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7 Multiline Insurers to Watch Out For as Economic Recovery Gains Traction
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Product diversification helps Zacks Multiline Insurance industry players lower concentration risk, ensure uninterrupted revenue generation, and improve retention ratio. Better pricing, prudent underwriting, exposure growth, reopening of the economy with receding impact of the pandemic and increased vaccinations should benefit MetLife Inc. (MET - Free Report) , American International Group (AIG - Free Report) , Cigna (CI - Free Report) , The Hartford Financial (HIG - Free Report) , Prudential (PRU - Free Report) , Assurant (AIZ - Free Report) and Horace Mann Educators Corporation (HMN - Free Report) . Increasing adoption of technology will help in smooth functioning of the industry. Solid capital level of the multiline insurers will again fuel merger and acquisition (M&A) activities. Though a low rate environment weighs on investment income and hampers life as well as long tail property and casualty operations, the same makes borrowed funding affordable.
About the Industry
The Zacks Multiline Insurance industry comprises companies that provide a single insurance coverage, bundling automobile, homeowner, long-term care, life and health insurance to individuals and businesses. The insured pays a single premium and is covered for many things through a single contract. 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, et al. The industry participants also provide risk management services. Since the companies offer single insurance coverage for multiple products, customer retention improves. An insured stands to benefit from lower premium payment, compared to paying individual premium for insuring varied products.
3 Trends Shaping the Future of Multiline Insurance Industry
Diversified portfolio lowers concentration risk: Given the nature of the business, multiline insurers’ product and service portfolio is diversified, which lowers concentration risk. Per a report published in Insurance Journal, S&P Global Ratings notes that though the pandemic cost $8 billion for 16 global multiline insurers in 2020, they could deliver net profit of $36 billion, given their diversified operations. Its property and casualty operations will face the fury of active hurricanes (per Colorado State University 2021 is likely to witness above-average hurricane season), which will weigh on underwriting profits. The life insurance business should benefit from lower mortality rates as the pandemic slowly recedes and vaccination programs increase, resulting in lower claim payments.
Merger and acquisitions: Consolidation in the multi-line insurance industry would continue as players look to diversify their operations into new business lines and geography. Buying businesses in the same lines will be driven by the players’ need to gain a fair market share and grow in their niche areas. Also, a low interest rate environment makes mergers and acquisitions possible since funding purchases become more affordable. Though deal volume has declined considerably due to the uncertainty surrounding the pandemic in 2020, a better stage is already set for 2021 with reopening of the economy, an optimistic growth outlook and solid capital level of the insurers. Rob Kindler, Global Head of M&A at Morgan Stanley said, “All the elements are there for an active M&A market in 2021, from corporations looking for scale and growth to private equity firms and SPACs looking to invest capital.”
Increased adoption of technology: The industry is witnessing greater use of technology like blockchain, AI, advanced analytics, telematics, cloud computing and robotic process automation to expedite business operations and save costs. Many life insurers have started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data is making premium calculation easier and reducing risk. The P&C industry, in particular, also witnessed the emergence of insurtech — technology-led insurers — sparking competition for incumbent players. Moreover, adoption of technology has helped in seamless underwriting and claims processing.
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 strong prospects in the near term. The Zacks Multiline Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #111, which places it in the top 44% of 255 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 a positive earnings outlook for the constituent companies in aggregate. The industry’s earnings estimates for the current year have been revised upward by 2.1% since April 2021.
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 Underperforms Sector and S&P 500
The Multiline Insurance industry has underperformed both the Zacks S&P 500 composite and its sector over the past year. The stocks in this industry have collectively rallied 32.2% in the past year compared with the Finance sector’s increase of 40.2%. Notably, the Zacks S&P 500 composite has gained 34.5% in the same time frame.
One-Year Price Performance
Current Valuation
On the basis of its trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 1.55X compared with the S&P 500’s 7.19X and the sector’s 3.18X.
