With strong economic growth, evolving demand among consumers, and rising adoption of digital technologies, the insurance industry is expected to experience robust growth in the coming years.
Given the industry’s bright prospects, fundamentally sound insurance stocks The Hartford Financial Services Group, Inc. (HIG), Brown & Brown, Inc. (BRO), and Primerica, Inc. (PRI) could be solid portfolio additions offering solid growth and stability.
After a slow first-quarter growth, the U.S. economy regained speed in the second quarter with gross domestic product growth at a 2.8% annualized rate. The economy grew faster than expected with rising consumer spending, business investment and easing price pressure. Also, expectations of a September interest rate cut from the Federal Reserve signal further improvement.
This strong economic growth trajectory will likely benefit economic activities, boost consumer confidence, and benefit businesses especially in segments like insurance. The commercial insurance rates in the U.S. increased 1%, and casualty insurance rates increased by 4% overall in the second quarter. This moderation is attributable to increased capacity, and competition among insurers.
The property and casualty insurance market is expected to grow from $2 trillion in 2024 to $3.79 trillion by 2032, exhibiting growth at a CAGR of 8.3%. Technological advancements like advanced core processes, Artificial intelligence (AI) and data analytics will propel the market demand.
Further, the insurance brokers & agents market is expected to reach $612.72 billion by 2028, expanding at a CAGR of 7% driven by rising demand from emerging markets.
Considering this favorable backdrop, let’s assess the fundamentals of the three insurance stocks.
The Hartford Financial Services Group, Inc. (HIG)
HIG provides insurance and financial services to individual and business customers internationally. The company operates through Commercial Lines segment; Personal Lines segment; Property & Casualty Other Operations segment; Group Benefits segment; and Hartford Funds segment.
HIG’s revenue and EBITDA have grown at respective CAGRs of 6.1% and 5.6% over the past three years. The company’s EBIT has increased 9.6% over the same timeframe, while its net income and EPS have improved at CAGRs of 10.7% and 17.3%, respectively.
On July 17, HIG’s Board of Directors declared a dividend of $0.47 per share of common stock, payable on October 2 to common stock shareholders of record at the close of business on September 3.
The Board also declared a dividend of $375 on each of the shares of Series G preferred stock (equivalent to $0.375 per depository share), payable on November 15 to Series G preferred stock shareholders of record at the close of business on November 1.
HIG pays an annual dividend of $1.88, which translates to a yield of 1.62% at the current share price. Its four-year average dividend yield is 2.21%. Moreover, the company’s dividend payouts have increased at a CAGR of 10.8% over the past three years. HIG has raised its dividends for 11 consecutive years.
During the second quarter that ended June 30, 2024, HIG’s total revenues increased 8.5% year-over-year to $3.48 billion. The company’s core earnings came in at $750 million and $2.50 per share, indicating growths of 27.5% and 33% from the prior year’s quarter, respectively.
In addition, the company’s book value per share rose 15.7% over the prior-year quarter to $51.43.
Analysts expect HIG’s revenue for the third quarter (ending September 2024) to increase 8.5% year-over-year to $6.69 billion, while its EPS is expected to grow 10.2% year-over-year to $2.52. Further, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past six months, HIG’s stock has gained 21.2% and 60.7% over the past year to close the last trading session at $116.15. It has a beta of 0.92.
HIG’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Momentum and a B for Growth and Stability. Within the A-rated Insurance – Property & Casualty industry, HIG is ranked #23 among 55 stocks.
Click here to access additional ratings of HIG (Value, Sentiment, and Quality).
Brown & Brown, Inc. (BRO)
BRO markets and sells insurance products and services internationally. It operates in four segments: Retail; National Programs; Wholesale Brokerage; and Services. The company provides property and casualty, employee benefits insurance products, personal insurance products, and specialties insurance products.
BRO’s revenue and EBITDA have grown at CAGRs of 15.9% and 17.7% over the past three years, respectively. The company’s EBIT has increased 18.5% over the same time frame, while its net income and EPS have improved at respective CAGRs of 20.4% and 20.1%, respectively.
On July 29, BRO entered into an agreement to acquire the Quintes insurance operations, one of the largest independent insurance brokers in the Netherlands. The transaction is expected to close in the fourth quarter of 2024. The strategic acquisition aligns well with BRO and will expand its international footprint and broaden the global capabilities scope.
For the second quarter that ended June 30, 2024, BRO’s total revenues rose 12.5% year-over-year to $1.18 billion. Its income before income taxes grew 36.2% from the year-ago value to $346 million. The company’s net income attributable to the company was $257 million and $0.90 per share, up 35.3% and 34.3% year-over-year, respectively.
In addition, the company’s adjusted EBITDAC came in at $420 million, an increase of 17.3% from the previous year’s quarter.
Street expects BRO’s revenue and EPS for the third quarter (ending September 2024) to increase 8.9% and 22.2% year-over-year to $1.16 billion and $0.87, respectively. Furthermore, the company topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past six months, the stock has gained 24.3% and 42% over the past year to close the last trading session at $104.65. It has a beta of 0.82.
BRO’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, equating to a Buy in our proprietary rating system.
BRO has an A grade for Momentum. It also has a B grade for Growth, Sentiment, Quality, and Stability. The stock is ranked #2 out of 13 stocks within the Insurance - Brokers industry.
To see the other ratings of BRO, click here.
Primerica, Inc. (PRI)
PRI provides financial products and services to middle-income households. The company operates through four segments: Term Life Insurance; Investment and Savings Products; Senior Health; and Corporate and Other Distributed Products.
PRI’s trailing-12-month gross profit and EBIT margins of 66.52% and 30.40% are 10.4% and 31.2% higher than the respective industry averages of 60.24% and 23.16%. Likewise, the stock’s trailing-12-month levered FCF margin of 32.83% is 84.2% higher than the industry average of 17.83%.
Over the past three years, PRI’s revenue and EBITDA have grown at CAGRs of 6.5% and 11.7%, respectively. The company’s EBIT has increased 11.7% over the same time frame, while its normalized net income and EPS have improved at respective CAGRs of 13.2% and 4.5%, respectively.
During the second quarter that ended June 30, 2024, PRI’s total revenues increased 16.7% year-over-year to $803.37 million and its total adjusted operating income before income taxes grew 11.6% year-over-year to $212.14 million. The company’s adjusted net operating income and adjusted EPS came in at $162.75 million, and $4.71, up 11.9% and 18% from the prior year’s quarter, respectively.
Analysts expect PRI’s revenue and EPS for the third quarter (ending September 2024) to grow 4.2% and 10.6% year-over-year to $740.69 million and $4.73, respectively. Moreover, the company has exceeded the consensus revenue estimates in all four trailing quarters, which is remarkable.
Shares of PRI have surged 6.7% over the past six months and 30.4% over the past year to close the last trading session at $216.57. It has a 24-month beta of 0.69.
PRI’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
PRI has an A grade for Momentum and a B grade for Growth, Sentiment, and Stability. It is ranked #11 among 26 stocks in the B-rated Insurance - Life industry.
In addition to the POWR Ratings highlighted above, you can check PRI’s ratings for Value and Quality here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
HIG shares were trading at $115.84 per share on Friday morning, down $0.31 (-0.27%). Year-to-date, HIG has gained 45.49%, versus a 18.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 Insurance Stocks That Offer Growth and Stability StockNews.com
