Insurance providers use their expertise in risk assessment to help protect assets while offering consumers peace of mind through comprehensive coverage options. But worries about an economic slowdown and potential claims deterioration have kept sentiment in check, and over the past six months, the industry’s return was flat while the S&P 500 climbed by 7.3%.
Investors should tread carefully as many of these insurers are also cyclical, and any misstep can have you catching a falling knife. Keeping that in mind, here are three insurance stocks we’re steering clear of.
Jackson Financial (JXN)
Market Cap: $8.15 billion
Spun off from British insurer Prudential plc in 2021 after more than 60 years as its U.S. subsidiary, Jackson Financial (NYSE: JXN) offers annuity products and retirement solutions that help Americans grow and protect their retirement savings and income.
Why Does JXN Give Us Pause?
- Growth in insurance policies was lackluster over the last two years as its 2.5% annual growth underperformed the typical financial institution
- Efficiency has decreased over the last four years as its pre-tax profit margin fell by 26.1 percentage points
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
At $112.04 per share, Jackson Financial trades at 0.6x forward P/B. To fully understand why you should be careful with JXN, check out our full research report (it’s free).
RenaissanceRe (RNR)
Market Cap: $13.52 billion
Born in Bermuda after the devastating Hurricane Andrew created a crisis in the catastrophe insurance market, RenaissanceRe (NYSE: RNR) provides property, casualty, and specialty reinsurance and insurance solutions to customers worldwide, primarily through intermediaries.
Why Are We Wary of RNR?
- Sales are projected to tank by 12% over the next 12 months as demand evaporates
- Day-to-day expenses have swelled relative to revenue over the last two years as its combined ratio increased by 7.8 percentage points
- Annual earnings per share growth of 3.6% underperformed its revenue over the last two years, showing its incremental sales were less profitable
RenaissanceRe’s stock price of $311.46 implies a valuation ratio of 1.1x forward P/B. If you’re considering RNR for your portfolio, see our FREE research report to learn more.
Everest Group (EG)
Market Cap: $13.68 billion
Rebranded from Everest Re in 2023 to reflect its evolution beyond just reinsurance, Everest Group (NYSE: EG) underwrites property and casualty reinsurance and insurance worldwide, serving insurance companies, corporations, and other clients across six continents.
Why Does EG Fall Short?
- Sales are projected to tank by 3.6% over the next 12 months as demand evaporates
- Operational productivity has decreased over the last two years as its combined ratio worsened by 7.9 percentage points
- Earnings per share fell by 17.7% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
Everest Group is trading at $336.01 per share, or 0.8x forward P/B. Check out our free in-depth research report to learn more about why EG doesn’t pass our bar.
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