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Buy 3 Insurance Stocks Amid Higher Interest Rates and Bond Yields
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Key Takeaways
Travelers benefits from disciplined underwriting, lower catastrophe losses and growing investment income.
Reinsurance Group of America gains from higher portfolio yields and favorable claims trends.
Assurant sees growth from subscriber gains, partnerships and expansion across its protection platforms.
U.S. stock markets are facing volatility in September. On Sept. 16, the Fed raised the benchmark lending rate by 25 basis points to the range of 3.75-4% with an overwhelming 12-0 voting majority.
The primary reason was sticky inflation, which was recently aggravated by spike in crude oil prices due to the persistent geopolitical conflicts in the Middle East. Fed Chairman Kevin Warsh said, “Our predominant focus is on the price stability side of our mandate.” Warsh added, “The plain fact is that inflation is too high and has been for too long.”
Following the release of the minutes, yields on several U.S. government bonds spiked. The yield on the benchmark 10-Year U.S. Treasury Note rose above the psychological barrier of 5% to 5.016%. This yield hit a 19-year high on Sept. 15.
The yield on the short-term 2-Year U.S. Treasury Note rose to 4.738%. This yield is closely linked to the movement of the Fed funds rate. The yield on the long-term 30-Year U.S. Treasury Note rose to 5.347%.
Insurance Industry to Gain
An increase 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, and 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.
At this stage, we recommend three insurance stocks with a favorable Zacks Rank for investment. These are: The Travelers Companies Inc. (TRV - Free Report) , Reinsurance Group of America Inc. (RGA - Free Report) and Assurant Inc. (AIZ - Free Report) . Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our three picks year-to-date.
Image Source: Zacks Investment Research
The Travelers Companies Inc.
Zacks Rank #1 Travelers Companies has been benefiting from broad commercial and personal insurance franchises, disciplined underwriting and growing investment income. TRV has been exhibiting strength in its earnings base, with healthy underlying margins, lower catastrophe losses and favorable reserve development across all segments.
Continued technology investment, refined pricing and segmentation, a high-quality fixed-income portfolio and consistent capital returns should sustain TRV’s earnings growth and shareholder value.
Although weather volatility, loss-cost inflation, reinsurance expenses and changing pricing conditions remain risks, TRV’s operating strength and diversified business mix should help it navigate these pressures. Solid fundamentals and dependable execution also support further share-price gains.
Strong Estimate Revisions
Travelers Companies has an expected revenue and earnings growth rate of -0.1% and 22.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 13.7% over the last 60 days.
TRV has an expected revenue and earnings growth rate of 2.9% and -11.5%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 4% over the last 60 days.
Image Source: Zacks Investment Research
Attractive Valuation
The stock has a forward P/E of 11.18X compared with the industry’s P/E of 11.56X and the S&P 500’s P/E of 17.89X. It has a P/S of 1.61X compared with the industry’s P/S of 1.29X and the S&P 500’s P/S of 2.97X. TRV has a P/B of 2.38X compared with the industry’s P/B of 1.68X and the S&P 500’s P/B of 3.58X.
Reinsurance Group of America Inc.
Zacks Rank #2 Reinsurance Group of America benefits from a diversified global reinsurance platform, disciplined underwriting and a mix of organic and in-force opportunities. RGA’s recent business is contributing to earnings as expected, while higher portfolio yields and favorable claims trends support profitability.
RGA’s Equitable block is working as per plan, and capital flexibility remains ample for transactions and shareholder returns. RGA’s technology partnerships provide a differentiated growth lever by pairing its insurance expertise with specialist platforms that can improve underwriting efficiency and client service.
Insurers continue to modernize claims, underwriting and policy servicing to shorten cycle times and reduce unit costs. RGA’s approach is to validate partner technology in real underwriting and claims use cases, then scale it through reinsurance relationships.
Strong Estimate Revisions
Reinsurance Group of America has an expected revenue and earnings growth rate of 12.3% and 30.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.6% over the last seven days.
RGA has an expected revenue and earnings growth rate of 4.9% and -1.4%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 0.1% over the last seven days.
