雅虎香港財經 10 Undervalued Insurance Stocks to Buy Now
In this article, we discuss the 10 undervalued insurance stocks to buy now. To skip the detailed analysis of the insurance industry, go directly to the 5 Undervalued Insurance Stocks to Buy Now.
Insurance is one of the largest industries in the world. An estimated $5.5 trillion worth of insurance premiums were written in 2021, which puts the industry’s market value ahead of the GDP of all countries except the US and Canada. The US has the largest insurance market in the world. In 2021, the country's total written premiums were over $2.7 trillion, which was more than its next 8 competing countries combined.
Insurance Market Analysis in the Third Quarter
The US Insurance Composite Renewal Rate increased by 5% in Q3 compared to 10% in the prior quarter. Property insurance pricing surged for the 20th consecutive quarter. In Q3, it increased by 8% compared to 6% in the previous quarter. Moreover, casualty insurance pricing went up by 3%, cyber insurance by 48% and financial and professional lines declined by 6% compared to an increase of 21% in the prior quarter.
In the quarter, Hurricane Ian and Fiona proved to be quite disruptive for the insurance companies. The catastrophe losses for insurance companies are estimated to be $50-$70 billion from Hurricane Ian alone. The residents of Florida already pay triple the average national amount of insurance premium at $4,321 per year, and the recent Hurricane Ian destruction might lead the insurers to either increase their premiums or cease operations in the state altogether.
Insurance Industry: Current Trends and Forecasts
The insurance industry is growing at a substantially fast pace. The market of the industry was valued at $4.47 trillion in 2020 and is expected to grow at a CAGR of over 63% to $224.34 trillion by 2028.
Rising interest rates usually fare well for insurance companies as the portfolio yields rise, leading to increased investment earnings for insurers. Keeping that in mind, Cigna Corporation (NYSE:CI), Lincoln National Corporation (NYSE:LNC), and The Travelers Companies, Inc. (NYSE:TRV) are of some the undervalued insurance stocks that one should keep an eye on.
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Our Methodology
After carefully analyzing the insurance stocks listed on NYSE and NASDAQ, we chose these 10 stocks based on their past performance, growth prospects, dividend history, and analyst ratings. The stocks on the list are either trading at a PE ratio below the industry average of 18.6x at the time of writing or have certain growth catalysts that make the company undervalued.
The stocks were listed in the ascending order of their hedge fund sentiment which was taken from Insider Monkey’s database of 920 elite hedge funds.
Undervalued Insurance Stocks to Buy Now
10. Prudential plc (NYSE:PUK)
Number of Hedge Fund holders: 9
Prudential plc (NYSE:PUK) is a British insurance company that started as a lending company in the 19th century. Although with its PE ratio of 16.78, the company seems to be fairly valued compared to the insurance industry average. However, the company’s growth prospects make it an undervalued company.
Prudential plc (NYSE:PUK) is expanding to Asia and Africa. The two continents have more significant growth catalysts due to a high addressable market and low penetration of insurance companies. Prudential plc (NYSE:PUK) expects its customer base to increase from 17 million in 2021 to 50 million by 2025.
On November 8, JPMorgan analyst Farooq Hanif maintained an Overweight rating on Prudential plc (NYSE:PUK) and raised the price target to 1,500 GBp from 1,450 GBp.
In the third quarter, 9 hedge funds were bullish on Prudential plc (NYSE:PUK), compared to 6 in the previous quarter.
Cigna Corporation (NYSE:CI), Lincoln National Corporation (NYSE:LNC), and The Travelers Companies, Inc. (NYSE:TRV) are some of the undervalued insurance stocks that provide ample entry points for investors along with Prudential plc (NYSE:PUK).
Here is what Third Point Management had to say about Prudential plc in its Q3 2021 investor letter:
“During the quarter, Prudential successfully completed its previously announced spin-off of Jackson National and raised additional equity in Asia for the remaining Pru-Asia business. We are pleased to see the value gap begin to close but see considerable additional appreciation potential as Asian-domiciled and other global investors begin to fully appreciate its significant discount to its peers, excellent franchise, and growth potential.”
9. BRP Group, Inc. (NASDAQ:BRP)
Number of Hedge Fund holders: 14
BRP Group, Inc. (NASDAQ:BRP) is a Florida-based insurance company that operates across the United States. The company works in four segments: Middle Market, Specialty, Mainstreet, and Medicare.
As of December 13, BRP Group, Inc. (NASDAQ:BRP) is one of the best undervalued insurance stocks as the company’s share price has dropped by 22.29% and is trading at a PE ratio of 8.82, compared to the industry average of 18.6x. Moreover, BRP Group, Inc. (NASDAQ:BRP) has been covered by 3 analysts in the last three months with an average price target of $31.67, which represents a 15.33% change from the stock price of $27.46 at the time of writing.
In the third quarter of 2022, 14 hedge funds had a stake in BRP Group, Inc. (NASDAQ:BRP) at a combined value of $105.89 million. Venator Management LLC was the most prominent shareholder of the company with over 1.2 million shares, worth $32.496 million.
