Insurance companies serve as the backbone of risk management, providing essential protection and financial security for individuals and businesses. But worries about an economic slowdown and potential claims deterioration have kept sentiment in check, and over the past six months, the industry’s 4.8% return has trailed the S&P 500 by 1.8 percentage points.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. On that note, here is one insurance stock boasting a durable advantage and two we’re steering clear of.
Two Insurance Stocks to Sell:
Employers Holdings (EIG)
Market Cap: $1.02 billion
With roots in Nevada and a strong concentration in California where 45% of its premiums are generated, Employers Holdings (NYSE:EIG) is a specialty provider of workers' compensation insurance focused on small and select businesses engaged in low-to-medium hazard industries across the United States.
Why Should You Sell EIG?
- 3.3% annualized net premiums earned growth over the last two years lagged behind its insurance peers
- Costs have risen faster than its revenue over the last two years, causing its combined ratio to worsen by 10.9 percentage points
- Earnings per share fell by 8.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
Employers Holdings is trading at $45.47 per share, or 0.9x forward P/B. Dive into our free research report to see why there are better opportunities than EIG.
Assured Guaranty (AGO)
Market Cap: $4.04 billion
Serving as a financial safety net for over $11 trillion in debt service payments since its founding in 2003, Assured Guaranty (NYSE:AGO) provides credit protection products that guarantee scheduled payments on municipal bonds, infrastructure projects, and structured finance obligations.
Why Is AGO Risky?
- Insurance offerings face significant market challenges this cycle as net premiums earned contracted by 3.6% annually over the last five years
- Forecasted revenue decline of 20% for the upcoming 12 months implies demand will fall even further
- Low return on equity reflects management’s struggle to allocate funds effectively
At $87.75 per share, Assured Guaranty trades at 0.7x forward P/B. Check out our free in-depth research report to learn more about why AGO doesn’t pass our bar.
One Insurance Stock to Watch:
Fidelity National Financial (FNF)
Market Cap: $15.63 billion
Issuing more title insurance policies than any other company in the United States, Fidelity National Financial (NYSE:FNF) provides title insurance and escrow services for real estate transactions while also offering annuities and life insurance through its F&G subsidiary.
Why Are We Positive On FNF?
- Projected revenue growth of 8% for the next 12 months suggests its momentum from the last two years will persist
- Pre-tax profits and efficiency rose over the last two years as it benefited from some fixed cost leverage
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
Fidelity National Financial’s stock price of $57.57 implies a valuation ratio of 1.6x forward P/B. Is now the right time to buy? See for yourself in our full research report, it’s free.
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