U.S. markets open in 7 hours 18 minutes
  • S&P Futures

    -15.00 (-0.39%)
  • Dow Futures

    -108.00 (-0.36%)
  • Nasdaq Futures

    -47.00 (-0.40%)
  • Russell 2000 Futures

    -10.70 (-0.60%)
  • Crude Oil

    -0.22 (-0.25%)
  • Gold

    -2.20 (-0.13%)
  • Silver

    -0.21 (-1.01%)

    -0.0017 (-0.17%)
  • 10-Yr Bond

    0.0000 (0.00%)
  • Vix

    -1.03 (-3.42%)

    -0.0033 (-0.28%)

    +0.0130 (+0.01%)

    +583.48 (+2.97%)
  • CMC Crypto 200

    +12.86 (+2.89%)
  • FTSE 100

    +177.70 (+2.57%)
  • Nikkei 225

    +142.50 (+0.53%)

5 Multiline Insurers to Watch as Exposure Increases, Price Rises

·8 min read

Product diversification helps Zacks Multiline Insurance industry players to lower concentration risk, ensure uninterrupted revenue generation and improve retention ratio. Better pricing, prudent underwriting, increased exposure, faster economic recovery on the receding impact of the pandemic and increased vaccinations should benefit MetLife Inc. MET, American International Group Inc. AIG, The Hartford Financial Services Group Inc. HIG, Assurant Inc. AIZ, and Radian Group RDN. Accelerated digitalization will help in the smooth functioning of the industry.

The solid capital level of the multiline insurers will fuel merger and acquisition (M&A) activities. With four hikes in the interest rate this year so far and more to come in the future, investment income should improve further as insurers are beneficiaries of a rising rate environment.

About the Industry

The Zacks Multiline Insurance industry comprises companies that provide a single insurance coverage, bundling automobile, homeowner, long-term care, life and health insurance to individuals and businesses. The insured pays a single premium and is covered for many things through a single contract. These companies cover commercial and personal properties, automobiles, marine, livestock, aviation, personal accident, life, including permanent and term insurance, supplemental accident and health insurance, workers’ compensation, annuity products, private mortgage insurance, et al. The industry participants also provide risk management services. Since the companies offer single insurance coverage for multiple products, customer retention improves. The insured stands to benefit from lower premium payment compared to paying individual premiums for insuring varied products.

3 Trends Shaping the Future of the Multiline Insurance Industry

Diversified portfolio lowers concentration risk:  Given the nature of the business, multiline insurers’ product and service portfolios are diversified, which lowers concentration risk. Increased awareness driving higher demand for protection products should benefit sales and premiums for life insurance operations. Continued improvement in pricing and increase in exposure should support premium growth for non-life insurance operations. Per Deloitte Insights, The Swiss Re Institute estimates an increase in demand for insurance coverage across the globe, in turn driving a 3.9% rise in premiums in 2022. Per Deloitte Insights, life insurance premium is estimated to increase 4%, while non-life insurance premium is expected to increase 3.7% in 2022.

Merger and acquisitions:  Consolidation in the multi-line insurance industry would continue as players look to diversify their operations into new business lines and geographies. Buying businesses in the same lines is driven by the players’ need to gain a fair market share and grow in their niche areas. With the reopening of the economy, an optimistic growth outlook and a solid capital level of the insurers, 2021 saw 869 deals, up 40% from 620 in 2020. The total deal value surged 165% to $57.5 billion per Deloitte. With a favorable operating backdrop, the stage is set for the momentum to continue.

Increased adoption of technology: Digitalization has taken a leap in the industry with the pandemic hitting hard and companies gathering strength to operate amid pandemic-induced restrictions. The industry is witnessing greater use of technology like blockchain, AI, advanced analytics, telematics, cloud computing and robotic process automation to expedite business operations and save costs.  Many life insurers have started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data is making premium calculation easier and reducing risk. The P&C industry, in particular, also witnessed the emergence of insurtech — technology-led insurers — sparking competition for incumbent players. Moreover, the adoption of technology has helped in seamless underwriting and claims processing. Per Deloitte Insights, the technology budget is projected to increase 13.7% in 2022.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects in the near term. The Zacks Multiline Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #94, which places it in the top 37% of 255 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate.