Over the past five years, the industry has traded as high as 1.98X, as low as 0.85X and at the median of 3.28X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
7 Multiline Insurance Stocks to Keep an Eye on
We are presenting three Zacks Rank #2 (Buy) stocks from the Multiline Insurance industry. We are also presenting four stocks with a Zacks Rank #3 (Hold) from the same industry.
Prudential: Headquartered in Newark, NJ, this Zacks Rank #2 insurer offers an array of financial products and services including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services. Prudential continues to benefit from solid asset-based businesses, improved margins in Group Insurance business, and international operations. Its high-performing asset management business and deeper reach in the pension risk transfer market are catalysts for long-term growth. The Zacks Consensus Estimate for 2021 indicates year-over-increase of 29.4% from its prior-year reported numbers. The expected long-term earnings (three to five years) growth rate stands at 11%.
Price and Consensus: PRU
MetLife: This New York, NY-based insurance-based global financial services company provides protection and investment products to a range of individual and institutional customers. Its focus on businesses with growth potential and strategies to control cost and increase efficiency bode well for growth. It carries a Zacks Rank #2. The Zacks Consensus Estimate for 2021 indicates year-over-increase of 16.9% from its prior-year reported numbers and has moved up about 1% in past 30 days. The expected long-term earnings growth rate is pegged at 4.8%.
Price and Consensus: MET
Horace Mann Educators Corporation: This Springfield, IL based company boasts being the largest financial services company focused on providing America’s educators and school employees with insurance and retirement solutions. Transformational actions, profitability initiatives and niche market focus place it well for growth. The Zacks Consensus Estimate for 2021 and 2022 earnings of this Zacks Rank #2 company has moved up 8.5% and 2.1%, respectively, in the past 30 days. The Zacks Consensus Estimate for 2021 indicates year-over-increase of 5.3%. The company delivered four-quarter average earnings surprise of 33.43%.
Price and Consensus: HMN
AIG: Headquartered in New York, this Zacks Rank #3 insurer provides insurance products for commercial, institutional, and individual customers in North America and internationally. Strategic business de-risking and acquisitions, cost control efforts, and accelerated capital deployment will drive growth. The Zacks Consensus Estimate for 2021 and 2022 indicates year-over-increase of 80.6% and 15.2% respectively from its prior-year reported numbers. The Zacks Consensus Estimate for 2021 of this Zacks Rank #3 company has moved up 1.5% in the past 30 days. The expected long-term earnings growth rate is 10%.
Price and Consensus: AIG
Cigna: This Bloomfield, CT based company provides insurance and related products and services. Acquisition of Express Scripts, strong international operations and growing medical membership auger well for growth of this Zacks Rank #3 company. The Zacks Consensus Estimate for 2021 and 2022 indicates year-over-increase of 10.8% and 13.8%, respectively from the prior-year reported numbers. The expected long-term earnings growth rate is 11.5%. The company delivered four-quarter average earnings surprise of 5.43%.
Price and Consensus: CI
Assurant: Headquartered in New York, Assurant is a global provider of risk management solutions in the housing and lifestyle markets. Strong performing Global Lifestyle business, growing Service business, and solid capital management should drive growth at the company. The Zacks Consensus Estimate for 2021 and 2022 of this Zacks Rank #3 company indicates 12.6% and 24.7% year-over-year growth. The expected long-term earnings growth rate is pegged at 17.8%, better than the industry average of 13.2%. The company delivered four-quarter average earnings surprise of 21.71%.
Price and Consensus: AIZ
Hartford Financial: This Hartford, CT-based Zacks Rank #3 company is one of the major multi-line insurance and investment companies in the country, providing investment products, group life and group disability insurance, property and casualty insurance and mutual funds in the United States. Expanded product offerings, efforts to strengthen commercial business, underwriting strength in products, capital appreciation and cost-curbing initiatives bode well for growth. The Zacks Consensus Estimate for 2021 of this Zacks Rank #3 company has moved up 1.5% in the past 30 days. The expected long-term earnings growth rate is pegged at 7%. The company delivered four-quarter average earnings surprise of 18.73%.
