We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The long suffering for insurers seems to be finally over as the much-awaited interest rate hike has materialized after seven years. The interest rates, which were kept at a near-zero level to bolster the economy, hit the investment income (a main component of revenues) of insurance companies. . Insurance industry is one of those sectors that stand to gain from high interest rates. The insurers’ top line consist primarily of two components – premiums earned from customers and net investment income generated from the float (premiums collected that would be used to pay out claims in the future) invested by insurance companies.
Insurance companies invest the funds from premiums earned to generate investment income. Insurers primarily utilize their surplus fund for safe investments, such as bonds. Investors should note that increases in rates by the Fed lead to rise in yields and coupons on these bonds. An increasing interest rates allows insurers to invest their funds at high yields and earn higher investment income
In the last decade, insurers witnessed a dent in their top line due to low investment income as investment yield declined owing to low interest rates. However, the tide is likely to turn for companies in this space as the hike in interest rate by the Fed will lead to improvement in bond yields. Insurers can then invest their premiums and receive higher yields. Higher investment income, in turn, will boost profits.
Apart from investment component, the hike in interest rates were also much awaited by the life insurance companies. Given that these companies base long-term average rates to fix premiums, low rates hurt the bottom line of life insurers, especially in annuities, certain life insurance products and long-term disability products.
Now that the Fed has increased interest rates (and is projecting three more rate hikes in 2017), the yield curve appears to be rising, which indicates improved profitability ahead for insurers.
Adding to the prevailing optimism, MetLife Inc. (MET - Free Report) announced that it now expects operating earnings to increase by $300 million in over the next three years.
Nevertheless, the rate hikes announced in 2017 will bring some respite to the industry that has incurred high catastrophe losses this year. As per Munich RE, economic losses in the U.S. caused by natural catastrophes in the first half of 2016 were $ 17 billion compared with $12 billion in the same period last year. Out of this, losses of $11 billion were insured compared with $8 billion of insured losses in first half of 2015.
Given the improving operating environment for the insurers, investment in the stocks of companies in this sector may be a good option, going forward.
Stocks to Pick
We have chosen value stocks with strong fundamentals that could witness higher returns. A value stock implies stocks trading lower than their fair value or intrinsic value, which can therefore offer a significant upside potential. For this particular strategy, the stocks with a Value Score of ‘A’ or ‘B’ have been selected.
We have zeroed in on stocks with a low price/earnings (“P/E”) ratio as these can prove to be great bargains. A low P/E indicates a decline in a stock’s price or an improvement in its earnings performance
Prudential Financial Inc. (PRU - Free Report) has a P/E ratio of 11.82, which is much lower than the industry PE ratio of 30.40. Also, the company has seen its earnings estimates rise to $8.98 per share from $8.78 per share over the past 60 days. Its PEG ratio of 1.9 is also lower than the industry PEG ratio of 2.98. It has a Value Style Score of ‘A’ and a Zacks #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
American International Group Inc. (AIG - Free Report) has a Zacks Rank #3 (Hold) and a Value Style Score of ‘B.’ The company’s P/E ratio of 17.20 is much lower than the industry PE ratio of 30.40. Also, the company has seen its earnings estimates rise to $8.98 per share from $8.78 per share over the past 60 days. Its PEG ratio of 1.61 is also lower than the industry PEG ratio of 2.98.
CNO Financial Group Inc. (CNO - Free Report) has a Zacks Rank # 3 (Hold) and a Value Style Score of ‘A.’ The company’s P/E ratio of 14.80 is much lower than the industry PE ratio of 30.40. Also, the company has seen its 2016 earnings estimates rise over the past 60 days. Its PEG ratio of 1.41 is also lower than the industry PEG ratio of 2.98.
Radian Group Inc. (RDN - Free Report) has a Zacks Rank # 3 (Hold) and a Value Style Score of ‘A.’ The company’s P/E ratio of 11.77 is much lower than the industry PE ratio of 30.40. Also, the company has seen its 2016 earnings estimates rise over the past 60 days. Its PEG ratio of 1.57 is also lower than the industry PEG ratio of 2.98.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
4 Insurance Stocks with Bright Prospects in 2017
The long suffering for insurers seems to be finally over as the much-awaited interest rate hike has materialized after seven years. The interest rates, which were kept at a near-zero level to bolster the economy, hit the investment income (a main component of revenues) of insurance companies.
