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The Zacks Analyst Blog Highlights Everest Re, RenaissanceRe, Universal Insurance, Kinsale Capital and Selective Insurance

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For Immediate Release

Chicago, IL – March 2, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Everest Re Group Ltd. , RenaissanceRe Holdings Ltd. (RNR - Free Report) , Universal Insurance Holdings Inc. (UVE - Free Report) , Kinsale Capital Group Inc. (KNSL - Free Report) and Selective Insurance Group Inc. (SIGI - Free Report) .

Here are highlights from Wednesday’s Analyst Blog:

5 Momentum Insurance Stocks Defying Headwinds to Buy for March

Wall Street ended February on a negative note after a strong January. The impressive rally of January, which extended to mid-February, has evaporated as yields on U.S. government bonds surged.

This situation arose after several measures of inflation spiked in January following three consecutive months of decline. Market participants are worried that the Fed will pursue a higher interest rate regime and tighter monetary control for longer than expected.

We have entered March with the above-mentioned headwinds and fears of a recession this year. However, defying volatility, a handful of momentum stocks from the insurance sector are available with the potential of providing good returns in the near term.

We have selected five such stocks with a favorable Zacks Rank. These are — Everest Re Group Ltd., RenaissanceRe Holdings Ltd., Universal Insurance Holdings Inc., Kinsale Capital Group Inc. and Selective Insurance Group Inc.

Inflation Remains a Serious Concern

Stubborn inflation compelled the Fed to hike the benchmark interest rate by 4.25% last year. However, a gradual decline in the various measures of inflation in the last three months of 2022 raised market participants’ expectations of lesser rate hikes as peak inflation was behind us.

On Feb 1, in its February FOMC meeting, the Fed also reduced the magnitude of the interest rate hike by 25 basis points to the range of 4.50% to 4.75%. In the beginning, investors were expecting a maximum of three more rate hikes of 25 basis points each in 2023.

However, the sudden surge in inflation in January changed the whole scenario. Market participants now expect the central bank to raise interest rate by at least 1% in 2023 with the possibility of another 50-basis point hike in the March FOMC meeting.

A rigorous hike in interest rate with tighter monetary control is likely to result in a recession. Consequently, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — tumbled 4.2%, 2.6% and 1.1%, respectively.

Insurance Industry to Gain

A massive rise in the market interest rate will raise the cost of funds, enabling financial companies to widen the spread between longer-term assets, such as loans, with shorter-term liabilities, thus boosting the financial sector’s profit margin.
Moreover, higher bond yields will raise the market's risk-free returns. Insurance providers are generally compelled to hold lots of long-term safe bonds to back the policies that are written. A higher interest rate should benefit insurance companies.

The spread between the longer-term assets and shorter-term liabilities would increase the spread of insurers. The insurance industry's profitability has risen historically during periods of rising interest rates.

Our Top Picks

We have narrowed our search to five momentum insurance stocks with double-digit returns year to date. These stocks have strong growth potential for 2023. Moreover, these stocks have seen positive earnings estimate revisions over the last 30 days.

Finally, each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Everest Re’s global presence, product diversification and capital adequacy bode well. Higher premiums earned by the Insurance segment will likely improve the expense and loss ratio. The Reinsurance segment of RE remains well-poised for leveraging opportunities, stemming from the continued disruption and evolution of the reinsurance market.

A strong capital position, with sufficient cash generation capabilities supports effective capital deployment. Everest RE is lowering exposure to areas not meeting the right risk-return profile, building a portfolio with a mix of product lines, better rate adequacy and higher long-term margins and repositioning its portfolio by moving up fixed-income credit quality.

Everest RE has an expected revenue and earnings growth rate of 13.1% and 70.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the last seven days. The stock price of RE has surged 15.9% year to date.

RenaissanceRe Holdings has been witnessing steady premium growth over the past few quarters. This upside is quite obvious from its seven-year CAGR (2014-2022) of 25%. RNR has been focusing on acquisitions and business expansions to sustain growth prospects.

RenaissanceRe Holdings has been undertaking divestitures to streamline its operations and get rid of low-return high-risk businesses. RNR’s balance sheet strength remains impressive. Its cash and cash equivalents are higher than its debt level. RNR is also engaged in the prudent deployment of capital.

RNR has expected revenue and earnings growth rates of 11% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last seven days. The stock price of RNR has climbed 16.6% year to date.

Universal Insurance operates as an integrated insurance holding company in the United States. UVE is engaged in insurance underwriting, distribution and claims settlement. Universal Insurance generates revenue from the collection and investment of premiums.

UVE’s agency operations which include Universal Florida Insurance Agency and U.S. Insurance Solutions Inc. generate income from policy fees, commissions, premium financing referral fees and the marketing of ancillary services.

Universal Insurance has expected revenue and earnings growth rates of 10.7% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10% over the last seven days. The stock price of UVE has soared 82.5% year to date.

Kinsale Capital continues to benefit from dislocation within the broader property/casualty insurance industry, rate increases and premium growth. Across the E&S market, KNSL’s products are exposed to those business lines, which have relatively lower risks.

Kinsale Capital boasts the lowest combined ratio among its specialty insurer peers while achieving the highest growth and targets the same in mid-80s over the long term. KNSL has various reinsurance contracts to limit exposure to potential losses apart from arranging for additional capacity for growth. Technological advancements have also been lowering expense ratios for quite some time.

Kinsale Capital has expected revenue and earnings growth rates of 32.2% and 23.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the last seven days. The stock price of KNSL has jumped 21.9% year to date.

Selective Insurance Group is poised to witness top-line growth backed by sustained premium growth across its segments. Premiums have benefited from compelling portfolio, high retention ratio, pure renewal price increase and new business growth. Net investment income should benefit from alternative investments in other investments portfolio.

SIGI estimates after-tax net investment income was $300 million from alternative investments in 2023. Geographic expansion plays a vital role in growth. SIGI boasts solid capital position supporting effective capital deployment that enhances shareholder value.

Selective Insurance Group has expected revenue and earnings growth rates of 13.7% and 30.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.9% over the last 30 days. The stock price of SIGI has advanced 14.6% year to date.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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