The Zacks Property and Casualty Insurance industry is placed within the top 11% of the 250 Zacks industries. It currently carries a Zack Industry Rank #28. The insurers remain well-poised for growth riding on better pricing, prudent underwriting, increased exposure, an improving rate environment, a solid capital position and ongoing economic expansion.

The property and casualty (P&C) insurance industry has returned 33.8% in the year-to-date period, outperforming the Zacks S&P 500 composite and the Finance sector’s growth of 27.1% and 23.8%, respectively.

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Global commercial insurance rates decreased 1% in the third quarter of 2024, which marked the first decrease in the composite rate in seven years, 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 exceed $722 billion by 2030.

Analysts at Swiss Re Institute predict premium growth of 9.5% for 2024 and 4% for 2025. Swiss Re Institute continues to predict an industry return on equity of 9.5% in 2024 and 10% in 2025.

However, industry players continue to grapple with issues like higher catastrophe events, both natural and man-made, which drag down underwriting profit. 

Per Aon, 280 notable global natural disaster events occurred in the first nine months of 2024, which resulted in economic losses of $258 billion and insurance losses of $102 billion. Per Aon, severe convective storms are projected to have driven $59 billion of the insurance industry catastrophe loss for the first nine months of 2024. 

The insurance industry is rate-sensitive. An improving rate environment is a boon for insurers, especially long-tail insurers. The Fed dropped interest rates by another 25 basis points to a range of 4.50-4.75% at the two-day Federal Open Market Committee meeting. With a large invested asset base, investment income should remain healthy.

A solid capital level supports insurers in pursuing strategic mergers and acquisitions to gain market share, expand in niche areas and diversify operations into new business lines and geography, as well as increase dividends, pay special dividends and buy back shares. Deloitte estimates more mergers and acquisitions in the reinsurance space in 2024.

The P&C insurance industry is witnessing increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation that expedite business operations and save costs. Insurers continue to invest heavily in technology to improve basis points, scale and efficiencies. Per the Deloitte FSI Predictions article, insurers are expected to generate around $4.7 billion in annual global premiums from AI-related insurance by 2032.

Given the bright prospects of the industry, growth stocks like The Allstate Corporation (ALL Quick QuoteALL - Free Report) , The Travelers Companies, Inc. (TRV Quick QuoteTRV - Free Report) , Root, Inc. (ROOT Quick QuoteROOT - Free Report) and Mercury General Corporation (MCY Quick QuoteMCY - Free Report) , driven by their solid fundamentals, should generate better returns.

Our 4 Growth Picks

Given the prospects of the industry, let’s look at a few stocks that have the potential to generate better returns. Our proprietary Growth Score makes the daunting task easier.

The Growth Score analyzes the growth prospects for a company. Studies have shown that stocks exhibiting the best growth characteristics consistently outperform the market. Back-tested results have shown that for stocks with a solid Growth Score and a favorable Zacks Rank, the returns are even better.

With the help of the Zacks Stock Screener, we have selected four P&C insurance stocks with an impressive Growth Score of A or B. ALL and TRV sport a Zacks Rank #1 (Strong Buy), while ROOT and MCY carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Northbrook, IL, Allstate is the third-largest P&C insurer and the largest publicly-held personal lines carrier in the United States. The insurer witnessed consistent growth in premiums, riding on expanding ventures. Rate hikes to counter inflationary pressures on loss costs are expected to continue in ALL’s auto insurance business for 2024. The company keeps expanding its Protection Services business with strategic acquisitions, which position it for long-term growth. 

ALL’s focus on optimizing core operations has allowed it to redirect resources toward high-growth areas. The sale of ALL’s Health & Benefits division is expected to free up capital. Cost-saving initiatives are projected to boost profits. ALL’s cash-generating abilities are crucial for returning capital to its shareholders.

The Zacks Consensus Estimate for ALL’s 2024 and 2025 earnings suggests 1,611.58% and 17.8% year-over-year growth, respectively. The consensus estimate for 2024 and 2025 has moved up 8.4% and 3.2%, respectively, in the past 30 days. The company delivered a four-quarter average earnings surprise of 135.21%. The expected long-term earnings growth rate is pegged at 7%. 

Based in New York, NY, Travelers Companies is one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance. High levels of retention, improved pricing, increased new business and a positive renewal premium change, banking on the strength of a compelling product portfolio of coverages across nine lines of business, poise it well for growth. Travelers expects renewal premium change to remain at these levels throughout 2024 as it continues to seek rates in response to elevated loss costs. 

TRV expects fixed income net investment income (NII), including earnings from short-term securities, to be $700 million after tax in the fourth quarter. It also estimates NII, including earnings from short-term securities to be $2.9 billion in 2025 with $700 million in the first quarter of 2025 and growing to approximately $760 million for the fourth quarter. Higher average levels of invested assets, reliable results from the fixed-income portfolio, and strong returns from the non-fixed income portfolio are likely to drive the metric higher.

The Zacks Consensus Estimate for TRV’s 2024 and 2025 earnings suggests 43.4% and 9% year-over-year growth, respectively. The consensus estimate for 2024 and 2025 has moved up 1.6% and 0.6%, respectively, in the past 30 days. It has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.40%. The expected long-term earnings growth rate is pegged at 11.2%.

Headquartered in Columbus, OH, Root provides insurance products and services in the United States. ROOT offers automobile, homeowners and renters’ insurance products. ROOT operates a direct-to-consumer mode, and serves customers primarily through mobile applications, as well as through its website. ROOT’s direct distribution channels also cover digital, media and referral channels, as well as distribution partners and agencies.

The Zacks Consensus Estimate for Root’s 2024 and 2025 earnings suggests 88.1% and 3.7% year-over-year growth, respectively. It delivered a four-quarter average earnings surprise of 127.21%. 

Headquartered in Los Angeles, CA, Mercury General is a leading provider of personal automobile insurance and is engaged primarily in writing all risk classifications of automobile insurance in a number of states. MCY offers automobile policyholders the following types of coverage: bodily injury liability, underinsured and uninsured motorist, property damage liability, comprehensive, collision and other hazards specified in the policy.

The Zacks Consensus Estimate for MCY’s 2024 and 2025 earnings suggests 2,016.6% and 8.6% year-over-year growth, respectively. The consensus estimate for 2024 and 2025 has moved up 58.7% and 15%, respectively, in the past 30 days. The company delivered a four-quarter average earnings surprise of 694.28%.