In this article, we discuss 10 best insurance stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to 5 Best Insurance Stocks To Buy Now.
Concerns around the normal operation of businesses continue to persist in 2022 but insurance experts predict rapid growth for the insurance industry in the coming months. According to a report by professional services firm Deloitte, a survey of insurance experts reveals that digital and talent transformation is accelerating as the industry adapts to the post-pandemic economy. The demand for insurance is expected to increase by close to 4% in 2022, up from 3.3% in 2021. Growth in China and emerging markets will lead this trend.
The report underlines that the strategic priorities of the industry in 2022 will be based around flexible work models, balancing automation with the “need to maintain a human touch” with customers, and being more proactive in boosting the trust of stakeholders. However, the challenges related to regulation, talent, sustainability, and evolving consumer preferences will act as possible disruptors of this growth. Despite these challenges, Swiss Re predicts that the premium for the insurance industry will rise to a record $7 trillion in 2022.
Some of the top insurance stocks to buy now include Willis Towers Watson Public Limited Company (NASDAQ:WTW), Humana Inc. (NYSE:HUM), and Cigna Corporation (NYSE:CI), among others discussed in detail below.
Our Methodology
The companies that operate in the insurance sector were selected for the list. The business fundamentals and analyst ratings for these firms are also discussed to provide readers with some additional context for their investment choices.
Data from around 900 elite hedge funds tracked by Insider Monkey in Q3 2021 was used to identify the number of hedge funds that hold stakes in each firm.
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Best Insurance Stocks To Buy Now
10. The Allstate Corporation (NYSE:ALL)
Number of Hedge Fund Holders: 27
The Allstate Corporation (NYSE:ALL) provides insurance products in the United States and Canada. On February 9, JPMorgan analyst Jimmy Bhullar maintained an Overweight rating on the stock with a price target of $146, noting that inflation presented a near-term headwind for the firm and the results of The Allstate Corporation (NYSE:ALL) should improve in 2022 given the imminent rise in interest rates.
Hedge funds concur with this analysis of The Allstate Corporation (NYSE:ALL). At the end of the third quarter of 2021, 27 hedge funds in the database of Insider Monkey held stakes worth $821 million in The Allstate Corporation (NYSE:ALL), compared to 33 the preceding quarter worth $923 million.
Just like Willis Towers Watson Public Limited Company (NASDAQ:WTW), Humana Inc. (NYSE:HUM), and Cigna Corporation (NYSE:CI), The Allstate Corporation (NYSE:ALL) is one of the stocks that investors are buying as interest rates rise.
In its Q2 2020 investor letter, Generation PMCA, an asset management firm, highlighted a few stocks and The Allstate Corporation (NYSE:ALL) was one of them. Here is what the fund said:
“The Allstate Corporation (NYSE:ALL), the second largest personal auto and home insurance writer in the U.S., should see earnings expand this year, during a challenging period when most companies aren’t expected to deliver year-over-year earnings growth. Higher mortality rates from coronavirus are being offset by lower mortality outside of virus-related deaths and expense control. In auto, the benefits of lower miles driven due to the pandemic offset auto rebates. Historically, Allstate’s scale and conservative underwriting have translated to superior profitability metrics. The company is on pace to achieve a mid-teen return on equity for ’21, well above peers. However, with shares currently at 1.3x book value, The Allstate Corporation (NYSE:ALL) trades at a discount to competitors. We believe skepticism around recent acquisitions to diversify away from life and auto insurance (e.g., identify theft and warranties) is the reason for its discounted valuation. We expect The Allstate Corporation (NYSE:ALL) to continue to cast its net further afield given the long-term threat of autonomous vehicles to its automobile franchise. We are comfortable with the strategy, especially since these acquisitions are immaterial. Meanwhile, the company should continue to post peer-beating results. Our FMV estimate is $120.”
9. Chubb Limited (NYSE:CB)
Number of Hedge Fund Holders: 30
Chubb Limited (NYSE:CB) is a Swiss firm that provides insurance products. Top hedge funds hold large stakes in the company. At the end of the third quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Chubb Limited (NYSE:CB), compared to 42 the preceding quarter worth $1.7 billion.
