The insurance industry is experiencing significant growth, driven by various factors that are reshaping the landscape. Technological advancements, demographic shifts, and evolving customer expectations are key contributors to this expansion.
Digital transformation is playing a crucial role in the industry's growth. Insurtech innovations are streamlining processes, enhancing customer experiences, and improving risk assessment and management.
Hence, investors might consider buying fundamentally strong insurance stocks such as The Allstate Corporation (ALL), The Hartford Financial Services Group, Inc. (HIG), and Brown & Brown, Inc. (BRO), due to their solid growth potential and stability.
Despite a slow first quarter with GDP growth at 1.4%, the US economy shows promise with strong business investment and potential recovery from temporary issues like high imports and inventory adjustments. Notably, the insurance market is growing due to rising demand from emerging economies, higher cyber insurance needs, and technological advancements.
Meanwhile, the insurance market is stable, thanks to rising awareness about financial security, particularly among Millennials and Gen Z, and the industry's move towards digitalization and personalized services. The insurance brokers and agents market is projected to achieve a 7% CAGR reaching $612.72 billion by 2028, driven by digital customer engagement and the emergence of online platforms.
Furthermore, the Property and Casualty market is expected to increase from $2 trillion this year to $3.79 trillion by 2032, with an average annual growth rate of 8.3%. Investors’ interest in insurance stocks is evident from SPDR S&P Insurance ETF’s (KIE) 24.1% returns over the past year.
Considering this favorable backdrop, let’s assess the fundamentals of the three insurance stocks.
The Allstate Corporation (ALL)
ALL and its subsidiaries provide property, casualty, and other insurance products in the United States and Canada. It operates in five segments: Allstate Protection, Protection Services, Allstate Health and Benefits, Run-off Property-Liability, and Corporate and Other segments.
ALL's revenue has grown at a CAGR of 9.6% over the past three years and 7.4% over the past five years.
In terms of the trailing-12-month Return on Total Assets, ALL’s 1.28% is 20.4% higher than the 1.07% industry average. Likewise, its 0.57x trailing-12-month asset turnover ratio is 165.3% higher than the 0.22x industry average.
ALL’s consolidated net revenues for the first quarter ended March 31, 2024, increased 10.7% year-over-year to $15.26 billion. The company’s adjusted net income amounted to $1.37 billion and $5.13 per share, compared to an adjusted net loss of $342 million and $1.30 per share in the year-ago quarter, respectively. Furthermore, its book value per common share rose 6.2% year-over-year to $62.27.
Analysts expect ALL’s revenue for the quarter ending June 30, 2024, to increase 9.4% year-over-year to $15.29 billion. Its EPS for the quarter ending September 30, 2024, is expected to increase 271.2% year-over-year to $3.01. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 46.8% to close the last trading session at $159.49. Its 24-month beta is 0.27.
ALL’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #8 out of 56 stocks in the B-rated Insurance - Property & Casualty industry. It has an A grade for Momentum and a B for Growth and Stability. To see ALL’s Value, Sentiment, and Quality ratings, click here.
The Hartford Financial Services Group, Inc. (HIG)
HIG and its subsidiaries provide insurance and financial services to individual and business customers in the United States, the United Kingdom, and internationally. It operates in five segments: Allstate Protection segment, Protection Services segment, Allstate Health and Benefits segment, Run-off Property-Liability segment, and Corporate and Other segments.
HIG’s EBIT grew at a CAGR of 14.2% over the past three years. Also, its levered FCF grew at a CAGR of 21% over the past three years.
In terms of the trailing-12-month levered FCF, HIG’s 20.56% is 17.5% higher than the 17.50% industry average. Similarly, its 18.54% trailing-12-month Return on Common Equity is 74.7% higher than the 10.61% industry average. Also, its 3.50x trailing-12-month asset turnover ratio is 228.7% higher than the 1.07% industry average.
HIG’s total revenues for the first quarter ended March 31, 2024, increased 8.6% year-over-year to $6.42 billion. For the same quarter, its core earnings stood at $709 million and $2.34 per share, up 32.3% and 39.3% from the year-ago values, respectively. Additionally, the company’s book value per share rose 10.3% over the prior-year quarter to $60.18.
For the quarter ending June 30, 2024, HIG’s EPS and revenue are expected to increase 23.3% and 8.5% year-over-year to $2.32 and $6.56 billion, respectively. HIG surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 40.8% to close the last trading session at $100.56. Its 24-month beta is 0.56.
HIG’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Growth and Stability. Within the Insurance – Property & Casualty industry, it is ranked #21. Beyond the grades mentioned above, we have also rated HIG for Value, Sentiment, and Quality. Get all ratings here.
Brown & Brown, Inc. (BRO)
BRO markets and sells insurance products and services in the United States, Canada, Ireland, the United Kingdom, and internationally. It operates through four segments: Retail, National Programs, Wholesale Brokerage, and Services.
On June 10, 2024, BRO announced the acquisition of T Oscar Rollins & Company Ltd, trading as Rollins Insurance Brokers. Rollins will become part of BRO’s Northern Ireland business, ABL Group, with its team, including managing director Dermot Rollins, continuing under new ownership.
On June 7, 2024, BRO announced the acquisition of the assets of McNamara Company, a family-owned insurance agency. The McNamara team will join BRO’s Phoenix office, enhancing their commercial and personal insurance services.
BRO’s net income grew at a CAGR of 20.7% over the past three years. Also, its revenue grew at a CAGR of 16.7% over the past three years.
In terms of the trailing-12-month Return on Total Capital, BRO’s 8.20% is 19.9% higher than the 6.84% industry average. Likewise, its 6.26% trailing-12-month Return on Total Assets is 487.8% higher than the industry average of 1.07%. In addition, its 28.61% trailing-12-month EBIT margin is 22% higher than the industry average of 23.45%.
BRO’s total revenues for the fiscal first quarter ended March 31, 2024, amounted to $1.26 billion, up 12.7% year-over-year. Its adjusted EBITDAC grew 17.1% year-over-year to $466 million. Its net income rose 24.2% over the previous year’s quarter to $293 million. In addition, its adjusted net income per share increased 18.8% year-over-year to $1.14.
Street expects BRO’s EPS for the quarter ending June 30, 2024, to increase 27.4% year-over-year to $0.87. Its revenue for the same quarter is expected to increase 9.6% year-over-year to $1.15 billion. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 34.2% to close the last trading session at $89.70. Its 24-month beta is 0.67.
BRO’s POWR Ratings reflect its positive outlook. Within the Insurance - Brokers industry, it is ranked #first out of 13 stocks. It has an A grade for Momentum and a B for Growth, Stability, and Quality. Click here to see BRO’s Value and Sentiment ratings.
What To Do Next?
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ALL shares were trading at $159.72 per share on Friday afternoon, down $0.29 (-0.18%). Year-to-date, ALL has gained 15.41%, versus a 15.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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