The Zacks S&P 500 composite has performed well so far this year after a disappointing 2018. The benchmark index has gained 17.3% year to date having lost 6.2% in 2018. Optimism over trade talks between the United States and China, Fed’s bullish outlook on U.S. GDP, strong labor market, solid manufacturing data, rising oil prices and stable housing market have contributed to the index’s upside.
Factors That Worked in Favor of the Insurance Space
The insurance industry seems to have benefited from a not-so-active catastrophe environment. During the first half of 2019, preliminary economic loss totaled $73 billion while preliminary insured loss was $20 billion, stemming from 163 catastrophe events across the globe, per reports from Aon. However, the economic loss and preliminary insured loss were 40% and 45% lower than the respective 10-year average, the report stated. The third quarter saw Hurricane Dorian making landfall in the Bahamas. Risk modeling and analytics firm RMS expects insured losses to range between $3.5 billion and $6.5 billion from Hurricane Dorian while catastrophe modeler Karen Clark & Co. estimates insured losses in the United States and Caribbean to be around $5 billion, per media release.
Pricing firmed up through the first half of 2019. In the first quarter of 2019, in personal lines insurance, homeowners, automobile and personal articles saw rate increase of 2%, 2.5% and 1%, respectively. In Commercial lines, most of the lines saw premium rate increase of 2%, while Commercial Auto saw a 7% rate increase. In the second quarter of 2019, U.S. commercial insurance prices increased about 4%. Property, excess/umbrella, and directors and officers saw near double-digit rate increase. Commercial Auto saw a near or above double-digits rate increase, per Willis Towers Watson’s Commercial Lines Insurance Pricing Survey. Improved pricing and increased underwriting exposure continue to fuel premium growth.
However, the Federal Reserve lowered rate by 25 basis points each twice in the first nine months of 2019, citing muted inflation pressure and geopolitical tension. A higher invested asset base somewhat offset the impact of low rates for insurers.
Nonetheless, adoption of technologies is helping insurers curb operational costs. Also, sturdy capital level is supporting consolidations, strategic investments as well as dividend increase and share buybacks should continue to support growth. The insurance industry boasts a good policy holders’ surplus with improved new premiums written to surplus.
5 Insurance Outperformers YTD
Though the insurance industry has risen 9.9% year to date, it has underperformed the Zacks S&P 500 composite. However, there were some insurance industry stocks, which managed to outperform the broader index in the said time frame.
These stocks have seen estimates for 2019 move north in the past 60 days and carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). Also, these stocks have an impressive Growth Score of A or B. This style score analyzes the growth prospects of a company.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Progressive Corporation (PGR - Free Report) provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services primarily in the United States. The stock has gained 28% year to date. This Zacks Rank #2 stock has a Growth Score of A. The Zacks Consensus Estimate for 2019 has moved up 0.7% in the past 60 days.
NMI Holdings (NMIH - Free Report) provides private mortgage guaranty insurance services in the United States. The stock has gained 47.1% year to date. This Zacks Rank #2 stock has a Growth Score of A. The Zacks Consensus Estimate for 2019 has moved up 0.4% in the past 60 days.
Brown & Brown (BRO - Free Report) markets and sells insurance products and services in the United States, England, Canada, Bermuda, and the Cayman Islands. This Zacks Rank #2 stock has gained 30.8% year to date. It has a Growth Score of B. The Zacks Consensus Estimate for 2019 has moved up 0.7% in the past 60 days.
Assurant (AIZ - Free Report) provides risk management solutions for housing and lifestyle markets in North America, Latin America, Europe, and the Asia Pacific. The stock has gained 40.7% year to date. This Zacks Rank #2 stock has a Growth Score of B. The Zacks Consensus Estimate for 2019 has moved up 2% in the past 60 days.
EverQuote (EVER - Free Report) operates an online marketplace for insurance shopping in the United States. The stock has surged 410.5% year to date. This Zacks Rank #2 stock has a Growth Score of B. The Zacks Consensus Estimate for 2019 has narrowed in the past 60 days.
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