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3 Top-Ranked Property & Casualty Insurers that Brokers Love

Zacks

The fourth quarter of 2017 seems to escape the furies of Mother Nature after massive devastation caused by a series of catastrophe events occurred in the preceding quarter. However, the current had to initially bear the brunt of Californian wildfires. Notably, each quarter in the year has experienced catastrophe loss with variations in magnitude.

Impact of catastrophes is been quite taxing and among the insurers, non-life insurers are usually the worst hit. While many incurred underwriting losses, others faced a slump in underwriting profit. Property and casualty (P&C) insurers are already coming up with fourth-quarter loss estimates, stemming from the Californian wildfires.

The industry has underperformed the S&P 500 index year to date. While the index has clocked a rally of 18.6%, the industry has gained 17.2% during the period.


Nonetheless, prudent underwriting discipline and a not-so-active catastrophe environment in the prior years have helped insurers build up capital reserve, helping companies meet insurance claims.

However, all is not lost in vain. A series of catastrophes has possibly induced insurers to raise pricing that remained flat for long owing to a benign catastrophe environment. This in turn will likely drive an increase in premiums and better pricing will always help insurers weather catastrophe loss in a judicious manner.

Also, with unemployment rate declining, demand for insurance is on the rise. This will again drive premiums higher, which is the primary source of insurers’ revenues.

The interest rate environment has been gradually improving. After keeping the interest rate at near-zero level since the financial crisis in 2008, the Federal Reserve has started raising the same, albeit at a slower pace. Post the Presidential election in November 2016, Fed has increased rates thrice.

The Central Bank of the United States had earlier indicated about three hikes in 2017 (two has already been made in the first half) with three more to go in 2018 that inevitably buoys optimism. With an improving rate environment, investment income is also set to increase, which is an important component of the insurers’ top line.

Strategic initiatives for a diversified portfolio, mergers and consolidation for accelerating growth and global expansion plus addition of capabilities position insurers well for a healthy performance on the path ahead.

Zacks Industry Rank

The Zacks Industry Rank relies on the same estimate revisions methodology that drives the Zacks Rank for stocks. The method of assessing the complete list of industries is that we categorize our X industries (all 265 of them) into two groups: the top half (i.e., industries with the best average Zacks Rank) and the bottom half (the industries with the worst average Zacks Rank).

Over the last decade, using a one-week rebalance, the top half beat the bottom half by a factor of more than 2 to 1. (To learn more visit: About Zacks Industry Rank)

The property and casualty industry is Ranked #176 at the bottom-half of the Zacks Industry Rank.

Choosing the Stocks

Despite unfavorable circumstances bothering the P&C insurance industry, solid fundamentals will continue to drive the insurers’ performance. However, it is always wise to have an expert opinion for making safe investments. Stocks preferred by analysts with a deep fundamental knowledge and understanding of the industry and its companies are likely to be safe bets.

With the help of our Zacks Stock Screener, we have selected three P&C insurance stocks that have been given a Strong Buy/Buy rating by 50% or more brokers. A favorable Zacks Rank #1 (Strong Buy) or #2 (Buy) that justifies a company’s strong fundamentals, further adds value to these stocks. You can see the complete list of today’s Zacks #1 Rank stocks here.

Infinity Property and Casualty Corp. IPCC provides personal automobile insurance products in the United States. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 41.4% upward while the same for 2018, increased 6.3% over the last 30 days. The stock flaunts a Zacks Rank of #1.

NMI Holdings Inc. NMIH provides private mortgage guaranty insurance services in the United States. The Zacks Consensus Estimate for 2017 has moved up 11.8% while the same for 2018, raised 5.7% in the last 30 days. The stock is a #1 Ranked player.

Donegal Group Inc. DGICA provides property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England and Southern states. The Zacks Consensus Estimate for 2017 has moved up 32.7% while the same for 2018, revised 8.7% upward in the last 30 days. The stock carries a Zacks Rank #2.

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