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For Immediate Release
Chicago, IL – September 6, 2024 – Today, Zacks Equity Research discusses MetLife Inc. MET, American International Group Inc. AIG, Prudential Financial Inc. PRU, Assurant Inc AIZ and MGIC Investment MTG.
Industry: Multi-line Insurance
Link: https://www.zacks.com/commentary/2332183/5-stocks-to-watch-from-the-prospering-multiline-insurance-industry
Product diversification helps Zacks Multiline Insurance industry players 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., American International Group Inc., Prudential Financial Inc., Assurant Inc and MGIC Investment. Accelerated digitalization will help in the smooth functioning of the industry.
The solid capital level of multiline insurers will fuel merger and acquisition (M&A) activities. An interest rate cut is likely in September FOMC, with chances of more later this year. These remain concerns as insurers are direct beneficiaries of an improved rate environment.
About the Industry
The Zacks Multiline Insurance industry comprises companies that provide single insurance coverage, bundling automobile, homeowner, long-term care, and 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 players 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 payments 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. This lowers concentration risk. Increased awareness, driving higher demand for protection products, should benefit sales and premiums of life insurance operations. Continued improvement in pricing and an increase in exposure should support premium growth.
Also, per Deloitte Insights, the transition to green energy and related insurance products, as well as exposure to intangible assets, offers growth opportunities. The increased adoption of artificial intelligence could increase potential cyber threats, thus fueling demand for cyber insurance. Per a report in Carrier Management, AM Best expects profitable commercial lines and improving personal lines in 2024. Swiss Re estimates high single-digit premium growth in 2024.
Merger and acquisitions: Consolidation in the multi-line insurance industry is expected to continue as players look to diversify their operations into new business lines and geographies. Buying businesses along the same lines is driven by the players’ need to gain a fair market share and grow in their niche areas. Consolidations that slowed down earlier due to inflation are expected to rise in 2024. Insurance technology companies are expected to top the list per media reports. The industry is undergoing accelerated digitalization.
Increased adoption of technology: Digitalization has increased by leaps and bounds. 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. Insurers remain focused on ramping up data and analytics capabilities as well as realizing the benefit of the technological infrastructure per Deloitte Insights. Moreover, the adoption of technology has helped in seamless underwriting and claims processing. However, the adoption of technology comes with the risk of cyber threats.
Zacks Industry Rank Indicates Rosy 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 #50, which places it in the top 20% of 251 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. The rosy outlook reflects that the industry’s earnings estimates have been revised upward by analysts for the current year.
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 Outperforms Sector and S&P 500
The Multiline Insurance industry has outperformed the sector and the Zacks S&P 500 composite over the past year. The stocks in this industry have collectively gained 17.6% in the past year compared with the Finance sector’s increase of 13.9% and the Zacks S&P 500 composite rise of 15.9% in the same time frame.
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 2.64X compared with the S&P 500’s 8.41X and the sector’s 3.77X.
Over the past five years, the industry has traded as high as 2.74X, as low as 0.69X and at the median of 1.54X.
5 Multiline Insurance Stocks to Keep an Eye On
We are presenting two Zacks Rank #1 (Strong Buy) and three Zacks Rank #3 (Hold) stocks from the Multiline Insurance industry.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Assuring: Headquartered in Hartford, CT, this Zacks Rank #1 insurer is one of the major multi-line insurance and investment companies in the country. It is poised to grow on improvement in the 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 its solid capital position.
The Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-increase of 6.8% and 6.1%, respectively. The consensus estimate for 2024 and 2025 earnings has moved 3.1% and 4.5% north, respectively, in the past 30 days. Its expected long-term earnings growth rate is pegged at 7.1%. AIZ delivered a four-quarter average earnings surprise of 33.56%.
MGIC Investment: Based in Milwaukee, WI, MGIC Investment is the largest private mortgage insurer in the United States. Solid insurance in force, a decline in loss and claims payments, lower delinquency, better housing market fundamentals and prudent capital deployment poise this Zacks Rank #1 insurer well for growth. New business, combined with increasing annual persistency, drives the growth of the insurance-in-force portfolio.
The Zacks Consensus Estimate for 2024 earnings indicates a year-over-increase of 9.1%. MTG delivered a four-quarter average earnings surprise of 15.59%. The consensus estimate for 2024 and 2025 has moved 2.2% and 1.5% north, respectively, in the past 30 days. The expected long-term earnings growth rate is pegged at 6.8%.
American International Group: Headquartered in New York, AIG provides insurance products for commercial, institutional and individual customers in North America and internationally. Strategic business de-risking, acquisitions, cost-control efforts and accelerated capital deployment will drive this Zacks Rank #3 insurer’s growth.
The Zacks Consensus Estimate for 2025 earnings indicates a year-over-increase of 23.7%, respectively. The expected long-term earnings growth rate is pegged at 3.8%. AIG delivered a four-quarter average earnings surprise of 1.63%.
MetLife: This New York-based insurance-based global financial services company provides protection and investment products to a range of individual and institutional customers. This Zacks Rank #3 insurer’s focus on businesses with growth potential and strategies to control costs and increase efficiency bodes well for growth.
The Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-increase of 18.4% and 13.4%, respectively. Its expected long-term earnings growth rate is pegged at 14.4%, better than the industry average of 12.4%. MET delivered a four-quarter average earnings surprise of 1.25%. The consensus estimate for 2024 and 2025 earnings has moved 1 cent and 2 cents north, respectively, in the past 30 days.
Prudential Financial: Headquartered in Newark, NJ, Prudential is a financial services leader offering an array of financial products and services. It carries a Zacks Rank #3. Its solid asset-based businesses, improved margins in the Group Insurance business, solid international operations, a high-performing asset management business and deeper reach in the pension risk transfer market are catalysts for long-term growth.
A vast distribution network, a compelling product portfolio and a superior brand image give it a competitive edge. PRU is on track to become a higher-growth, less market-sensitive business.
The Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-increase of 14.7% and 9.6%, respectively. The expected long-term earnings growth rate is pegged at 9.7%. PRU delivered a four-quarter average earnings surprise of 0.76%.
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