Here is what Madison Asset Management, LLC had to say about BRP Group, Inc. (NASDAQ:BRP) in its Q3 2022 investor letter:
“BRP Group (NASDAQ:BRP) operates as one of largest middle market insurance brokers in a highly fragmented domestic market. Historically, insurance brokerage has been very resilient in economic downturns. Their unique acquisition strategy in a highly fragmented industry should lead to above-average growth for many years. We also like BRP’s organic growth characteristics due to their exposure in middle market brokerage. BRP has attractive margins with room for meaningful expansion. The market selloff gave us an opportunity to initiate this new investment at very attractive prices. We estimate BRP’s private market value to be $35.”
8. American Equity Investment Life Holding Company (NYSE:AEL)
Number of Hedge Fund holders: 18
American Equity Investment Life Holding Company (NYSE:AEL) is an American insurance company primarily focusing on life insurance. In Q3, Pzena Investment Management held the largest stake in the company with 971,596 shares, worth $36.231 million.
On December 8, Piper Sandler analyst John Barnidge reaffirmed an Overweight rating on American Equity Investment Life Holding Company (NYSE:AEL)’s shares and raised the price target to $44 from $40. According to the analyst, the company is one of the best-positioned small-mid cap insurers in his coverage list and has a catalyst-based thesis for upcoming years.
American Equity Investment Life Holding Company (NYSE:AEL) is one of the best undervalued insurance stocks with a TTM PE ratio of 2.88. The company stock is up 10.38% in the last 12 months, outperforming the S&P 500 which is down 14.14% year-over-year as of December 13.
First Pacific Advisors made the following comment about American Equity Investment Life Holding Company (NYSE:AEL) in its Q3 2022 investor letter:
“American Equity Investment Life Holding Company (NYSE:AEL), a leading writer of fixed index annuities, has continued to transition to its AEL 2.0 business model. The plan’s main goals are to diversify the company’s assets into a broader array of investments, including private debt through strategic partnerships, and to increase its use of reinsurance to free up capital. We think this is an interesting, but somewhat aggressive plan. Thus far, the results have been impressive, but we continue to monitor the credit quality of their assets as they move toward achieving their target of having 40% of their portfolio invested in private assets, up from 15.4%.”
7. Jackson Financial Inc. (NYSE:JXN)
Number of Hedge Fund holders: 24
Jackson Financial Inc. (NYSE:JXN) is an insurance company that generates most of its revenue from retail annuities. It has around 2,800 employees and is headquartered in Michigan. Jackson Financial Inc. (NYSE:JXN) is one of the best undervalued insurance stocks as it is trading at a substantially low TTM PE ratio of 0.47.
Jackson Financial Inc. (NYSE:JXN) posted its Q3 results in the second week of November. Its revenue of $4.02 billion outperformed the revenue estimates by a whopping $2.59 billion. The company’s revenue surged by over 156% year-over-year. Jackson Financial Inc. (NYSE:JXN) reported an EPS of $4.24 compared to the $2.9 Wall Street estimates. Furthermore, the company holds an excellent balance sheet with $5.3 billion in cash and cash equivalents against total debt of $4.6 billion.
As of December 13, Jackson Financial Inc. (NYSE:JXN) has an above-average dividend yield of 5.97% and has paid out $88 million to its shareholders in the third quarter. The company expects its shareholder returns at the end of 2022 to be at the mid-point of its targeted range of $425-$525 million.
Here is what Miller Value Partners Income Strategy had to say about Jackson Financial Inc. (NYSE:JXN) in its Q2 2022 investor letter:
“Jackson Financial (NYSE:JXN) fell 37.3% during the quarter. Jackson Financial reported 1Q22 revenue of $4.3 billion, -21.9% Y/Y, and adjusted operating earnings of $3.94 per diluted share, down from earnings of $6.01 per share in 1Q21, below analyst expectations for EPS of $4.72. The market appeared to worry most about a drawdown in risk-based capital, 70% of which came from one-time items or capital return. During the quarter, the company returned $192 million to shareholders through $140 million of share repurchases and $52 million in dividends, in-line with its FY22 capital return target of $425-525 million, or ~22.2% of the company’s market cap at the midpoint.”
6. Voya Financial, Inc. (NYSE:VOYA)
Number of Hedge Fund holders: 31
Voya Financial, Inc. (NYSE:VOYA) is an American company that provides health insurance, wealth management, and retirement services to its customers. The company has around 6,000 employees and is headquartered in New York. Voya Financial, Inc. (NYSE:VOYA)’s TTM PE ratio stands at around 10.49.
On November 16, Citi analyst Michael Ward reaffirmed a Buy rating on Voya Financial, Inc. (NYSE:VOYA)’s shares with an $82 price target, down from $83. Ward updated the forecasts on life insurance companies under his coverage after the Q3 results and equity market strength.
Samlyn Capital was the largest shareholder of Voya Financial, Inc. (NYSE:VOYA) in the third quarter with over 4.9 million shares, worth $297.391 million. The firm added 7% additional company stock to its portfolio in Q3. Moreover, Ken Griffin’s Citadel Investment Group increased its holdings in Voya Financial, Inc. (NYSE:VOYA) by 124% in the quarter to 1.1 million shares, worth $66.823 million.
Voya Financial, Inc. (NYSE:VOYA) makes it to our list of the best undervalued insurance stocks along with Cigna Corporation (NYSE:CI), Lincoln National Corporation (NYSE:LNC), and The Travelers Companies, Inc. (NYSE:TRV).
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Disclosure: none. 10 Undervalued Insurance Stocks to Buy Now is originally published on Insider Monkey.
