Geopolitical tensions, particularly conflicts in the Middle East and Ukraine, high inflation and catastrophe events, both natural and man-made, have put pressure on the insurance companies’ profitability over the past few years. Nevertheless, better pricing, prudent underwriting standards, increased exposure, streamlined operations, a wider global presence and a solid capital position have been tailwinds for the insurance industry. This, combined with accelerated digitalization and an improving rate environment, are expected to provide some relief.
The insurance industry has outperformed the Zacks S&P 500 Composite and the Finance sector in the past year. The insurance industry has rallied 29.3% in the past year, outperforming the Zacks S&P 500 Composite’s return of 27.3% and the Finance sector’s growth of 18.1%.
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Here are five insurance stocks that have performed well in the past year, riding on strong fundamentals. Mercury General Corporation MCY, The Allstate Corporation ALL, CNO Financial Group, Inc. CNO, Primerica, Inc. PRI and Unum Group UNM have outperformed the industry, the sector and the S&P 500 Composite in the past year. Given their solid prospects, these stocks are poised to maintain the rally,
The economy has improved throughout 2024. For 2024, the Fed upgraded its gross domestic product (GDP) growth forecast to 2.5% compared with 2% projected in September. Swiss Re estimated global real GDP growth to be 2.8% in 2025 and 2.7% in 2026. In the upcoming years, Fed officials project GDP to slow down to its long-term projection of 1.8%.
After 27 consecutive quarters of increases, Global commercial insurance rates declined 1% in the third quarter of 2024, per Marsh Global Insurance Market Index. Per Marsh, property rates declined 2% while casualty rates increased 6% globally.
Price hikes, operational strength, higher retention, strong renewal and the appointment of retail agents should help write higher premiums. Per Deloitte Insights, gross premiums are estimated to exceed $722 billion by 2030.
Swiss Re estimated global total insurance premiums to increase 2.6% on average in real terms in 2025 and 2026, which is higher than the past five years (2019-2023) average of 1.6%. The industry will be fueled by steady economic growth, buoyant labor markets, rising real incomes as inflation moderates, and still-elevated long-term interest rates that support investment yields.
According to Swiss Re, global non-life premium growth will slow as pricing conditions become less favorable, led by advanced markets. Swiss Re forecasts global non-life premiums to witness a negative CAGR of 2.3% over the 2025-2026 period, below the 4.3% growth rate of 2024 and the 3.1% CAGR of the last five years.
Per LIMRA’s Third Quarter 2024 Retail Individual Life Insurance Sales Survey, the total new annualized premium increased 6% to $3.9 billion. For 2024, the new premium increased 1% year over year to $11.6 billion, while the policy count remained unchanged in the first nine months of 2024. Per John Carroll, senior vice president and head of Life & Annuities, LIMRA and LOMA, LIMRA projects 2024 as the fourth year of record-high new premium. LIMRA estimates life sales to increase in 2025.
Swiss Re estimated US individual annuity sales to reach a new record of over $400 billion in 2024. Life and non-life (including health) premiums accounted for 43% and 57%, respectively, of total premium in 2024.
The global life insurance market is resilient. Total global life insurance premiums should reach $4.8 trillion by 2035, driven by higher interest rates. This will bring the life insurance market share to 43% of global insurance premiums. Per Swiss Re, global life premiums are estimated to witness a compounded annual growth rate (CAGR) of 3% in real terms in 2025-2026.
However, industry players continue to grapple with issues like higher catastrophe events, both natural and man-made, which drag down underwriting profit. The United States has been affected by Hurricane Helene, Hurricane Milton and a high frequency of severe thunderstorms in 2024. Swiss Re estimated insured losses from these events to exceed $135 billion in 2024.
Swiss Re Institute marked this year as the fifth consecutive year with insured natural catastrophe losses above $100 billion due to hurricanes, severe thunderstorms and floods. Per Swiss Re, total insured losses are estimated at $144 billion, which increased 16% year over year, and the total economic loss from these events amounted to $320 billion.