.
Insurance industry is one of those sectors that stand to gain from high interest rates. The insurers’ top line consist primarily of two components – premiums earned from customers and net investment income generated from the float (premiums collected that would be used to pay out claims in the future) invested by insurance companies.
Insurance companies invest the funds from premiums earned to generate investment income. Insurers primarily utilize their surplus fund for safe investments, such as bonds. Investors should note that increases in rates by the Fed lead to rise in yields and coupons on these bonds. An increasing interest rates allows insurers to invest their funds at high yields and earn higher investment income
In the last decade, insurers witnessed a dent in their top line due to low investment income as investment yield declined owing to low interest rates. However, the tide is likely to turn for companies in this space as the hike in interest rate by the Fed will lead to improvement in bond yields. Insurers can then invest their premiums and receive higher yields. Higher investment income, in turn, will boost profits.
Apart from investment component, the hike in interest rates were also much awaited by the life insurance companies. Given that these companies base long-term average rates to fix premiums, low rates hurt the bottom line of life insurers, especially in annuities, certain life insurance products and long-term disability products.
Now that the Fed has increased interest rates (and is projecting three more rate hikes in 2017), the yield curve appears to be rising, which indicates improved profitability ahead for insurers.
Adding to the prevailing optimism, MetLife Inc. (MET - Free Report) announced that it now expects operating earnings to increase by $300 million in over the next three years.
Nevertheless, the rate hikes announced in 2017 will bring some respite to the industry that has incurred high catastrophe losses this year. As per Munich RE, economic losses in the U.S. caused by natural catastrophes in the first half of 2016 were $ 17 billion compared with $12 billion in the same period last year. Out of this, losses of $11 billion were insured compared with $8 billion of insured losses in first half of 2015.
Given the improving operating environment for the insurers, investment in the stocks of companies in this sector may be a good option, going forward.
Stocks to Pick
We have chosen value stocks with strong fundamentals that could witness higher returns. A value stock implies stocks trading lower than their fair value or intrinsic value, which can therefore offer a significant upside potential. For this particular strategy, the stocks with a Value Score of ‘A’ or ‘B’ have been selected.
We have zeroed in on stocks with a low price/earnings (“P/E”) ratio as these can prove to be great bargains. A low P/E indicates a decline in a stock’s price or an improvement in its earnings performance
Prudential Financial Inc. (PRU - Free Report) has a P/E ratio of 11.82, which is much lower than the industry PE ratio of 30.40. Also, the company has seen its earnings estimates rise to $8.98 per share from $8.78 per share over the past 60 days. Its PEG ratio of 1.9 is also lower than the industry PEG ratio of 2.98. It has a Value Style Score of ‘A’ and a Zacks #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
American International Group Inc. (AIG - Free Report) has a Zacks Rank #3 (Hold) and a Value Style Score of ‘B.’ The company’s P/E ratio of 17.20 is much lower than the industry PE ratio of 30.40. Also, the company has seen its earnings estimates rise to $8.98 per share from $8.78 per share over the past 60 days. Its PEG ratio of 1.61 is also lower than the industry PEG ratio of 2.98.
CNO Financial Group Inc. (CNO - Free Report) has a Zacks Rank # 3 (Hold) and a Value Style Score of ‘A.’ The company’s P/E ratio of 14.80 is much lower than the industry PE ratio of 30.40. Also, the company has seen its 2016 earnings estimates rise over the past 60 days. Its PEG ratio of 1.41 is also lower than the industry PEG ratio of 2.98.
Radian Group Inc. (RDN - Free Report) has a Zacks Rank # 3 (Hold) and a Value Style Score of ‘A.’ The company’s P/E ratio of 11.77 is much lower than the industry PE ratio of 30.40. Also, the company has seen its 2016 earnings estimates rise over the past 60 days. Its PEG ratio of 1.57 is also lower than the industry PEG ratio of 2.98.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>