Price and Consensus: HIG
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7 Multiline Insurers to Watch Out For as Economic Recovery Gains Traction
Product diversification helps Zacks Multiline Insurance industry players lower concentration risk, ensure uninterrupted revenue generation, and improve retention ratio. Better pricing, prudent underwriting, exposure growth, reopening of the economy with receding impact of the pandemic and increased vaccinations should benefit MetLife Inc. (MET - Free Report) , American International Group (AIG - Free Report) , Cigna (CI - Free Report) , The Hartford Financial (HIG - Free Report) , Prudential (PRU - Free Report) , Assurant (AIZ - Free Report) and Horace Mann Educators Corporation (HMN - Free Report) . Increasing adoption of technology will help in smooth functioning of the industry. Solid capital level of the multiline insurers will again fuel merger and acquisition (M&A) activities. Though a low rate environment weighs on investment income and hampers life as well as long tail property and casualty operations, the same makes borrowed funding affordable.
About the Industry
The Zacks Multiline Insurance industry comprises companies that provide a single insurance coverage, bundling automobile, homeowner, long-term care, life and health insurance to individuals and businesses. The insured pays a single premium and is covered for many things through a single contract. 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, et al. The industry participants also provide risk management services. Since the companies offer single insurance coverage for multiple products, customer retention improves. An insured stands to benefit from lower premium payment, compared to paying individual premium for insuring varied products.
3 Trends Shaping the Future of Multiline Insurance Industry
Diversified portfolio lowers concentration risk: Given the nature of the business, multiline insurers’ product and service portfolio is diversified, which lowers concentration risk. Per a report published in Insurance Journal, S&P Global Ratings notes that though the pandemic cost $8 billion for 16 global multiline insurers in 2020, they could deliver net profit of $36 billion, given their diversified operations. Its property and casualty operations will face the fury of active hurricanes (per Colorado State University 2021 is likely to witness above-average hurricane season), which will weigh on underwriting profits. The life insurance business should benefit from lower mortality rates as the pandemic slowly recedes and vaccination programs increase, resulting in lower claim payments.
Merger and acquisitions: Consolidation in the multi-line insurance industry would continue as players look to diversify their operations into new business lines and geography. Buying businesses in the same lines will be driven by the players’ need to gain a fair market share and grow in their niche areas. Also, a low interest rate environment makes mergers and acquisitions possible since funding purchases become more affordable. Though deal volume has declined considerably due to the uncertainty surrounding the pandemic in 2020, a better stage is already set for 2021 with reopening of the economy, an optimistic growth outlook and solid capital level of the insurers. Rob Kindler, Global Head of M&A at Morgan Stanley said, “All the elements are there for an active M&A market in 2021, from corporations looking for scale and growth to private equity firms and SPACs looking to invest capital.”
Increased adoption of technology: The industry is witnessing greater use of technology like blockchain, AI, advanced analytics, telematics, cloud computing and robotic process automation to expedite business operations and save costs. Many life insurers have started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data is making premium calculation easier and reducing risk. The P&C industry, in particular, also witnessed the emergence of insurtech — technology-led insurers — sparking competition for incumbent players. Moreover, adoption of technology has helped in seamless underwriting and claims processing.
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 strong prospects in the near term. The Zacks Multiline Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #111, which places it in the top 44% of 255 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 a positive earnings outlook for the constituent companies in aggregate. The industry’s earnings estimates for the current year have been revised upward by 2.1% since April 2021.
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 Underperforms Sector and S&P 500
The Multiline Insurance industry has underperformed both the Zacks S&P 500 composite and its sector over the past year. The stocks in this industry have collectively rallied 32.2% in the past year compared with the Finance sector’s increase of 40.2%. Notably, the Zacks S&P 500 composite has gained 34.5% in the same time frame.
One-Year Price Performance
Current Valuation
On the basis of its trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 1.55X compared with the S&P 500’s 7.19X and the sector’s 3.18X.