Per Aon plc in its third-quarter Global Catastrophe Recap – October 2024 report, the first and third quarters of 2024 witnessed at least 280 notable natural disaster events, which drove year-to-date economic losses above at least $258 billion and insured losses of at least $102 billion.
Exposure growth, better pricing, prudent underwriting and favorable reserve development will help non-life insurers withstand the blow despite an above-average hurricane season. Also, frequent occurrences of natural disasters should accelerate the policy renewal rate.
The insurance industry is rate-sensitive. An improving rate environment is a boon for insurers, especially long-tail insurers. At the December 2024 Federal Open Market Committee meeting, the Fed cut interest rates by 0.25% and brought its borrowing costs to a range of 4.25-4.5%. The Fed’s decision reflects its commitment to achieving its dual goals of maximum employment and price stability. With a large invested asset base, investment income should remain healthy.
The Fed signals only two rate cuts in 2025. The Fed also projects a solid U.S. economy in 2025 without any recession. Inflation is projected to reach the 2% target by 2027.
A solid capital level supports insurers in pursuing strategic mergers and acquisitions to gain market share, expand in niche areas and diversify operations into new business lines and geography, as well as increase dividends, pay special dividends and buy back shares. Per a report from Willis Towers Watson’s Quarterly Deal Performance Monitor, merger and acquisition activity is projected to get momentum in 2025, riding on improved economic conditions, curbed inflation, technology-driven deals and stabilized interest rates.
Players in the insurance industry are investing heavily in technology to expedite business operations. Increased use of blockchain, artificial intelligence, advanced analytics, telematics, cloud computing, Chatbot and RoboAdvisory, and insurtech solutions curb costs and improve basis points, scale and efficiencies. Per the Deloitte FSI Predictions article, insurers are likely to generate around $4.7 billion in annual global premiums from AI-related insurance by 2032, yielding a CAGR of nearly 80%.
With the help of the Zacks Stock Screener, we have selected five insurance stocks with an impressive Value Score of A or B. The stocks mentioned below either carry a Zacks Rank #1 (Strong Buy) or a Zacks Rank 2 (Buy) at present. Back-tested results have shown that for stocks with a solid Value Score and a favorable Zacks Rank, the returns are even better. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mercury General Corporation: Los Angeles, CA-based Mercury General is a leading provider of personal automobile insurance and is engaged primarily in writing all risk classifications of automobile insurance in a number of states. MCY offers automobile policyholders the following types of coverage — bodily injury liability, underinsured and uninsured motorist, property damage liability, comprehensive, collision and other hazards specified in the policy. Mercury General currently flaunts a Zacks Rank #1 and has an impressive VGM Score of A.
Premium growth is expected to gain from rate increases in the California automobile and homeowners lines of insurance business, as well as an increase in the number of policies written in the California homeowners line of insurance business. Higher average yield combined with higher average invested assets and cash should drive the net investment income.
The Zacks Consensus Estimate for Mercury General’s 2025 earnings per share and revenues indicates a year-over-year increase of 8.6% and 9.1%, respectively, from the corresponding 2024 estimates. Mercury General has a Growth Score of B. The consensus estimate for 2025 has moved up 15% in the past 60 days. The company delivered a four-quarter average earnings surprise of 694.28%. Shares of MCY have rallied 81.6% in the past year.
The Allstate: Headquartered in Illinois, this insurer is likely to benefit from continued growth in premiums, strong underwriting performance and increased investment income from market-based assets, which should drive revenues and profitability. Strategic acquisitions and expanding ventures should drive consistent growth in premiums. This Zacks Rank #1 insurer has an impressive VGM Score of A.
