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4 Stocks to Gain on Expected Recovery in Insurance Sector

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Zacks Equity Research
·4 min read
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The U.S. Treasury yield curve has steepened, thanks to December’s weak jobs data that increased the prospects of additional stimulus spending by the government to pep up the coronavirus-ravaged economy. Interestingly, a steepening yield curve bodes well for insurance stocks. After all, investors can claim a greater yield in return on investment in longer-term maturities. This is because when the longer-term maturity rates are higher, insurance companies can expect more income from their investment in those longer-term securities.

Notably, the global insurance markets are set to turnaround in 2021, per a press release by the Swiss Re Institute. Swiss Re estimated that global insurance premiums are set to grow 3.4% in real terms in 2021 following an expected contraction of 1.4% in 2020. Moreover, the report predicted that in North America, the total insurance premium should grow 2% in 2021 followed by an expected growth rate of 2.4% in 2022. The report further mentioned that non-life premiums in North America are expected to continue with rate hardening in 2021, “supporting overall market growth of 2.6% and improving profitability.” On the life insurance front in North America, Swiss Re predicted that life premiums will be stagnant in 2021 before growth improving “to below-trend 1.2% in 2022, in real terms.” The report stated that rising awareness for protection products helped demand to rise while the disruptions caused by the lockdowns were also less severe than what was initially anticipated.

Moreover, medical insurers have predicted that global health care benefit costs will go up in 2021. Per a press release by Willis Towers Watson, employer-sponsored healthcare benefits are estimated to rise 8.1% in 2021. Notably, in North America, health care benefit costs are expected to increase 7.1% in 2021.

4 Top Stocks to Buy Now

The U.S. insurance sector looks poised to make a comeback in 2021 following the steepening of the yield curve. Moreover, an increase in health care benefit costs along with rising insurance premium prices bode well for the industry. Hence, this makes it a good time to invest in insurance stocks that can benefit from this trend going forward. We have handpicked four such stocks that carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brown & Brown, Inc. BRO markets and sells insurance products and services in the United States. The Zacks Consensus Estimate for its current-year earnings increased 6.2% over the past 90 days. The company’s expected earnings growth rate for the current year is 5.5%.

Primerica, Inc. PRI, along with its subsidiaries, provides financial products to middle income households in the United States and Canada. One of the segments under which the company operates is Term Life Insurance. It underwrites individual term life insurance products. The Zacks Consensus Estimate for its current-year earnings increased 3.8% over the past 90 days. The company’s expected earnings growth rate for the current year is 10.7%.

The Allstate Corporation ALL, through its subsidiaries, provides property and casualty, and other insurance products in the United States and Canada. The company’s Allstate Benefits segment provides life, accident, critical illness, short-term disability, and other health insurance products. The Zacks Consensus Estimate for its current-year earnings increased 8.2% over the past 90 days. The company’s expected earnings growth rate for the next five years is 7.5%.

Markel Corporation MKL, a diverse financial holding company, markets and underwrites specialty insurance products in the United States, the United Kingdom, Canada, and internationally. Its Insurance segment offers general and professional liability, personal lines, marine and energy, specialty programs, and workers' compensation insurance products, and so on. The Zacks Consensus Estimate for its current-year earnings increased 5.1% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.

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The Allstate Corporation (ALL) : Free Stock Analysis Report
 
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Primerica, Inc. (PRI) : Free Stock Analysis Report
 
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