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 3.2% return has trailed the S&P 500 by 2.3 percentage points.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, here are two insurance stocks boasting durable advantages and one best left ignored.
One Insurance Stock to Sell:
Radian Group (RDN)
Market Cap: $4.76 billion
Founded during the housing boom of 1977 and weathering multiple real estate cycles since, Radian Group (NYSE: RDN) provides mortgage insurance and real estate services, helping lenders manage risk and homebuyers achieve affordable homeownership.
Why Is RDN Not Exciting?
- Net premiums earned contracted by 3% annually over the last five years, showing unfavorable market dynamics this cycle
- Expenses have increased as a percentage of revenue over the last two years as its combined ratio degraded by 23.4 percentage points
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 1.5% annually
Radian Group is trading at $35.15 per share, or 1x forward P/B. If you’re considering RDN for your portfolio, see our FREE research report to learn more.
Two Insurance Stocks to Buy:
F&G Annuities & Life (FG)
Market Cap: $4.76 billion
Founded in 1959 and serving approximately 677,000 policyholders who rely on its financial protection products, F&G Annuities & Life (NYSE: FG) provides fixed annuities, life insurance, and pension risk transfer solutions to retail and institutional clients.
Why Are We Bullish on FG?
- Net premiums earned surged by 19.7% annually over the past two years, reflecting strong market share gains this cycle
- Annual book value per share growth of 28.2% over the last two years was superb and indicates its capital strength increased during this cycle
- Capital strength is on track to rise over the next 12 months as its 50.3% projected book value per share growth implies profitability will accelerate from its two-year trend
F&G Annuities & Life’s stock price of $35.33 implies a valuation ratio of 1x forward P/B. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Palomar Holdings (PLMR)
Market Cap: $3.23 billion
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
Why Will PLMR Beat the Market?
- Strong 38.3% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
- Annual book value per share growth of 37.7% over the last two years was superb and indicates its capital strength increased during this cycle
- Book value per share outlook for the upcoming 12 months is outstanding and shows it’s on track to build significant equity value
At $120.60 per share, Palomar Holdings trades at 3.5x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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