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Tap Into the Insurance Industry's Momentum With These ETFs
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The rising frequency and seriousness of potential global challenges, ranging from climate change to cybercrime, secures the insurance industry’s ability to act as a financial cushion. According to Deloitte, insurers realizing the need to proactively prevent losses from occurring in the initial stages is driving the industry’s growth.
After experiencing a positive shift in its trend in the second half of last year, the U.S. property and casualty industry has continued with its robust momentum entering 2024. Significant premium increases, a slowdown in the growth of claims costs and improved investment returns have all had a beneficial effect on the sector, giving a boost to profitability.
The S&P Insurance Select Industry Index has gained 8.54% over the past year, as of 17 Jan 2024, compared to the broader S&P 500 Financials Index, which added about 3.82% over the past year.
Growth in Digits
According to Swiss Re, the industry ROE is estimated to surge to 9.5% in 2024 and reach 10% in 2025, hinting at a substantial increase from the 5% recorded in 2023, backed by robust premium growth and reduced inflationary pressures. Estimates for ROE are supported by solid premium growth expectations of 7% and 4.5% for 2024 and 2025, respectively.
Combined ratio, a comprehensive measure of an insurance company’s profitability, used to evaluate how well the company is operating on a daily basis, is anticipated to improve significantly. The ratio is projected to be 98.5% for both 2024 and 2025, implying a notable improvement from the estimated 103% for 2023. A ratio below 100% signifies that the company is realizing an underwriting profit.
Direct premium written (DPW), which represents the growth of a company’s insurance business during a particular period, is forecast to grow at 7% in 2024, indicating an upward revision from 5.5% in 2023.
Industry’s Anticipated Earnings Success
According to Factset, the insurance industry is expected to be the primary driver of positive year-over-year earnings growth for the financial sector, growing by a staggering 26%. Year-on-year earnings growth at the sub-industry level is led by the property & casualty insurance, growing at 48%, followed by reinsurance (30%) and multi-line insurance (17%).
Seventeen out of the top 20 insurers trading on major U.S. exchanges experienced an uptick in market capitalization during the fourth quarter of 2023, per S&P Global Market Intelligence, with most insurers exhibiting increases of 6% or more.
According to Zacks Earnings Trend, Insurance - Multi Line and Insurance - Property And Casualty have a growth rate of 8.04% and 8.02%, respectively.
ETFs in Focus
Below, we highlight a few insurance ETFs for investors to capitalize on the industry’s continuing momentum.
SPDR S&P Insurance ETF seeks to track the performance of the S&P Insurance Select Industry Index with a basket of 48 securities. The fund has amassed an asset base of $738.17 million and charges an annual fee of 0.35%.
SPDR S&P Insurance ETF has a major exposure of 50.43% in property and casualty insurance, followed by life and health insurance, with a share of 24.84% of its assets. The fund has gained 6.78% over the past three months and 12.12% over the past year.
iShares U.S. Insurance ETF seeks to track the performance of the Dow Jones U.S. Select Insurance Index, with a basket of 55 securities. The fund has gathered an asset base of $476.5 million and charges an annual fee of 0.40%.
iShares U.S. Insurance ETF has major exposure of 67.88% in property and casualty insurance, followed by life and health insurance, with a share of 24.13% of its assets. The fund has gained 9.67% over the past three months and 11.22% over the past year.
Invesco KBW Property & Casualty Insurance ETF seeks to track the KBW Nasdaq Property & Casualty Index, with a basket of 26 securities. The fund has amassed an asset base of $200.9 million and charges an annual fee of 0.35%.
Invesco KBW Property & Casualty Insurance ETF has an exposure of 60.09% in large-cap securities. The fund has gained 8.01% over the past three months and 7.06% over the past year.
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Tap Into the Insurance Industry's Momentum With These ETFs
The rising frequency and seriousness of potential global challenges, ranging from climate change to cybercrime, secures the insurance industry’s ability to act as a financial cushion. According to Deloitte, insurers realizing the need to proactively prevent losses from occurring in the initial stages is driving the industry’s growth.
After experiencing a positive shift in its trend in the second half of last year, the U.S. property and casualty industry has continued with its robust momentum entering 2024. Significant premium increases, a slowdown in the growth of claims costs and improved investment returns have all had a beneficial effect on the sector, giving a boost to profitability.
The S&P Insurance Select Industry Index has gained 8.54% over the past year, as of 17 Jan 2024, compared to the broader S&P 500 Financials Index, which added about 3.82% over the past year.
Growth in Digits
According to Swiss Re, the industry ROE is estimated to surge to 9.5% in 2024 and reach 10% in 2025, hinting at a substantial increase from the 5% recorded in 2023, backed by robust premium growth and reduced inflationary pressures. Estimates for ROE are supported by solid premium growth expectations of 7% and 4.5% for 2024 and 2025, respectively.
Combined ratio, a comprehensive measure of an insurance company’s profitability, used to evaluate how well the company is operating on a daily basis, is anticipated to improve significantly. The ratio is projected to be 98.5% for both 2024 and 2025, implying a notable improvement from the estimated 103% for 2023. A ratio below 100% signifies that the company is realizing an underwriting profit.
Direct premium written (DPW), which represents the growth of a company’s insurance business during a particular period, is forecast to grow at 7% in 2024, indicating an upward revision from 5.5% in 2023.
Industry’s Anticipated Earnings Success
According to Factset, the insurance industry is expected to be the primary driver of positive year-over-year earnings growth for the financial sector, growing by a staggering 26%. Year-on-year earnings growth at the sub-industry level is led by the property & casualty insurance, growing at 48%, followed by reinsurance (30%) and multi-line insurance (17%).
Seventeen out of the top 20 insurers trading on major U.S. exchanges experienced an uptick in market capitalization during the fourth quarter of 2023, per S&P Global Market Intelligence, with most insurers exhibiting increases of 6% or more.
According to Zacks Earnings Trend, Insurance - Multi Line and Insurance - Property And Casualty have a growth rate of 8.04% and 8.02%, respectively.
ETFs in Focus
Below, we highlight a few insurance ETFs for investors to capitalize on the industry’s continuing momentum.
SPDR S&P Insurance ETF (KIE - Free Report)
SPDR S&P Insurance ETF seeks to track the performance of the S&P Insurance Select Industry Index with a basket of 48 securities. The fund has amassed an asset base of $738.17 million and charges an annual fee of 0.35%.
SPDR S&P Insurance ETF has a major exposure of 50.43% in property and casualty insurance, followed by life and health insurance, with a share of 24.84% of its assets. The fund has gained 6.78% over the past three months and 12.12% over the past year.
iShares U.S. Insurance ETF (IAK - Free Report)
iShares U.S. Insurance ETF seeks to track the performance of the Dow Jones U.S. Select Insurance Index, with a basket of 55 securities. The fund has gathered an asset base of $476.5 million and charges an annual fee of 0.40%.
iShares U.S. Insurance ETF has major exposure of 67.88% in property and casualty insurance, followed by life and health insurance, with a share of 24.13% of its assets. The fund has gained 9.67% over the past three months and 11.22% over the past year.
Invesco KBW Property & Casualty Insurance ETF (KBWP - Free Report)
Invesco KBW Property & Casualty Insurance ETF seeks to track the KBW Nasdaq Property & Casualty Index, with a basket of 26 securities. The fund has amassed an asset base of $200.9 million and charges an annual fee of 0.35%.
Invesco KBW Property & Casualty Insurance ETF has an exposure of 60.09% in large-cap securities. The fund has gained 8.01% over the past three months and 7.06% over the past year.