Insurance firms play a critical role in the financial system, offering everything from property coverage to life insurance and specialized risk solutions. But worries about an economic slowdown and potential claims deterioration have kept sentiment in check, and over the past six months, the industry’s 2.5% return has trailed the S&P 500 by 22.2 percentage points.
Investors should tread carefully as many of these insurers are also cyclical, and any misstep can have you catching a falling knife. On that note, here are three insurance stocks best left ignored.
Globe Life (GL)
Market Cap: $11.3 billion
With roots dating back to 1900 and a rebranding from Torchmark Corporation in 2019, Globe Life (NYSE: GL) is an insurance holding company that offers life insurance, supplemental health insurance, and annuity products through various distribution channels.
Why Do We Think Twice About GL?
- Sales trends were unexciting over the last two years as its 4.6% annual growth was below the typical insurance company
- Net premiums earned expanded by 4.4% annually over the last two years, falling below our expectations for the insurance sector
- Annual book value per share declines of 2.4% for the past five years show its capital management struggled during this cycle
Globe Life’s stock price of $139.44 implies a valuation ratio of 1.9x forward P/B. Read our free research report to see why you should think twice about including GL in your portfolio.
Everest Group (EG)
Market Cap: $14.72 billion
Rebranded from Everest Re in 2023 to reflect its evolution beyond just reinsurance, Everest Group (NYSE: EG) underwrites property and casualty reinsurance and insurance worldwide, serving insurance companies, corporations, and other clients across six continents.
Why Does EG Worry Us?
- Estimated sales growth of 1.7% for the next 12 months implies demand will slow from its two-year trend
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 10.2% annually while its revenue grew
At $351.05 per share, Everest Group trades at 1x forward P/B. If you’re considering EG for your portfolio, see our FREE research report to learn more.
AXIS Capital (AXS)
Market Cap: $7.34 billion
Founded in the aftermath of the 9/11 attacks when insurance capacity was scarce, AXIS Capital Holdings Limited (NYSE: AXS) is a global specialty insurer and reinsurer that provides coverage for complex risks across property, liability, professional lines, cyber, and other specialty markets.
Why Are We Wary of AXS?
- Sales trends were unexciting over the last five years as its 4.9% annual growth was below the typical insurance company
- Sluggish 3.4% annualized growth in net premiums earned over the last two years indicates the firm trailed its insurance peers
- Underwhelming 9.7% return on equity reflects management’s difficulties in finding profitable growth opportunities
AXIS Capital is trading at $93.84 per share, or 1.3x forward P/B. To fully understand why you should be careful with AXS, check out our full research report (it’s free).
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