Rate hikes to counter inflationary pressures on loss costs are expected to continue in ALL’s auto insurance business for 2024. Continued rate increases in the auto business will now slow down and improve retention ratios for ALL. ALL’s focus on optimizing core operations has allowed it to redirect resources toward high-growth areas. The sale of ALL’s Health & Benefits division is expected to free up capital. Cost-saving initiatives are projected to boost profits. ALL’s cash-generating abilities sound excellent for returning capital to shareholders through share repurchases and dividend payments.
The Zacks Consensus Estimate for The Allstate’s 2025 earnings per share and revenues indicates a year-over-year increase of 17.7% and 7.1%, respectively, from the corresponding 2024 estimates. ALL has a Growth Score of B. The consensus estimate for 2025 has moved up 0.1% in the past 30 days. The company delivered a four-quarter average earnings surprise of 135.21%. Shares of ALL have rallied 39.8% in the past year.
CNO Financial Group: Headquartered in Carmel, IN, this Zacks Rank #2 insurer is a top-tier holding company for a group of insurance companies operating throughout the United States. This Zacks Rank #2 insurer develops, administers and markets supplemental health insurance, annuity, individual life insurance and other insurance products.
The Zacks Consensus Estimate for CNO Financial’s 2025 earnings per share and revenues indicates a year-over-year increase of 0.6% and 4.3%, respectively, from the corresponding 2024 estimates.
The consensus estimate for 2025 earnings has moved 3% north in the past 60 days. Earnings have improved 10.3% in the past five years, better than the industry average of 9.2%. Its earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 24.51%. Shares of CNO have rallied 33.8% in the past year.
Primerica: This Duluth, GA-based, second-largest issuer of term-life insurance coverage in North America aims to be a successful senior health business while continuing to enhance its shareholders’ value. Strong demand for protection products drives sales growth and policy persistency benefit of this Zacks Rank #2 insurer.
The insurer gains from strong policy sales in its Term Life segment and the enhancement of its products in the Investments and Savings Products segment. Primerica’s expanding sales force, with an increase in independent life-licensed representatives, also provides a solid foundation for business growth. Increased investment income and a rise in commissions and fees also bode well. A strong business model makes Primerica well-poised to cater to the middle market’s increased demand for financial security.
The Zacks Consensus Estimate for Primerica’s 2025 earnings per share and revenues indicates a year-over-year increase of 7.1% and 4.6%, respectively, from the corresponding 2024 estimates. The consensus estimate for 2025 earnings has moved 0.3% north in the past 30 days. Earnings have improved 17.6% in the past five years, better than the industry average of 4.6%. The company’s earnings surpassed estimates in three of the last four quarters and missed in the other two, the average surprise being 4.89%. Shares of PRI have rallied 32.1% in the past year.
Unum Group: Chattanooga, TN-based Unum Group provides long-term care insurance, life insurance, employer- and employee-paid group benefits and related services.
Premiums, the primary component of UNM’s top line, continue to gain from its healthy in-force block growth and higher sales. For the long term, it expects sales growth in the range of 8-12% and premium growth in the band of 4-7%. UNM is poised to grow on the operational excellence of Unum U.S. and Colonial Life.
This Zacks Rank #2 insurer has consistently enhanced shareholders’ value through dividend hikes and share buybacks. UMM raised dividends 15 times in the last 14 years and has grown its dividend by 7.6% in the last five years. Its dividend yield is 2.3%, better than the industry average of 1.96%. Strong persistency in group lines and the growth of new product lines, improved premium income, prudent capital deployment and a solid capital position continue to drive this insurer.
The Zacks Consensus Estimate for Unum Group’s 2025 earnings per share and revenues indicates a year-over-year increase of 5.6% and 3.9%, respectively, from the corresponding 2024 estimates. The expected long-term earnings growth rate is pegged at 8.2%. The consensus estimate for 2025 earnings has moved 1.2% north in the past 60 days. Earnings have improved 9% in the past five years, better than the industry average of 3.8%. Its earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 3.17%. Shares of UNM have rallied 62.9% in the past year.
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