Despite the challenging economic scenario, the insurance industry is well-positioned to remain afloat in the upcoming months. To that end, let us probe into insurance stocks AXIS Capital Holdings Limited (AXS), Loews Corporation (L), and Global Indemnity Group, LLC (GBLI), which could be solid portfolio additions now, for the reasons mentioned throughout the article.
The relevance of insurance is known to all. The insurance industry exists to provide effective risk management services to protect businesses, entities, and individuals from a potential loss and compensate the insured during catastrophe, injury, or loss.
The insurance industry is a major component of the economy by virtue of the amount of premiums it collects, the scale of its investment, and, more fundamentally, the essential social and economic role it plays by covering personal and business risks.
According to a new report by Allianz Trade, total global insurance premium income amounted to nearly €5.6 trillion ($5.99 trillion) last year. The Property & Casualty (P&C) segment grew at a robust 8.7%, and more than half, or €77.5 billion ($82.91 billion) of last year’s global increase came from North America alone.
The P&C insurance market is anticipated to reach $2.47 trillion in 2027, growing at a CAGR of 7.6%. The growth would be mainly driven by the rising adoption of stand-out technologies in the industry.
Given persistently high inflation, insurance companies could open up opportunities by providing profitable options to underinsured policyholders and leveraging technology for better outcomes.
According to a survey by investment management firm Nuveen, 39% of insurers planned to allocate more to private infrastructure, and 34% expected to invest more in inflation-linked bonds, thereby fortifying themselves against inflation.
The global insurance market is projected to grow by $1.43 trillion, accelerating at a CAGR of 4.5% between 2022 and 2027.
Given this backdrop, insurance stocks AXS, L, and GBLI, with strong fundamentals, could be solid buys now.
AXIS Capital Holdings Limited (AXS)
Headquartered in Pembroke, Bermuda, AXS provides various specialty insurance and reinsurance products worldwide. It operates through two segments, Insurance and Reinsurance.
On May 3, AXS announced that its Board of Directors had declared a quarterly dividend of $0.44 per common share payable to shareholders on July 18. In addition, the Board declared a dividend of $34.375 per Series E 5.50% preferred share (equivalent to $0.34375 per depositary share), payable on the same date.
AXS pays a $1.76 per share dividend annually, which translates to a 3.32% yield on the current share price. Its four-year average dividend yield is 2.88%. The company’s dividend payout has grown at a CAGR of 12.6% over the past three years and a CAGR of 2.5% over the past five years.
AXS’ revenues have grown at 1.2% and 1.6% CAGRs over the past three and five years, respectively. Moreover, its EBIT and net income have grown at 44.8% and 90.3% CAGRs over the past three years, respectively.
For the fiscal first quarter that ended March 31, 2023, AXS’ total revenues stood at $1.34 billion, up 6.5% year-over-year. Its net income available to common shareholders and net income per share stood at $172.53 million and $2.01, respectively, up 21.8% year-over-year.
Moreover, the company’s operating income and operating income per share stood at $200.05 million and $2.33, up 11.2% and 11.5% from the prior-year quarter, respectively.
For the fiscal third quarter ending September 2023, AXS’ revenue is expected to increase 7.9% year-over-year to $1.12 billion, while its EPS is expected to grow significantly year-over-year to $1.59. AXS surpassed its consensus EPS estimates in three of the trailing four quarters, which is impressive.
AXS’ stock has gained 4.2% over the past five days and 2.1% intraday to close the last trading session at $54.09.
AXS’ POWR Ratings reflect its positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AXS has an A grade for Growth and a B for Momentum and Sentiment. It is ranked #9 within the B-rated 56-stock Insurance - Property & Casualty industry.
For additional AXS ratings for Value, Stability, and Quality, click here.
Loews Corporation (L)
L provides commercial property and casualty insurance in the United States and internationally. The company offers specialty insurance products like management and professional liability, other coverage products, surety and fidelity bonds, property insurance, and casualty insurance.
For the quarter that ended March 31, 2023, L repurchased 8.2 million shares for a total cost of $486 million, which represents nearly 3.5% of its shares outstanding at the beginning of the quarter.
On May 9, L announced a quarterly dividend of $0.0625 per share of common stock, paid to shareholders on June 6. L pays a $0.25 per share dividend annually, which translates to a 0.43% yield on the current share price. Its four-year average dividend yield is 0.51%.
L’s revenues have grown 0.4% and 0.6% CAGRs over the past three and five years, respectively. Moreover, its EBIT and EBITDA have grown at 22.9% and 6.2% CAGRs over the past three years, respectively.
For the fiscal first quarter that ended March 31, 2023, L’s total revenues increased 11.2% year-over-year to $3.78 billion. The company’s net income attributable to L increased 16.5% year-over-year to $375 million. In addition, its net income per share came in at $1.61, representing an increase of 24.8% year-over-year.
The company’s retained earnings stood at $15.29 billion as of March 31, 2023, compared to $14.93 billion as of December 31, 2022.
Over the past six months, L’s stock has gained 2.6% to close the last trading session at $58.63. Over the past five days, it has gained 4.7%.
L’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Momentum, Stability, and Sentiment. It is ranked #11 within the same industry.
Click here to see the other ratings of L for Growth, Value, and Quality.
Global Indemnity Group, LLC (GBLI)
GBLI provides specialty property and casualty insurance, and reinsurance products worldwide. It operates in two segments, Commercial Specialty and Reinsurance Operations.
On June 1, GBLI announced that its Board of Directors had approved a distribution payment of $0.25 per common share to be paid to shareholders on June 30. GBLI pays a $1 per share dividend annually, which translates to a 3.59% yield on the current share price. Its four-year average dividend yield is 3.81%. The company’s dividend payout has grown at a CAGR of 32% over the past five years.
GBLI’s revenue has grown at 5.6% and 6.2% CAGRs over the past three and five years, respectively. Moreover, its EBIT and net income have grown at 14.9% and 41.2% CAGRs over the past three years, respectively.
For the fiscal first quarter that ended March 31, 2023, GBLI’s total revenues came in at $140.41 million. Its adjusted operating income and operating income per share stood at $3.43 million and $0.24, respectively.
The company’s net income available to common shareholders stood at $2.38 million, compared to a net loss of $14.88 million in the previous-year quarter, while net income available to shareholders per share stood at $0.17, compared to a net loss per share of $1.03 in the prior-year quarter.
The company expects to generate between $415 million and $430 million of gross written premium in its commercial specialty segment for the full year 2023.
For the fiscal fourth quarter ending December 2023, the consensus revenue estimate is $141 million. Analysts expect GBLI’s EPS for the same quarter to grow 420% year-over-year to $0.78.
Over the past six months, GBLI’s stock has gained 8.3% to close the last trading session at $27.61. The stock has gained 18.5% year-to-date.
It’s no surprise that GBLI has an overall B rating, equating to Buy in our proprietary rating system.
GBLI has a B grade for Growth, Momentum, and Sentiment. Within the same industry, GBLI is ranked #10.
Beyond what we have stated above, we’ve also rated GBLI for Value, Stability, and Quality. Get all GBLI ratings here.
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AXS shares were trading at $54.16 per share on Wednesday afternoon, up $0.07 (+0.13%). Year-to-date, AXS has gained 0.80%, versus a 12.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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