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4 Insurers That Have Outperformed 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.

The insurance industry has outperformed the Zacks S&P 500 composite and the Finance sector in the past year. The insurance industry has rallied 21.4% in the past year compared with the Zacks S&P 500 composite’s return of 16.4% and the Finance sector’s growth of 19.1%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Here are four insurance stocks that have performed well over the past year, riding on strong fundamentals. HCI Group, Inc. HCI, NMI Holdings Inc. NMIH, Reinsurance Group of America, Incorporated RGA and Old Republic International Corporation ORI 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

Per a report in Carrier Management, AM Best expects profitable commercial lines and improving personal lines, coupled with higher investment returns on increased yields and strong cash flow, to drive the industry’s performance in 2024.

Improved pricing will help insurers write higher premiums and address claims payment prudently. Swiss Re estimates premiums to grow 7% in 2024 and 4.5% in 2025. Per Fitch Ratings, personal auto will likely perform better than other lines of business, thus leading to better premiums.

Colorado State University (CSU) estimates an active hurricane season this year, about 170% of the average season. Swiss Re estimates the combined ratio in 2024 to be 98.5%.

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.

With a rise in the number of baby boomers, the demand for retirement benefits is increasing. Per a Statista report, the life insurance market is expected to grow, with a gross written premium expected to be $3.67 trillion in 2024.

Increased awareness continues to support the life insurance business. A compelling product portfolio will thus aid sales of life insurers. Also, prudently pricing the products and balancing customers' preferences and claim costs will be the key to driving growth. Per a report published in ReporterLinker, global life insurance gross written premium is expected to be $2.5 trillion by 2026. Per Statista’s report, gross written premium is expected to show an annual growth rate (CAGR 2024-2028) of 1.7%.

Insurers invest a portion of their premium income. Therefore, the higher the rates, the better the investment results. Despite different opinions, the Fed has refrained from cutting rates so far. With a large invested asset base, investment income should remain healthy even if the Fed cuts rates later this year.

The industry is also witnessing accelerated digitalization to improve scale and efficiency. While a solid policyholders’ surplus helps the industry absorb losses, a sturdy capital level supports inorganic expansion, investment in growth initiatives and distribution of wealth to shareholders.

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 #1 (Strong Buy) or 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 stocks here.

Headquartered in Tampa, FL, HCI Group provides property and casualty insurance, insurance management, reinsurance, and real estate and has information technology businesses. Growing homeowners business, acquiring profitable books of business, proactively managing risk and loss costs and deploying excess capital into investments and growth initiatives fuel growth.

The Zacks Consensus Estimate for HCI Group’s 2024 earnings per share indicates a year-over-year increase of 57.6%. The consensus estimate for revenues is pegged at $775.98 million, implying a year-over-year improvement of 40.9%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 4.2% and 4.4%, respectively, from the corresponding 2024 estimates.

The consensus estimates for 2024 and 2025 have moved 13% and 4.3% north, respectively, in the past 60 days. Earnings have improved 33.8% in the past five years, better than the industry average of 10.5%. HCI Group delivered a four-quarter average earnings surprise of 139.15%. The insurer has an impressive Value Score of A, as well as a favorable VGM Score of A. HCI shares have rallied 65.3% in the past year.

The company’s return on equity in the trailing 12 months was 40.3%, better than the industry average of 7.8%.

Emeryville, CA-based NMI Holdings provides private mortgage insurance through its wholly-owned insurance subsidiaries in the United States. Improving mortgage insurance portfolio, higher new insurance written volume, a comprehensive reinsurance program, a solid capital position and effective capital deployment poise the insurer well for growth. The expected long-term earnings growth rate is pegged at 6.9%.

The Zacks Consensus Estimate for NMI Holdings’ 2024 earnings per share indicates a year-over-year increase of 10.6%. The consensus estimate for revenues is pegged at $643.21 million, implying a year-over-year improvement of 11%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 7.6% and 6.1%, respectively, from the corresponding 2024 estimates.

The consensus estimates for 2024 and 2025 have moved 1.4% and 0.6% north, respectively, in the past 30 days. Earnings have grown 18.7% in the past five years, better than the industry average of 10.5%. NMIH delivered a four-quarter average earnings surprise of 8.60%. The insurer has an impressive Value Score of B, indicating an attractive stock valuation. NMIH shares have rallied 28% in the past year. The insurer also has a favorable VGM Score of A.

The company’s return on equity in the trailing 12 months was 18%, better than the industry average of 7.8%.

Chesterfield, MO-based Reinsurance Group 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. This 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 3.9%. The consensus estimate for revenues is pegged at $20.41 billion, implying a year-over-year improvement of 7.1%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 5.5% and 2.2%, respectively, from the corresponding 2024 estimates.

The consensus estimates for 2024 and 2025 have moved 0.8% and 1.2% north, respectively, in the past 30 days. Earnings have grown 10.4% in the past five years, better than the industry average of 5.9%. RGA delivered a four-quarter average earnings surprise of 19.48%. The insurer has an impressive Value Score of A, as well as a favorable VGM Score of A. RGA shares have rallied 46.3% in the past year.

The company’s return on equity in the trailing 12 months was 15.9%, better than the industry average of 15.5%.

Headquartered in Chicago, IL, Old Republic International specializes in insurance underwriting and related services, operating primarily in the United States and Canada. ORI’s solid market presence, niche focus, low property catastrophe exposure in its General Insurance segment and robust capital position bode well for growth. ORI continues to strengthen its balance sheet by improving its cash balance while lowering its leverage ratio.

The Zacks Consensus Estimate for Old Republic International’s 2024 earnings per share indicates a year-over-year increase of 3.8%. The consensus estimate for revenues is pegged at $7.96 billion, implying a year-over-year improvement of 6.8%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 4.4% and 4%, respectively, from the corresponding 2024 estimates.

The consensus estimates for 2024 and 2025 have moved 1.1% north in the past 60 days. Earnings have grown 10.3% in the past five years, better than the industry average of 9.2%. ORI has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 6.61%. The insurer has an impressive Value Score of B, as well as a favorable VGM Score of B. ORI shares have rallied 22.5% in the past year.

The company’s return on invested capital in the trailing 12 months was 5.9%, better than the industry average of 2%.

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