Insurance providers use their expertise in risk assessment to help protect assets while offering consumers peace of mind through comprehensive coverage options. Market leaders have certainly capitalized on strong underwriting results and rising investment income to boost profitability, helping fuel a 7% gain for the industry over the past six months - 2.4 percentage points higher than the S&P 500.

Nevertheless, investors should tread carefully as many insurers are cyclical due to their exposure to claims risk and regulatory changes. Taking that into account, here are two insurance stocks boasting durable advantages and one we’re passing on.

One InsuranceStock to Sell:

Allstate (ALL)

Market Cap: $51.84 billion

Born from a Sears, Roebuck & Co. initiative during the Great Depression with its famous "You're in good hands" slogan, Allstate (NYSE: ALL) is one of America's largest personal property and casualty insurers, offering protection for autos, homes, and personal property.

Why Does ALL Fall Short?

1. Operational productivity has decreased over the last four years as its combined ratio worsened by 10.1 percentage points
2. Performance over the past five years shows its incremental sales were less profitable, as its 7.4% annual earnings per share growth trailed its revenue gains
3. Annual book value per share growth of 1.4% over the last five years lagged behind its insurance peers as its large balance sheet made it difficult to generate incremental capital growth

Allstate’s stock price of $195.76 implies a valuation ratio of 2.3x forward P/B. Check out our free in-depth research report to learn more about why ALL doesn’t pass our bar.

Two Insurance Stocks to Buy:

NMI Holdings (NMIH)

Market Cap: $3.30 billion

Founded in the aftermath of the 2008 housing crisis to bring new capacity to the mortgage insurance market, NMI Holdings (NASDAQ: NMIH) provides mortgage insurance that protects lenders against losses when homebuyers default on their mortgage loans.

Why Are We Bullish on NMIH?

1. Annual net premiums earned growth of 9.6% over the last two years beat the sector average and underscores the value of its insurance products
2. Underwriting operating profits and efficiency rose over the last four years as it benefited from some fixed cost leverage
3. Balance sheet strength has increased this cycle as its 15.9% annual book value per share growth over the last five years was exceptional

NMI Holdings is trading at $42 per share, or 1.3x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.

Kinsale Capital Group (KNSL)

Market Cap: $11.03 billion

Founded in 2009 during the aftermath of the financial crisis when many insurers were retreating from riskier markets, Kinsale Capital Group (NYSE: KNSL) is an insurance company that specializes in writing policies for hard-to-place, unusual, or high-risk businesses that standard insurers typically avoid.

Why Is KNSL a Good Business?

1. Annual net premiums earned growth of 28.4% over the past two years was outstanding, reflecting market share gains this cycle
2. Incremental sales over the last two years have been highly profitable as its earnings per share increased by 37.6% annually, topping its revenue gains
3. Annual book value per share growth of 38.8% over the past two years was outstanding, reflecting strong capital accumulation this cycle

At $475 per share, Kinsale Capital Group trades at 5.9x forward P/B. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

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