The Zacks Multiline Insurance industry comprises companies that provide single insurance coverage bundling automobile, homeowner, long-term care, life and health insurance to individuals and businesses. The insured is covered for many things through a single contract by paying just one premium.
These companies cover commercial and personal properties, automobiles, marine, livestock, aviation, personal accident, life, including permanent and term insurance, supplemental accident and health insurance, workers' compensation, annuity products, private mortgage insurance, among others. They also provide risk management services.
Multiline insurers stand to gain from disseminating the risk among different coverage.
Here are the three major industry themes:
- These insurers are one of the major beneficiaries of an improving rate environment, as higher rates allow them to invest the premiums at a higher rate and generate better investment income. After four rate hikes in 2018, the Federal Reserve intends to implement two hikes in the current year. Also, a strengthening economy backed by low unemployment level, improving wages and growing GDP should drive demand for coverages from these companies.
- Multiline insurers' profits are vulnerable to catastrophes because of the presence of property coverage in their bundle. As a result, frequent natural disasters of significant magnitude occurring since 2017 have compelled these insurers to raise prices for most of their products to safeguard profitability. Nonetheless, pricing for workers compensation and international liability continue to remain weak.
- Increasing adoption of technologies like artificial intelligence, robotic process automation, cognitive intelligence or blockchain and cloud computing should help insurers control costs. A solid capital level continues to support active merger and acquisitions.
Zacks Industry Rank Indicates Bright Prospects
The group's Zacks Industry Rank , which is basically the average of the Zacks Rank of all the member stocks, indicates bright prospects in the near term. The Zacks Multiline Insurance industry, which is housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #94, which places it at the top 37% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry's positioning in the top 50% of the Zacks-ranked industries is the result of positive earnings outlook for the constituent companies in aggregate. In about six months' time, the industry's EPS estimates for the current year have gone up nearly 43%.
Before we present a few multiline insurance stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Lags S&P 500 and Sector
The Multiline Insurance industry has underperformed the Zacks S&P 500 composite and its own sector over the past year. The stocks in this industry have collectively declined 22.1% in the past year while the Finance sector declined 14.1%. Meanwhile, the Zacks S&P 500 composite has lost 6.7%.
One-Year Price Performance
On the basis of trailing 12-month price-to-book (P/B) ratio, which is commonly used for valuing insurance stocks, the industry is currently trading at 1.50X compared with the S&P 500's 3.71X and the sector's 2.40X.
Over the past five years, the industry has traded as high as 1.98X, as low as 1.33X and at the median of 1.62X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
Adoption of technology, product development, prudent underwriting practices, competitive pricing and a compelling product portfolio should keep supporting business growth for multiline insurers. Also, a sturdy capital level should support effective capital deployment like investing in growth opportunities and returning capital to shareholders.
Stocks to Consider
Investors may consider buying the following stocks that carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Kemper Corp. (KMPR): This provider of property and casualty, and life and health insurance to individuals and businesses in the United States is based in Chicago, IL. The Zacks Consensus Estimate for 2019 EPS has moved 1.5% north over the past 60 days. As a result, the stock currently carries a Zacks Rank #1.
Price and Consensus: KMPR
MGIC Investment Corp. (MTG): This Milwaukee, WI-based provider of private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States company sports a Zacks Rank of 1. The company has a long-term earnings growth rate of 5%. It surpassed estimates in each of the trailing four quarters.
Price and Consensus: MTG
Aegon N.V. (AEG): Headquartered in Netherlands, this Zacks Rank #1 provider life insurance, pensions, and asset management services has seen its consensus estimate for 2019 move 5.2% north in the past 60 days. The Zacks Consensus Estimate for 2019 indicates an increase of nearly 63% year over year.
Price and Consensus: AEG
ageas SA/NV (AGESY): Brussels, Belgium based ageas SA/NV engages in insurance business in Europe and Asia. The Zacks Consensus Estimate for 2019 EPS has moved up by a couple of cents over the past 60 days. The stock too sports a Zacks Rank #1.
Price and Consensus: AGESY
Radian Group Inc . (RDN): This Philadelphia, PA-based provider of provides mortgage and real estate products and services in the United States sports a Zacks Rank of 1. The Zacks Consensus Estimate for 2019 translate to a year over year increase of 3.2% and has a long-term earnings growth rate of 5%. It surpassed estimates in each of the trailing four quarters.
Price and Consensus: RDN
Cigna Corporation (CI): This Bloomfield, CT-based company is a health services organization providing insurance and related products and services in the United States and internationally. The consensus EPS estimate for this Zacks Rank #2 stock has moved 10.9% north over the past 60 days.
Price and Consensus: CI
MetLife, Inc . (MET): This insurer engages in engages in the insurance, annuities, employee benefits, and asset management businesses. The Zacks Consensus Estimate for 2019 EPS of this Schaumburg, IL-based company has moved up by a cent over the past 60 days and carries a Zacks Rank #2.
Price and Consensus: MET
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