The Fed’s aggressive interest rate hikes to control the high inflation have put pressure on equities and other risky asset classes. However, the central bank’s hawkish stance is finally yielding results, with inflation cooling down for the second consecutive month in November.
While the Fed announced a 50-basis-point increase last week, lower than the previous four hikes, it indicated that it would continue raising rates through 2023. Although rising rates put pressure on most industries, they benefit financial companies, including insurers.
Insurers hold long-term safe bonds to meet their promised returns to policyholders. Amid a rising interest rate environment, their returns on such assets increase.
Therefore, it could be wise to invest in fundamentally strong insurance stocks The Hartford Financial Services Group, Inc. (HIG), CNA Financial Corporation (CNA), and Tiptree Inc. (TIPT).
The Hartford Financial Services Group, Inc. (HIG)
HIG provides insurance and financial services to individual and business customers worldwide. It operates through Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits, and Hartford Funds segments.
Over the last three years, HIG’s dividend payouts have grown at a 9.6% CAGR. Its four-year average dividend yield is 2.37%, and its forward annual dividend of $1.70 per share translates to a 2.29% yield. It is paid a quarterly dividend of $0.385 per share on October 4, 2022.
HIG’s net cash provided by operating activities for the nine months ended September 30, 2022, increased 1.2% year-over-year to $2.92 billion. Its core earnings for the quarter ended September 30, 2022, increased 6.6% year-over-year to $471 million.
Analysts expect HIG’s EPS and revenue for the quarter ending March 31, 2023, to increase 24.4% and 10.2% year-over-year to $2.06 and $5.94 billion, respectively. HIG has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 7.5% year-to-date to close the last trading session at $74.21.
HIG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Insurance - Property & Casualty industry, it is ranked #4 out of 53 stocks. It has an A grade for Sentiment and a B for Momentum and Stability.
We have also given HIG grades for Growth, Value, and Quality. Get all the HIG ratings here.
CNA Financial Corporation (CNA)
CNA provides commercial property and casualty insurance products. It operates through Specialty, Commercial, International, Life & Group, and Corporate & Other segments.
Over the last three years, CNA’s dividend payouts have grown at a 9.6% CAGR. Its four-year average dividend yield is 2.37%, and its forward annual dividend of $1.70 per share translates to a 2.29% yield. It paid a quarterly dividend of $0.40 per share on December 1, 2022.
CNA’s net earned premiums increased 8% year-over-year to $2.22 billion for the third quarter ended September 30, 2022. Its net earned premiums from the Property & Casualty segment rose 9% year-over-year to $2.10 billion, and its core income increased 20% year-over-year to $260 million.
Its net cash flows provided by operating activities for the nine months ended September 30, 2022, increased 47% year-over-year to $1.99 billion.
Analysts expect CNA’s revenue for the quarter ending December 31, 2022, to increase marginally year-over-year to $3.05 billion. Its EPS for the quarter ending March 31, 2023, is expected to increase 3.5% year-over-year to $1.20. Over the past three months, the stock has gained 6.3% to close the last trading session at $40.65.
It is no surprise that CNA has an overall rating of B, translating to a Buy in our proprietary rating system. Within the Insurance - Property & Casualty industry, CNA is ranked #7. In addition, it has an A grade for Stability and a B for Momentum and Sentiment.
Click here to see the additional ratings of CNA for Growth, Value, and Quality.
Tiptree Inc. (TIPT)
TIPT underwrites and administers specialty insurance products. The company operates in two segments, Insurance, and Mortgage. It offers niche commercial and personal lines insurance, credit insurance and collateral protection products, warranty and service contract products and solutions, as well as premium finance services.
Over the last three years, TIPT’s dividend payouts have grown at a 1.1% CAGR. Its four-year average dividend yield is 2.04%, and its forward annual dividend of $0.16 per share translates to a 1.12% yield. It paid a quarterly dividend of $0.04 per share on November 28, 2022.
TIPT’s total revenues for the fiscal third quarter ended September 30, 2022, increased 26.8% year-over-year to $363.48 million. Its net income attributable to common stockholders increased 608.3% year-over-year to $14.22 million. Additionally, its EPS increased 533.3% year-over-year to $0.38.
The stock has gained 3.7% year-to-date to close the last trading session at $14.34.
TIPT’s strong outlook is reflected in its POWR Ratings. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. Within the Insurance - Life industry, it is ranked first out of 26 stocks. The company has an A grade for Growth and a B for Momentum, Stability, and Sentiment.
Click here to see the additional POWR Ratings of TIPT for Value and Quality.
HIG shares were trading at $74.09 per share on Monday afternoon, down $0.12 (-0.16%). Year-to-date, HIG has gained 9.74%, versus a -18.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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