Institute predict non-life premiums to grow 7% and life premiums to grow 2.9% in 2024. Per a report in Carrier Management, AM Best expects profitable commercial lines and improving personal lines in 2024.

Colorado State University estimates an extremely active 2024 hurricane season. Catastrophes and non-life insurers’ profitability are inversely related. The hurricane season typically starts in June and lasts through November, gathering strength in August and September. Thus, property and casualty insurers’ third-quarter results are affected the most.  

Per Verisk and The American Property Casualty Insurance Association (APCIA), premiums written increased 10.2% and earned premiums grew 11% in the first half of 2024. Aon estimates first-half 2024 total economic losses to be $117 billion, whose 50% is covered by insurance. Verisk and APCIA stated a net underwriting gain of $3.7 billion in the first half of 2024, reversing the $23.4 billion loss incurred in the year-ago period. Swiss Re expects the combined ratio, a measure of the insurer's profitability, to improve 350 basis points year over year to 98.5% in 2024.

The insurance industry is rate-sensitive. An improving rate environment is a boon for insurers, especially long-tail insurers. In its FOMC meeting, the Federal Reserve announced cutting the interest rate by 50 basis points. This is the first time in four years that the central bank has taken such an action. The interest rate is now 4.75-5%, down from a more than two-decade high of 5.25-5.5%. 

Also, the insurance industry continues to witness accelerated digitalization. Players are investing heavily in technology to improve scale and efficiencies. 
A sturdy capital position supports effective capital deployments like mergers and acquisitions, dividend hikes, special dividends and share buyback programs. 

Let’s focus on some low-beta stocks that tend to deliver steady performance irrespective of market conditions.

Understanding Beta

Beta indicates the volatility of a particular stock with respect to the market. In other words, beta measures the extent of the stock price movement relative to the market and provides an investor with an estimation of how much risk a stock will add to the portfolio.

If a stock has a beta of 1, then the price of the stock will move with the market. So, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.

Low-beta stocks are anticipated to yield robust returns while providing protection against unpredictable market conditions.

Screening Criteria:

We have used our proprietary Zacks Stock Screener to find stocks that can deliver steady performance, even in times of market turmoil. We have included stocks with a beta of less than 1 for selecting low-risk stocks. However, this should not be the only factor to be considered while selecting a winning strategy. We need to take into account other parameters that can add value to the portfolio.

Percentage Change in Price in the Last 12 Weeks Greater Than 1: This ensures that the stocks have witnessed positive price movement over the last three months.

Average 20-Day Volume Greater Than 400,000: A substantial trading volume ensures that the stocks are easily tradable.

Zacks Rank Less Than Equal to 3: Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stocks will either outperform or perform in line with the broader U.S. equity market over the next one to three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

VGM Score of A or B: The selected insurance stocks have a VGM Score of A or B.

4 Low-Beta P&C Insurance Stocks

Bermuda-based AXIS Capital Holdings Limited provides a broad range of specialty insurance and reinsurance solutions to its clients on a worldwide basis through operating subsidiaries and branch networks based in Bermuda, the United States, Europe, Singapore, Canada, Latin America and the Middle East. The expected long-term earnings growth rate is 27.8%, better than the industry average of 11.6%. The Zacks Consensus Estimate for 2024 has moved up 6.9% in the past 60 days, indicating year-over-year growth of 8.7%.

Rate increases, increased new business opportunities and a focus on driving growth in its most attractive lines, underwriting excellence, a compelling and diversified product portfolio, digital capabilities and a solid capital position poise this Zacks Rank #1 insurer well for growth.

Based in Greenwich, CT, W.R. Berkley is one of the nation’s largest commercial lines property casualty insurance providers. A solid insurance business, momentum in international business and a sturdy financial position should continue to drive earnings. W.R. Berkley maintains a solid balance sheet with sufficient liquidity and strong cash flows. 

The expected long-term earnings growth rate is 13.5%. The Zacks Consensus Estimate for 2024 has moved up 1.7% in the past 60 days and indicates year-over-year growth of 22.8%.

Banking on prudent underwriting, it boasts more than 60 straight quarters of favorable reserve development. This Zacks Rank #2 stock has been hiking dividends since 2005, banking on a solid capital position.

Headquartered in Northbrook, IL, The Allstate Corporation is the third-largest property-casualty insurer and the largest publicly-held personal lines carrier in the United States. It is principally engaged, through its subsidiaries, in providing 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. The expected long-term earnings growth rate is 7%. The Zacks Consensus Estimate for 2024 has moved up 10.5% in the past 60 days, indicating year-over-year growth of 1,500%.

A diversified product portfolio, strategic acquisitions and disciplined pricing should continue to fuel the top line. Changes in the business mix to focus on those that command a high return on equity bodes well for growth. This Zacks Rank #3 insurer's strategic business streamlining and cost reduction efforts are central to its long-term growth strategy.

Headquartered in Tampa, FL, Progressive Corp is one of the major auto insurers in the country. PGR is a leading independent agency writer of private passenger auto coverage and the market leader for motorcycle products. 

This Zacks Rank #1 insurer continues to gain on higher premiums, given its compelling product portfolio, leadership position and strength in both Vehicle and Property businesses. Focus on becoming a one-stop insurance destination, catering to customers opting for a combination of home and auto insurance, poising well for PGR’s growth. 

Policies in force and retention ratio should remain healthy. Competitive pricing to retain current customers and address their needs with new offerings should continue to drive policy life expectancy. The expected long-term earnings growth rate is 27.6%. The Zacks Consensus Estimate for 2024 has moved up 6.7% in the past 30 days and indicates year-over-year growth of 113%.