Image Source: Zacks Investment Research
Attractive Valuation
The stock has a forward P/E of 8.37X compared with the industry’s P/E of 11.58X and the S&P 500’s P/E of 17.89X. It has a P/S of 0.65X compared with the industry’s P/S of 0.72X and the S&P 500’s P/S of 2.97X. RGA has a P/B of 1.18X compared with the industry’s P/B of 1X and the S&P 500’s P/B of 3.58X.
Assurant Inc.
Zacks Rank #2 Assurant’s embedded protection and service platforms support recurring revenue and durable growth across Global Lifestyle and Global Housing. Connected Living is benefiting from program optimization, subscriber gains and broader supply-chain capabilities, while Global Automotive is gaining from international partnerships and better loss experience.
The new Freedom Mortgage relationship and Cover360 expansion strengthen Housing’s longer-term growth profile. Higher liquidity and disciplined buybacks add financial flexibility. AIZ expects Global Lifestyle adjusted EBITDA to grow in the low double digits in 2026, up from its prior expectation of about 10%.
AIZ continues to deepen relationships with large mobile carriers, cable operators, retailers and financial institutions. The expanded T-Mobile relationship includes the migration of UScellular’s in-force business and a new reverse-logistics program. Recently added or optimized programs with Telstra, Best Buy and Chase Card Services broaden AIZ’s Connected Living platform.
Strong Estimate Revisions
Assurant has an expected revenue and earnings growth rate of 8.4% and 12.7%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 2.5% over the last 30 days.
AIZ has an expected revenue and earnings growth rate of 6.7% and 5.7%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 0.9% over the last 30 days.
Image Source: Zacks Investment Research
Attractive Valuation
The stock has a forward P/E of 12.84X compared with the industry’s P/E of 10.24X and the S&P 500’s P/E of 17.89X. It has a P/S of 1.05X compared with the industry’s P/S of 1.07X and the S&P 500’s P/S of 2.97X. AIZ has a P/B of 2.32X compared with the industry’s P/B of 1.30X and the S&P 500’s P/B of 3.58X.
View the Zacks #1 Rank List
Image: Bigstock
Buy 3 Insurance Stocks Amid Higher Interest Rates and Bond Yields
Key Takeaways
U.S. stock markets are facing volatility in September. On Sept. 16, the Fed raised the benchmark lending rate by 25 basis points to the range of 3.75-4% with an overwhelming 12-0 voting majority.
The primary reason was sticky inflation, which was recently aggravated by spike in crude oil prices due to the persistent geopolitical conflicts in the Middle East. Fed Chairman Kevin Warsh said, “Our predominant focus is on the price stability side of our mandate.” Warsh added, “The plain fact is that inflation is too high and has been for too long.”
Following the release of the minutes, yields on several U.S. government bonds spiked. The yield on the benchmark 10-Year U.S. Treasury Note rose above the psychological barrier of 5% to 5.016%. This yield hit a 19-year high on Sept. 15.
The yield on the short-term 2-Year U.S. Treasury Note rose to 4.738%. This yield is closely linked to the movement of the Fed funds rate. The yield on the long-term 30-Year U.S. Treasury Note rose to 5.347%.
Insurance Industry to Gain
An increase 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, and 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.
At this stage, we recommend three insurance stocks with a favorable Zacks Rank for investment. These are: The Travelers Companies Inc. (TRV - Free Report) , Reinsurance Group of America Inc. (RGA - Free Report) and Assurant Inc. (AIZ - Free Report) . Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our three picks year-to-date.
Image Source: Zacks Investment Research
The Travelers Companies Inc.
Zacks Rank #1 Travelers Companies has been benefiting from broad commercial and personal insurance franchises, disciplined underwriting and growing investment income. TRV has been exhibiting strength in its earnings base, with healthy underlying margins, lower catastrophe losses and favorable reserve development across all segments.
Continued technology investment, refined pricing and segmentation, a high-quality fixed-income portfolio and consistent capital returns should sustain TRV’s earnings growth and shareholder value.
