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Accident & Health Insurance Industry's Prospects Seem Bright
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The Zacks Accident and Health Insurance industry comprises companies that provide workers’ compensation insurance, largely to employers operating in hazardous industries, such as construction, trucking, logging and lumber plus manufacturing and agriculture. These companies also offer group, individual or voluntary supplemental insurance products.
Workers' compensation is a form of accident insurance paid by employers without affecting employees’ pay. Claims are generally met by insurance companies or state-run workers’ compensation fund.
Let us take a look at the industry’s three major themes: • The accident and health insurance space has witnessed growth over the years, primarily driven by increase in benefits offered by employers. A right kind of workers’ compensation policy means personal care for injured workers, increased productivity, higher employee morale, lower turnover, reduced claims costs and less financial worry. The current solid employment rates further fueled demand by employers for accident and health insurance products. • The worker’s compensation industry is witnessing pricing pressure from the last several quarters. Premium pricing has been declining by 2.5%, on average, since the first quarter of 2015, which continued through the third quarter of 2019. Given this soft pricing, efforts to retain market share will again induce pricing pressure, which might curb top-line growth. Also, higher spending on technological advancements will cause escalated expense ratios. Nonetheless, adoption of technologies like cloud computing or blockchain should help insurers gain a competitive edge. • Rising medical costs remain a headwind for workers’ compensation insurance. However, elevated underwriting exposure, sustained decrease in claims frequency rates (attributable to better working environment) and conservative reserve levels should boost the industry’s performance.
Zacks Industry Rank Indicates Bright Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all-member stocks, indicates bright near-term prospects. The Zacks Accident and Health Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #109, which places it in the top 43% of 250 plus 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. Looking at the aggregate earnings estimate revisions, it appears that analysts are confident about this group’s earnings growth potential.
Before we present a few accident and health insurance stocks that investors may focus on, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms Sector and S&P 500
The Accident and Health Insurance industry has underperformed the Zacks S&P 500 composite but outperformed its own sector over the past year. The stocks in this industry have collectively returned 10.1% in the past year while the Finance sector has grown 14.2%. The Zacks S&P 500 composite has increased 23.7% over the same period.
One-Year Price Performance
Current Valuation
On the basis of a trailing 12-month price-to-book (P/B) ratio, commonly used for valuing insurance stocks, the industry is currently trading at 1.14X compared with the S&P 500’s 4.42X and the sector’s 2.81X.
Over the past five years, the industry has traded as high as 1.6X, as low as 1.09X and at the median of 1.37X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
Bottom Line
A steady economic boom should keep bolstering the industry’s performance. Also, prudent underwriting and intensive claims management practices with the aid of technology bode well for the industry. Nonetheless, pricing pressure and escalating medical costs are persistent concerns.
We are presenting four stocks with a Zacks Rank #3 (Hold).
AMERISAFE, Inc. (AMSF - Free Report) : This Zacks #3 Ranked workers' compensation insurance provider in the United States offers benefits to injured employees for temporary or permanent disability, death, and medical and hospital expenses. The company delivered a positive earnings surprise in all the last four quarters, the average being 26%.
Price and Consensus: AMSF
Aflac Incorporated (AFL - Free Report) : This Columbus, GA-based company offers voluntary supplemental health and life insurance products. The company came up with a beat in all the trailing four quarters, the average being 7.3%
Price and Consensus: AFL
Unum Group (UNM - Free Report) : The Zacks Consensus Estimate for current-year EPS of this Chattanooga, TN-based provider of financial protection benefit solutions in the United States indicates a 3.9% increase from the year-ago reported figure. Its expected long-term earnings growth rate of 9% betters the industry average of 6.6%.
Price and Consensus:UNM
Employers Holdings Inc. (EIG - Free Report) : This Reno, NV-based company provides workers' compensation insurance to small businesses in low-to-medium risk-prone industries. The company has a stellar record of pulling off positive earnings surprises in the preceding four quarters, the average being 74.39%. Price and Consensus:EIG
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q3 2019, while the S&P 500 gained +39.6%, five of our strategies returned +51.8%, +57.5%, +96.9%, +119.0%, and even +158.9%.
