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Upbeat Near-Term Outlook for Multiline Insurance Industry

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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. They also provide risk management services.

Here are the industry’s three major themes:

•    The U.S. multiline-insurance sector should remain stable in 2020 on economic growth, solid industry capitalization and increased insurance prices. Available 2019 results for the property and casualty (P&C) insurers reflect a rise in after-tax income, underwriting gains, net earned premiums along with a decline in catastrophe losses. Higher insurance pricing for most insurance lines is likely to be seen in 2020.
However, the insurance companies will continue to witness a lower investment yield, which might keep their investment incomes under pressure. Also the continuing low interest rate environment prompted life insurance companies to make product modifications by moving away from fixed annuity products with guarantee returns to variable annuity products and products with market related returns.

•    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 conducive since funding purchases become more affordable. However, in 2019, there was a slowdown in volume as well as value of U.S. property and casualty mergers and acquisitions.

•    The industry is noticing 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 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 also witnessed the emergence of insurtech — technology-led insurers — sparking competition for incumbent players. The focus of insurtech is mainly on the property and casualty insurance industry. As insurtechs employ cutting-edge technologies and concepts that the incumbents are just beginning to experiment with, there remains a huge market risk.

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 bullishprospects in the near term. The Zacks Multiline Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #98, which places it in the top 38% 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.

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 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 gained 7.8% in the past year compared with the Finance sector and the Zacks S&P 500 composite’s increase of 8.5% and 20.7%, respectively.

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 1.39X compared with the S&P 500’s 4.66X and the sector’s 2.85X.

Over the past five years, the industry has traded as high as 1.98X, as low as 0.94X and at the median of 1.46X.

Price-to-Book (P/B) Ratio (TTM)

Price-to-Book (P/B) Ratio (TTM)


Bottom Line

Adoption of technology, product development, prudent underwriting practices, competitive pricing and a compelling product portfolio should keep boosting business growth for multiline insurers. Also, a sturdy capital level should support effective capital deployment like investing in growth opportunities and returning capital to their shareholders.

Investors may look at the following stocks that carry a Zacks Rank #2 (Buy) or 3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kemper Corporation (KMPR - Free Report) : This Zacks Rank #2 company is a financial services provider. It specializes in property and casualty insurance as well as life and health insurance products for individuals, families and small businesses. The Zacks Consensus Estimate for 2020 and 2021 earnings per share indicates 1.52% and 2.3% increase from the respective year-ago reported figures.

Price and Consensus: KMPR

Radian Group Inc. RDN is a credit enhancement company backing homebuyers, mortgage lenders, loan servicers and investors with a suite of private mortgage insurance and related risk-management products and services. The Zacks Consensus Estimate for 2020 and 2021 earnings per share suggests 2.2% and 1.02% rise from the respective prior-year reported numbers. The stock carries a Zacks Rank #3.

Price and Consensus: RDN

MGIC Investment Corporation MTG is the largest private mortgage insurer in the United States. It established the private mortgage insurance (PMI) industry for providing a private market alternative to federal government insurance programs regarding families wanting to buy a home with less than 20% down payment. The stock with a Zacks Rank of 3 surpassed estimates in each of the last four quarters, the average being 13.42%.

Price and Consensus: MTG

MetLife, Inc. MET provides protection and investment products to a range of individual and institutional customers. In addition to offering individual insurance, annuity and investment products, the company provides group insurance, retirement and savings products, and services. This Zacks #3 Ranked stock surpassed estimates in three of the last four quarters, the average positive surprise being 12.67%. It missed earnings in one of the quarters by 9.93%

Price and Consensus: MET

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