The Zacks Property and Casualty Insurance industry is placed within the top 22% of the 246 Zacks industries. It currently carries Zack Industry Rank #54. The insurers remain well-poised for growth, riding on better pricing, prudent underwriting, increased exposure, an improving rate environment, a solid capital position and ongoing economic expansion. 

The property and casualty (P&C) insurance industry has returned 14.5% in the year-to-date period, outperforming the Finance sector’s growth of 1.8% and the Zacks S&P 500 composite’s decline of 5.6%.

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Global commercial insurance rates decreased 2% in the fourth quarter of 2024, which marked the second consecutive quarterly decrease after seven years of rising rates, per the Marsh Global Insurance Market Index.

Price hikes, operational strength, higher retention, strong renewal and the appointment of retail agents should help write higher premiums. Per Deloitte Insights, gross premiums are estimated to exceed $722 billion by 2030.

Analysts at Swiss Re Institute predict industry return on equity (ROE) of 10% in 2025 and 2026 as higher investment return, offset by a gradual weakening in underwriting profitability. Swiss Re Institute increased the premium growth estimate to 5% (from 4%) for 2025 as inflation pressures may slow rate declines. Swiss Re also forecasts 4% premium growth in 2026.

However, industry players continue to grapple with issues like higher catastrophe events, both natural and man-made, which drag down underwriting profit. 

Per CoreLogic, the risk modelling and catastrophe data company, the initial estimate for insured losses from the Los Angeles, California wildfires, is expected to be between $35 billion and $45 billion. Per Moody’s RMS Event Response, the insured losses for the January 2025 Los Angeles firestorm events are estimated in the range of $20-$30 billion.

The insurance industry is rate-sensitive. An improving rate environment is a boon for insurers, especially long-tail insurers. The Fed held the borrowing rate targeted between 4.25% and 4.5% since December. The Fed officials project two rate cuts for 2025, totaling 50 basis points. With a large invested asset base, investment income should remain healthy.

A solid capital level supports insurers in pursuing strategic mergers and acquisitions to gain market share, expand in niche areas and diversify operations into new business lines and geography, as well as increase dividends, pay special dividends and buy back shares. Per a report from Willis Towers Watson’s Quarterly Deal Performance Monitor, Merger and acquisition (M&A) activity is projected to get momentum in 2025, riding on improved economic conditions, curbed inflation, technology-driven deals and stabilized interest rates. 

Players in the insurance industry are investing heavily in technology to expedite business operations. Increased use of blockchain, artificial intelligence, advanced analytics, telematics, cloud computing, Chatbot and RoboAdvisory, and insurtech solutions curb costs and improve basis points, scale and efficiencies. Per the Deloitte FSI Predictions article, insurers are likely to generate around $4.7 billion in annual global premiums from AI-related insurance by 2032, yielding a CAGR of nearly 80%. 

Given the bright prospects of the industry, growth stocks like Heritage Insurance Holdings, Inc. (HRTG Quick QuoteHRTG - Free Report) , Kingstone Companies, Inc (KINS Quick QuoteKINS - Free Report) , Root, Inc. (ROOT Quick QuoteROOT - Free Report) and The Progressive Corporation (PGR Quick QuotePGR - Free Report) , driven by their solid fundamentals, should generate better returns.

4 Growth Picks

Given the prospects of the industry, let’s look at a few stocks that have the potential to generate better returns. Our proprietary Growth Score makes the daunting task easier.

The Growth Score analyzes the growth prospects for a company. Studies have shown that stocks exhibiting the best growth characteristics consistently outperform the market. Back-tested results have shown that for stocks with a solid Growth Score and a favorable Zacks Rank, the returns are even better.

With the help of the Zacks Stock Screener, we have selected four P&C insurance stocks with an impressive Growth Score of A or B. HRTG, KINS and ROOT sport a Zacks Rank #1 (Strong Buy) each, while PGR carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tampa, FL-based Heritage Insurance provides personal and commercial residential insurance products. Its focus on rate adequacy, selective underwriting and profit-oriented underwriting criteria while restricting new business in over-concentrated markets or products poises it well for growth. The insurer has strategically diversified its portfolio to achieve better risk distribution, claims trends and lower reinsurance costs.

The Zacks Consensus Estimate for HRTG’s 2025 and 2026 earnings suggests 11.9% and 38.8% year-over-year growth, respectively. The consensus estimate for 2025 and 2026 has moved up 25.6% and 30.4%, respectively, in the past 30 days. It surpassed earnings estimates in three of the last four quarters and missed in one, the average beat being 328.63%. Earnings have grown 17.6% in the past five years. The stock currently has a Value Score of A and an impressive VGM Score of A.

Headquartered in Kingston, NY, Kingstone provides property and casualty insurance products to individuals in the United States. KINS is well-poised for growth, given its heightened focus on its core business and scaling back of unprofitable non-core businesses. The insurer only writes businesses that meet its underwriting standards and profit-margin objectives. KINS expects the direct written premium in core business to grow between 15% and 25% in 2025.

The Zacks Consensus Estimate for KINS’ 2025 and 2026 earnings suggests 31% and 5.2% year-over-year growth, respectively. The consensus estimate for 2025 and 2026 has moved up 22.5% and 11.1%, respectively, in the past 60 days. The stock currently has a Value Score of A and an impressive VGM Score of A.

Headquartered in Columbus, OH, Root provides insurance products and services in the United States. ROOT offers automobile, homeowners and renters’ insurance products. ROOT operates a direct-to-consumer mode, and serves customers primarily through mobile applications, as well as through its website. ROOT’s direct distribution channels also cover digital, media and referral channels, as well as distribution partners and agencies.

The Zacks Consensus Estimate for Root’s 2025 and 2026 revenues suggests 5.1% and 12.5% year-over-year growth, respectively, while the estimate for Root’s 2026 earnings suggests 322.4% year-over-year growth. It delivered a four-quarter average earnings surprise of 195.26%. The consensus estimate for 2026 has moved up 30% in the past 60 days. ROOT also has an impressive VGM Score of B.

Headquartered in Mayfield Village, OH, The Progressive operates as an insurance company in the United States and writes insurance for personal autos and special lines products. It continues to gain on higher premiums, given its compelling product portfolio, leadership position and strength in both Vehicle and Property businesses. PGR’s focus on becoming a one-stop insurance destination, catering to customers opting for a combination of home and auto insurance, augurs well for the company's growth. PGR’s policies in force and retention ratio should remain healthy. 

The Zacks Consensus Estimate for PGR’s 2025 and 2026 earnings suggests 9.1% and 2.2% year-over-year growth, respectively. The consensus estimate for 2025 and 2026 has moved up 2% and 0.8%, respectively, in the past 30 days. The company delivered a four-quarter average earnings surprise of 18.49%. The expected long-term earnings growth rate is pegged at 10.9%, better than the industry average of 7.6%.