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3 Insurance Stocks to Steer Clear of Sluggish September


September has historically been the languid month for the stock market. While several theories for this uncanny phenomenon have been doing the rounds, the most common notion is that investors take time off during the summer months, inducing an overall decline in trading volumes. September also witnesses the mid-term election in the United States. Stock Trader’s Almanac found that September has been the weakest month for the S&P 500 since 1950 and since 1971 for Nasdaq.

September should also see trade war intensifying between United States and China as the former could levy another $200 billion tariff on Chinese goods.

Yet the first trading session of the month witnessed the S&P 500 to continue with the bull run with the index still touching the 2,900 mark but slipping nearly 0.2% to finally close at 2,896.72. The S&P 500 index touched its record high of 2,916.50 on Aug 29, 2018.

Shares of the insurance industry have increased 2.9% to date in September, outperforming the Zacks S&P Composite’s gain of 2.5%. The insurance industry seems well poised for the bull run, banking on a favorable operating environment.

The Federal Reserve is also due for its two-days’ FOMC meeting to be held on Sep 25-26. Per current market speculations, there is a very high possibility of nearly 96% for a rate hike in the current month. While the interest rate currently stands at 2%, the Fed has already made two hikes this year, reflecting strengthening of U.S. economy.

Inflation in the United States has also reached the set 2% target, a figure to denote economic growth. GDP, a major indicator of the nation's overall economic health, has improved to 4.2% during the second quarter of 2018 from an increase of 2.2%, registered in the first quarter. Per a recent release, Kevin Hassett, chairman of the White House Council of Economic Advisers, expects GDP to grow 3.5% in the third quarter.

Labor market has been strengthening with unemployment rate moving south to 3.9% in July and job addition continuing for 94 months on the trot.

A major catalyst for determining insurers’ profitability are the occurrences and magnitude of catastrophe events. Typhoon Jebi, estimated as the strongest typhoon in 25 years, made a landfall in Japan a couple of days back. Though the hurricane season lashed on the shores with Hurricane Lane hitting Hawaii in August, Colorado State University projected a milder hurricane season this year with a total of 12 named storms. This should offer a major relief for insurers as 2017 was the costliest year for insurers in terms of cat loss.

An all-time high capital level should consistently support insurers to pursue strategic endeavours to accelerate growth. Lower tax rate owing to the implementation of the Tax Cuts and Jobs Act should provide an additional boost to profitability.

Solid Picks

It might be an uphill task to pick the right stocks for greater investment rewards. Here comes our handy Zacks Stock Screener to help identify the best bets.

We shortlisted three stocks backed by a bullish Zacks Rank, an impressive Growth Score and northbound estimates over the past 60 days. These stocks have also outperformed the industry as well as the Zacks S&P500 Composite to date in September.

The Growth Score analyzes the growth prospects of a company and also evaluates its corporate financial statements. Back tested results show that stocks with an attractive Growth Score of A or B combined with a solid Zacks Rank offers better investment returns.

The Progressive Corporation PGR provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. The stock sports a Zacks Rank #1 (Strong Buy) and a favourable Growth Score of B. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 2.7% upward over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Progressive have gained 14.7% month to date.

Kemper Corporation KMPR provides property and casualty plus life and health insurance to individuals and businesses in the United States. The stock carries a Zacks Rank #2 (Buy) and a Growth Score of B. The stock has seen the Zacks Consensus Estimate for current-year earnings move 1.9% north over the past 30 days.

Shares of Kemper have gained 5.7% month to date.

James River Group Holdings, Ltd. JRVR provides specialty insurance and reinsurance services in the United States. The stock carries a Zacks Rank of 2 and a Growth Score of B. The stock has seen the Zacks Consensus Estimate for current-year earnings being raised 2.2% over the past 30 days.

Shares of James River Group have gained 0.9% month to date.

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