On February 1, Chubb Limited (NYSE:CB) reported earnings for the fourth quarter of 2021, posting earnings per share of $3.81, beating estimates by $0.53. The revenue over the period was $9.3 billion, up more than 10% year-on-year.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Chubb Limited (NYSE:CB) was one of them. Here is what the fund said:
“Chubb is now among the Fund’s largest P&C holdings at 5.2% and illustrates well why we thought there was an opportunity to add to our P&C names. Through September 30, 2020, Chubb had returned −24% for the year, reflecting investors’ fears that (1) the insurance industry would be compelled to cover substantial business interruption claims that were never intended as part of insured’s policies, (2) declining long-term rates would diminish the value of “float” (i.e., customers’ funds that insurers get to hold and invest until claims are paid), and (3) adverse trends (pre-dating the pandemic) in insured loss rates (e.g., rising litigation and settlement costs, increased frequency and severity of catastrophe losses, etc.).
With industry economics already soft, it was only a matter of time before insurance pricing would have to adjust. In fact, P&C pricing had already begun to increase in a number of business lines before COVID hit, and that trend has only increased and broadened since then. Chubb disclosed in Q3 2020 that North American commercial P&C pricing increased by more than 15% in aggregate. Some of the price increase will go to cover rising insurance loss rates, but we certainly do anticipate some dropping into underwriting profit too. Admittedly, some of that increased underwriting profit will itself get offset by a decline in investment income owing to lower interest rates, but that is a “feature,” if you will, of P&C insurance companies. Unlike a bank, where the floor on its deposit funding costs practically speaking is zero, there is in theory no reason underwriting profit cannot increase to offset low interest rates, so it is feasible for its earnings to “normalize” far in advance of an eventual rise in long-term rates.
With respect to the setting of loss reserves, we have always admired Chubb’s conservative approach in establishing cautious initial loss estimates and in recognizing the bad news first. In terms of COVID related losses, Chubb reserved $1.4 billion for customers’ claims in the second quarter, the majority of which were “incurred but not reported” loss estimates for professional and general liability lines that would be the second- and third-order impacts of the virus. Like the banks’ “life-of-loan” reserving described above, Chubb has made an honest effort to put all of COVID’s financial impact behind it.
When we started adding to our position in Chubb this year, it was valued at 1.6x tangible book value, and we expect it has the potential to earn a mid-teens return on capital over time and for it to grow decently and gain market share over time.”
8. American International Group, Inc. (NYSE:AIG)
Number of Hedge Fund Holders: 30
American International Group, Inc. (NYSE:AIG) is a New York-based insurance firm. It has paid a dividend payout to shareholders for eight consecutive years. On December 14, the company declared a quarterly dividend of $0.32 per share, in line with previous.
Major hedge funds are exceedingly bullish on American International Group, Inc. (NYSE:AIG). Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in American International Group, Inc. (NYSE:AIG), with 31 million shares worth more than $1.7 billion.
7. Prudential Financial, Inc. (NYSE:PRU)
Number of Hedge Fund Holders: 33
Prudential Financial, Inc. (NYSE:PRU) provides insurance and investment management services. Hedge funds have been piling into the stock. At the end of the third quarter of 2021, 33 hedge funds in the database of Insider Monkey held stakes worth $460 million in Prudential Financial, Inc. (NYSE:PRU), up from 28 in the previous quarter worth $494 million.
On January 6, Barclays analyst Tracy Benguigui maintained an Equal Weight rating on Prudential Financial, Inc. (NYSE:PRU) stock with a price target of $59, underlining that the property and casualty pricing cycle was peaking and inflation and reserves were coming into focus.
6. MetLife, Inc. (NYSE:MET)
Number of Hedge Fund Holders: 39
MetLife, Inc. (NYSE:MET) is a financial services firm with core interests in insurance. The stock has climbed in the past few days to a record high as media reports indicate that the company is exploring the sale of the variable annuity business in the United States. In the fourth quarter of 2021, premiums and annuity revenues for the firm were around $14.5 billion.
MetLife, Inc. (NYSE:MET) is a top insurance stock on Wall Street. At the end of the third quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in MetLife, Inc. (NYSE:MET), compared to 41 in the previous quarter worth $1 billion.
In addition to Willis Towers Watson Public Limited Company (NASDAQ:WTW), Humana Inc. (NYSE:HUM), and Cigna Corporation (NYSE:CI), MetLife, Inc. (NYSE:MET) is one of the stocks that elite investors are keeping their eye on as inflation rises.
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Disclosure. None. 10 Best Insurance Stocks To Buy Now is originally published on Insider Monkey.