Over the past five years, the industry has traded as high as 1.98X, as low as 0.85X and at the median of 3.28X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
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7 Multiline Insurance Stocks to Keep an Eye on
We are presenting three Zacks Rank #2 (Buy) stocks from the Multiline Insurance industry. We are also presenting four stocks with a Zacks Rank #3 (Hold) from the same industry.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Prudential: Headquartered in Newark, NJ, this Zacks Rank #2 insurer offers an array of financial products and services including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services. Prudential continues to benefit from solid asset-based businesses, improved margins in Group Insurance business, and international operations. Its high-performing asset management business and deeper reach in the pension risk transfer market are catalysts for long-term growth. The Zacks Consensus Estimate for 2021 indicates year-over-increase of 29.4% from its prior-year reported numbers. The expected long-term earnings (three to five years) growth rate stands at 11%.
Price and Consensus: PRU
MetLife: This New York, NY-based insurance-based global financial services company provides protection and investment products to a range of individual and institutional customers. Its focus on businesses with growth potential and strategies to control cost and increase efficiency bode well for growth. It carries a Zacks Rank #2. The Zacks Consensus Estimate for 2021 indicates year-over-increase of 16.9% from its prior-year reported numbers and has moved up about 1% in past 30 days. The expected long-term earnings growth rate is pegged at 4.8%.
Price and Consensus: MET
Horace Mann Educators Corporation: This Springfield, IL based company boasts being the largest financial services company focused on providing America’s educators and school employees with insurance and retirement solutions. Transformational actions, profitability initiatives and niche market focus place it well for growth. The Zacks Consensus Estimate for 2021 and 2022 earnings of this Zacks Rank #2 company has moved up 8.5% and 2.1%, respectively, in the past 30 days. The Zacks Consensus Estimate for 2021 indicates year-over-increase of 5.3%. The company delivered four-quarter average earnings surprise of 33.43%.
Price and Consensus: HMN
AIG: Headquartered in New York, this Zacks Rank #3 insurer provides insurance products for commercial, institutional, and individual customers in North America and internationally. Strategic business de-risking and acquisitions, cost control efforts, and accelerated capital deployment will drive growth. The Zacks Consensus Estimate for 2021 and 2022 indicates year-over-increase of 80.6% and 15.2% respectively from its prior-year reported numbers. The Zacks Consensus Estimate for 2021 of this Zacks Rank #3 company has moved up 1.5% in the past 30 days. The expected long-term earnings growth rate is 10%.
Price and Consensus: AIG
Cigna: This Bloomfield, CT based company provides insurance and related products and services. Acquisition of Express Scripts, strong international operations and growing medical membership auger well for growth of this Zacks Rank #3 company. The Zacks Consensus Estimate for 2021 and 2022 indicates year-over-increase of 10.8% and 13.8%, respectively from the prior-year reported numbers. The expected long-term earnings growth rate is 11.5%. The company delivered four-quarter average earnings surprise of 5.43%.
Price and Consensus: CI
Assurant: Headquartered in New York, Assurant is a global provider of risk management solutions in the housing and lifestyle markets. Strong performing Global Lifestyle business, growing Service business, and solid capital management should drive growth at the company. The Zacks Consensus Estimate for 2021 and 2022 of this Zacks Rank #3 company indicates 12.6% and 24.7% year-over-year growth. The expected long-term earnings growth rate is pegged at 17.8%, better than the industry average of 13.2%. The company delivered four-quarter average earnings surprise of 21.71%.
Price and Consensus: AIZ
Hartford Financial: This Hartford, CT-based Zacks Rank #3 company is one of the major multi-line insurance and investment companies in the country, providing investment products, group life and group disability insurance, property and casualty insurance and mutual funds in the United States. Expanded product offerings, efforts to strengthen commercial business, underwriting strength in products, capital appreciation and cost-curbing initiatives bode well for growth. The Zacks Consensus Estimate for 2021 of this Zacks Rank #3 company has moved up 1.5% in the past 30 days. The expected long-term earnings growth rate is pegged at 7%. The company delivered four-quarter average earnings surprise of 18.73%.
Price and Consensus: HIG
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