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4 Top Insurance Stocks That Outperformed S&P 500 in 2019

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The year 2019 is nearing an end and the Zacks S&P 500 composite has performed quite favorably after a disappointing 2018. The benchmark index has gained 26.1% year to date after losing 5.9% in 2018. Optimism over trade talks between the United States and China, Fed’s bullish outlook on U.S. GDP, a strong labor market, solid manufacturing data, and a 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 respectively 40% and 45% lower than the 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.

Insurers gained from pricing that firmed up in 2019. According to the Commercial Lines Pricing Survey issued by Willis Towers Watson PLC on Monday, U.S. commercial pricing continued to accelerate during the third quarter, increasing by more than 4% compared with the same period a year ago.

According to MarketScout’s composite rate for personal lines continued to rise, with rates increasing from 3.5% plus in the second quarter 2019 to 4.5% plus in the third quarter of 2019, as rate rises seemed to accelerate, in areas that suffered from catastrophe losses.

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. Rate cut in the near term horizon is unlikely and that should make insurers better off.

Nonetheless, adoption of technologies is helping insurers curb operational costs. Also, a 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.

4 Insurance Outperformers YTD

Though the insurance industry has risen 16.3% 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). To further narrow down the list, we have selected those that have a VGM Score of A or B. Per the Zacks’ proprietary methodology, stocks with this favorable combination offer good investment opportunities.

 You can see the complete list of today’s Zacks #1 Rank stocks here.

Our Picks

W.R. Berkley Corp. (WRB - Free Report) is one of the nation’s largest commercial lines property casualty insurance providers.
•    Zacks Rank #2
 
•    VGM Score of B
 
•    Market cap of $12.7 billion
 
•    The Zacks Consensus Estimate for 2019 earnings moved up by 7% over the past 60 days.
•    Up 39.5% versus the industry’s and Zacks S&P 500 composite’s gain of 16.3% and 26%, respectively.

First American Financial Corporation (FAF - Free Report) provides title insurance and closing/settlement services; property data and automated title plant records and images; home warranty products; property and casualty insurance through its subsidiaries.
•    Zacks Rank #2
 
•    VGM Score of A
 
•    Market cap of $6.9 billion
 
•    The Zacks Consensus Estimate for 2019 earnings moved up by 5.5% over the past 60 days.
•    Up 32% versus the industry’s and Zacks S&P 500 composite’s gain of 16.3% and 26%, respectively.



MGIC Investment Corp. (MTG - Free Report) is the largest private mortgage insurer in the United States.

•    Zacks Rank #2
 
•    VGM Score of B
 
•    Market cap of $5 billion
 
•    The Zacks Consensus Estimate for 2019 earnings moved up by 0.5% over the past 60 days.

•    Up 36.8% versus the industry’s and Zacks S&P 500 composite’s gain of 16.3% and 26%, respectively.



Radian Group Inc. (RDN - Free Report) provides a suite of private mortgage insurance and related risk-management products and services.
•    Zacks Rank #2
 
•    VGM Score of A
 
•    Market cap of $5.1 billion
 
•    The Zacks Consensus Estimate for 2019 earnings moved up by 5.1% over the past 60 days.
•    Up 55.3% versus the industry’s and Zacks S&P 500 composite’s gain of 16.3% and 26%, respectively.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>

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