Although weather volatility, loss-cost inflation, reinsurance expenses and changing pricing conditions remain risks, TRV’s operating strength and diversified business mix should help it navigate these pressures. Solid fundamentals and dependable execution also support further share-price gains.
Strong Estimate Revisions
Travelers Companies has an expected revenue and earnings growth rate of -0.1% and 22.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 13.7% over the last 60 days.
TRV has an expected revenue and earnings growth rate of 2.9% and -11.5%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 4% over the last 60 days.
Image Source: Zacks Investment Research
Attractive Valuation
The stock has a forward P/E of 11.18X compared with the industry’s P/E of 11.56X and the S&P 500’s P/E of 17.89X. It has a P/S of 1.61X compared with the industry’s P/S of 1.29X and the S&P 500’s P/S of 2.97X. TRV has a P/B of 2.38X compared with the industry’s P/B of 1.68X and the S&P 500’s P/B of 3.58X.
Reinsurance Group of America Inc.
Zacks Rank #2 Reinsurance Group of America benefits from a diversified global reinsurance platform, disciplined underwriting and a mix of organic and in-force opportunities. RGA’s recent business is contributing to earnings as expected, while higher portfolio yields and favorable claims trends support profitability.
RGA’s Equitable block is working as per plan, and capital flexibility remains ample for transactions and shareholder returns. RGA’s technology partnerships provide a differentiated growth lever by pairing its insurance expertise with specialist platforms that can improve underwriting efficiency and client service.
Insurers continue to modernize claims, underwriting and policy servicing to shorten cycle times and reduce unit costs. RGA’s approach is to validate partner technology in real underwriting and claims use cases, then scale it through reinsurance relationships.
Strong Estimate Revisions
Reinsurance Group of America has an expected revenue and earnings growth rate of 12.3% and 30.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.6% over the last seven days.
RGA has an expected revenue and earnings growth rate of 4.9% and -1.4%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 0.1% over the last seven days.
Image Source: Zacks Investment Research
Attractive Valuation
The stock has a forward P/E of 8.37X compared with the industry’s P/E of 11.58X and the S&P 500’s P/E of 17.89X. It has a P/S of 0.65X compared with the industry’s P/S of 0.72X and the S&P 500’s P/S of 2.97X. RGA has a P/B of 1.18X compared with the industry’s P/B of 1X and the S&P 500’s P/B of 3.58X.
Assurant Inc.
Zacks Rank #2 Assurant’s embedded protection and service platforms support recurring revenue and durable growth across Global Lifestyle and Global Housing. Connected Living is benefiting from program optimization, subscriber gains and broader supply-chain capabilities, while Global Automotive is gaining from international partnerships and better loss experience.
The new Freedom Mortgage relationship and Cover360 expansion strengthen Housing’s longer-term growth profile. Higher liquidity and disciplined buybacks add financial flexibility. AIZ expects Global Lifestyle adjusted EBITDA to grow in the low double digits in 2026, up from its prior expectation of about 10%.
AIZ continues to deepen relationships with large mobile carriers, cable operators, retailers and financial institutions. The expanded T-Mobile relationship includes the migration of UScellular’s in-force business and a new reverse-logistics program. Recently added or optimized programs with Telstra, Best Buy and Chase Card Services broaden AIZ’s Connected Living platform.
Strong Estimate Revisions
Assurant has an expected revenue and earnings growth rate of 8.4% and 12.7%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 2.5% over the last 30 days.
AIZ has an expected revenue and earnings growth rate of 6.7% and 5.7%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 0.9% over the last 30 days.
Image Source: Zacks Investment Research
Attractive Valuation
The stock has a forward P/E of 12.84X compared with the industry’s P/E of 10.24X and the S&P 500’s P/E of 17.89X. It has a P/S of 1.05X compared with the industry’s P/S of 1.07X and the S&P 500’s P/S of 2.97X. AIZ has a P/B of 2.32X compared with the industry’s P/B of 1.30X and the S&P 500’s P/B of 3.58X.