Before we present a few multiline insurance stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Underperforms Sector and S&P 500

The Multiline Insurance industry has underperformed both the Zacks S&P 500 composite and its sector over the past year. The stocks in this industry have collectively lost 12.8% in the past year compared with the Finance sector’s decrease of 9.2% and the Zacks S&P 500 composite’s decline of 7.7% in the same time frame.

One-Year Price Performance

Current Valuation

On the basis of its trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 1.65X compared with the S&P 500’s 5.77X and the sector’s 3.03X.

Over the past five years, the industry has traded as high as 1.96X, as low as 0.84X and at the median of 1.59X.

Price-to-Book (P/B) Ratio (TTM)

Price-to-Book (P/B) Ratio (TTM)

5 Multiline Insurance Stocks to Keep an Eye on

We are presenting one Zacks Rank #1 (Strong Buy) and one Zacks Rank #2 (Buy) stock from the Multiline Insurance industry.  

We are also presenting three stocks carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Radian Group: Philadelphia, PA-based Radian Group is a credit enhancement company, which supports homebuyers, mortgage lenders, loan servicers and investors with a suite of private mortgage insurance and related risk-management products and services. Improvement in quality and size of mortgage insurance in force, a decline in claim payments given the strong credit characteristics of the new loans insured, maintenance of capital in compliance with regulations, and solid capital position poise it well for growth.

The Zacks Consensus Estimate for 2022 earnings of this Zacks Rank #1 company indicates a 14.3% year-over-year increase. The expected long-term earnings growth rate is pegged at 5%. Radian delivered a four-quarter average earnings surprise of 29.51%. RDN has a VGM Score of B.

Price and Consensus: RDN

Hartford Financial: This Hartford, CT-based Zacks Rank #2 company is one of the major multi-line insurance and investment companies in the country, providing investment products, group life and group disability insurance, property and casualty insurance, and mutual funds in the United States. Hartford Financial’s expanded product offerings, efforts to strengthen the commercial business, underwriting strength in products, capital appreciation and cost-curbing initiatives bode well for growth.

The Zacks Consensus Estimate for 2022 and 2023 indicates a year-over-increase of 16.3% and 16.4%, respectively. The expected long-term earnings growth rate is pegged at 7%. Hartford Financial delivered a four-quarter average earnings surprise of 34.08%. HIG has a VGM Score of B.

Price and Consensus: HIG

American International Group: Headquartered in New York, this Zacks Rank #3 insurer provides insurance products for commercial, institutional, and individual customers in North America and internationally. Strategic business de-risking and acquisitions, cost-control efforts, and accelerated capital deployment will drive American International’s growth.

The Zacks Consensus Estimate for 2022 and 2023 indicates a year-over-increase of 0.2% and 21.9%, respectively. AIG delivered a four-quarter average earnings surprise of 18.87%. American International has a VGM Score of A.

Price and Consensus: AIG

Assurant: Headquartered in New York, this Zacks Rank #3 company is a global provider of risk management solutions in the housing and lifestyle markets, protecting where people live and the goods they buy. A well-performing Global Lifestyle business, growth in fee-based capital-light businesses and solid capital management poise AIZ well for growth.

The Zacks Consensus Estimate for Assurant’s 2022 and 2023 earnings has moved 0.2% and 0.1% north, respectively in the past 30 days and indicates a year-over-increase of 38% and 12.8%. The expected long-term earnings growth rate is pegged at 17.3%, better than the industry average of 12%. AIZ delivered a four-quarter average earnings surprise of 11.26%.

Price and Consensus: AIZ

MetLife: This New York, NY-based insurance-based global financial services company provides protection and investment products to a range of individual and institutional customers. MetLife’s focus on businesses with growth potential and strategies to control cost and increase efficiency bode well for growth. MET carries a Zacks Rank #3.

The Zacks Consensus Estimate for 2023 indicates a year-over-increase of 19.8% and has moved up 1% in the past 30 days. The expected long-term earnings growth rate is pegged at 18.2%, better than the industry average of 12%. MetLife delivered a four-quarter average earnings surprise of 42.90%. MET has VGM Score of B.

Price and Consensus: MET   

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
MetLife, Inc. (MET) : Free Stock Analysis Report
The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
American International Group, Inc. (AIG) : Free Stock Analysis Report
Assurant, Inc. (AIZ) : Free Stock Analysis Report
Radian Group Inc. (RDN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research