Insurance companies serve as the backbone of risk management, providing essential protection and financial security for individuals and businesses. 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 4.2% over the past six months. This drawdown is a stark contrast from the S&P 500’s 10% gain.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Keeping that in mind, here is one insurance stock boasting a durable advantage and two we’re passing on.
Two Insurance Stocks to Sell:
Hartford (HIG)
Market Cap: $34.91 billion
Recognizable by its iconic stag logo that dates back to 1810, The Hartford (NYSE: HIG) provides property and casualty insurance, group benefits, and investment products to individuals and businesses across the United States.
Why Do We Think Twice About HIG?
- Net premiums earned only expanded by 6.5% annually over the last two years, trailing its insurance peers as its scale limited incremental business
- Sales are projected to tank by 27.5% over the next 12 months as demand evaporates
- Scale is a double-edged sword because it limits the firm’s capital growth potential compared to its smaller competitors, as reflected in its below-average annual book value per share increases of 6.8% for the last five years
Hartford’s stock price of $127.37 implies a valuation ratio of 1.7x forward P/B. Dive into our free research report to see why there are better opportunities than HIG.
Kemper (KMPR)
Market Cap: $1.40 billion
Originally known as Unitrin until rebranding in 2011, Kemper (NYSE: KMPR) is an insurance holding company that provides automobile, homeowners, life, and other insurance products to individuals and businesses across the United States.
Why Should You Dump KMPR?
- Insurance offerings face significant market challenges this cycle as net premiums earned contracted by 1.8% annually over the last five years
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 7.6% annually over the last five years
At $23.76 per share, Kemper trades at 0.5x forward P/B. If you’re considering KMPR for your portfolio, see our FREE research report to learn more.
One Insurance Stock to Watch:
NMI Holdings (NMIH)
Market Cap: $2.74 billion
Founded in the aftermath of the 2008 housing crisis to bring new capacity to the mortgage insurance market, NMI Holdings (NASDAQ: NMIH) provides mortgage insurance that protects lenders against losses when homebuyers default on their mortgage loans.
Why Could NMIH Be a Winner?
- Pre-tax profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Annual book value per share growth of 16.5% over the past five years was outstanding, reflecting strong capital accumulation this cycle
- ROE punches in at 17.3%, illustrating management’s expertise in identifying profitable investments
NMI Holdings is trading at $36.11 per share, or 0.9x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
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