Insurance providers use their expertise in risk assessment to help protect assets while offering consumers peace of mind through comprehensive coverage options. Still, investors are uneasy as insurers face challenges from catastrophic events and potential regulatory changes. These doubts have caused the industry to lag recently as insurance stocks have collectively shed 4.9% over the past six months. This drop was worse than the S&P 500’s 2.8% loss.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here are two resilient insurance stocks at the top of our wish list and one we’re steering clear of.
One Insurance Stock to Sell:
MetLife (MET)
Market Cap: $46.41 billion
Founded in 1863 by a group of New York businessmen during the Civil War era, MetLife (NYSE: MET) is a global financial services company that provides insurance, annuities, employee benefits, and asset management services to individuals and businesses worldwide.
Why Should You Dump MET?
- Scale presents growth limitations compared to smaller competitors, evidenced by its below-average 2.8% annualized growth in net premiums earned for the last five years
- Earnings per share lagged its peers over the last two years as they only grew by 10.3% annually
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 12.3% annually over the last five years
MetLife is trading at $71.20 per share, or 1.6x forward P/B. To fully understand why you should be careful with MET, check out our full research report (it’s free).
Two Insurance Stocks to Buy:
Skyward Specialty Insurance (SKWD)
Market Cap: $1.92 billion
Founded in 2006 to serve markets where standard insurance coverage falls short, Skyward Specialty Insurance (NASDAQ: SKWD) provides customized commercial property, casualty, and health insurance solutions for underserved or specialized market niches.
Why Is SKWD a Top Pick?
- Strong 25.4% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 38.2% outpaced its revenue gains
- Notable projected book value per share growth of 21.8% for the next 12 months hints at strong capital generation
At $43.05 per share, Skyward Specialty Insurance trades at 1.5x forward P/B. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Palomar Holdings (PLMR)
Market Cap: $3.11 billion
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
Why Should You Buy PLMR?
- Net premiums earned expanded by 52.3% annually over the last two years, demonstrating exceptional market penetration this cycle
- Annual book value per share growth of 36.7% over the last two years was superb and indicates its capital strength increased during this cycle
- Expected book value per share growth of 26.4% for the next year suggests its capital position will strengthen considerably
Palomar Holdings’s stock price of $116.73 implies a valuation ratio of 2.7x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
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