This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
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Accident & Health Insurance Industry's Prospects Seem Bright
The Zacks Accident and Health Insurance industry comprises companies that provide workers’ compensation insurance, largely to employers operating in hazardous industries, such as construction, trucking, logging and lumber plus manufacturing and agriculture. These companies also offer group, individual or voluntary supplemental insurance products.
Workers' compensation is a form of accident insurance paid by employers without affecting employees’ pay. Claims are generally met by insurance companies or state-run workers’ compensation fund.
Let us take a look at the industry’s three major themes:
• The accident and health insurance space has witnessed growth over the years, primarily driven by increase in benefits offered by employers. A right kind of workers’ compensation policy means personal care for injured workers, increased productivity, higher employee morale, lower turnover, reduced claims costs and less financial worry. The current solid employment rates further fueled demand by employers for accident and health insurance products.
• The worker’s compensation industry is witnessing pricing pressure from the last several quarters. Premium pricing has been declining by 2.5%, on average, since the first quarter of 2015, which continued through the third quarter of 2019. Given this soft pricing, efforts to retain market share will again induce pricing pressure, which might curb top-line growth. Also, higher spending on technological advancements will cause escalated expense ratios. Nonetheless, adoption of technologies like cloud computing or blockchain should help insurers gain a competitive edge.
• Rising medical costs remain a headwind for workers’ compensation insurance. However, elevated underwriting exposure, sustained decrease in claims frequency rates (attributable to better working environment) and conservative reserve levels should boost the industry’s performance.
Zacks Industry Rank Indicates Bright Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all-member stocks, indicates bright near-term prospects. The Zacks Accident and Health Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #109, which places it in the top 43% of 250 plus 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. Looking at the aggregate earnings estimate revisions, it appears that analysts are confident about this group’s earnings growth potential.
Before we present a few accident and health insurance stocks that investors may focus on, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms Sector and S&P 500
The Accident and Health Insurance industry has underperformed the Zacks S&P 500 composite but outperformed its own sector over the past year. The stocks in this industry have collectively returned 10.1% in the past year while the Finance sector has grown 14.2%. The Zacks S&P 500 composite has increased 23.7% over the same period.
One-Year Price Performance
Current Valuation
On the basis of a trailing 12-month price-to-book (P/B) ratio, commonly used for valuing insurance stocks, the industry is currently trading at 1.14X compared with the S&P 500’s 4.42X and the sector’s 2.81X.
Over the past five years, the industry has traded as high as 1.6X, as low as 1.09X and at the median of 1.37X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
Bottom Line
A steady economic boom should keep bolstering the industry’s performance. Also, prudent underwriting and intensive claims management practices with the aid of technology bode well for the industry. Nonetheless, pricing pressure and escalating medical costs are persistent concerns.
We are presenting four stocks with a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMERISAFE, Inc. (AMSF - Free Report) : This Zacks #3 Ranked workers' compensation insurance provider in the United States offers benefits to injured employees for temporary or permanent disability, death, and medical and hospital expenses. The company delivered a positive earnings surprise in all the last four quarters, the average being 26%.
Price and Consensus: AMSF
Aflac Incorporated (AFL - Free Report) : This Columbus, GA-based company offers voluntary supplemental health and life insurance products. The company came up with a beat in all the trailing four quarters, the average being 7.3%
Price and Consensus: AFL
Unum Group (UNM - Free Report) : The Zacks Consensus Estimate for current-year EPS of this Chattanooga, TN-based provider of financial protection benefit solutions in the United States indicates a 3.9% increase from the year-ago reported figure. Its expected long-term earnings growth rate of 9% betters the industry average of 6.6%.
Price and Consensus: UNM
Employers Holdings Inc. (EIG - Free Report) : This Reno, NV-based company provides workers' compensation insurance to small businesses in low-to-medium risk-prone industries. The company has a stellar record of pulling off positive earnings surprises in the preceding four quarters, the average being 74.39%.
Price and Consensus: EIG
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q3 2019, while the S&P 500 gained +39.6%, five of our strategies returned +51.8%, +57.5%, +96.9%, +119.0%, and even +158.9%.
This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
See their latest picks free >>