Insurance companies serve as the backbone of risk management, providing essential protection and financial security for individuals and businesses. Still, investors are uneasy as insurers face challenges from catastrophic events and potential regulatory changes. These doubts have certainly contributed to insurance stocks’ recent underperformance - over the past six months, the industry’s 6.9% gain has fallen behind the S&P 500’s 9% rise.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. With that said, here is one resilient insurance stock at the top of our wish list and two we’re swiping left on.
Two Insurance Stocks to Sell:
The Hanover Insurance Group (THG)
Market Cap: $6.86 billion
Founded in 1852 during a time when fire insurance was crucial for protecting businesses and homes, The Hanover Insurance Group (NYSE: THG) provides property and casualty insurance products through independent agents, serving individuals, small businesses, and mid-sized companies.
Why Does THG Worry Us?
- Muted 4.9% annual revenue growth over the last two years shows its demand lagged behind its insurance peers
- Net premiums earned expanded by 4.2% annually over the last two years, falling below our expectations for the insurance sector
- Annual book value per share growth of 3.7% over the last five years was below our standards for the insurance sector
The Hanover Insurance Group’s stock price of $218.36 implies a valuation ratio of 2x forward P/B. Read our free research report to see why you should think twice about including THG in your portfolio.
Enact Holdings (ACT)
Market Cap: $5.87 billion
Playing a critical role in helping first-time homebuyers access the housing market, Enact Holdings (NASDAQ: ACT) provides private mortgage insurance that enables lenders to offer home loans with lower down payments while protecting against borrower defaults.
Why Do We Steer Clear of ACT?
- Net premiums earned remained stagnant over the last five years, indicating expansion challenges this cycle
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 6.7% annually
At $45.50 per share, Enact Holdings trades at 1.1x forward P/B. To fully understand why you should be careful with ACT, check out our full research report (it’s free).
One Insurance Stock to Buy:
Palomar Holdings (PLMR)
Market Cap: $3.05 billion
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
Why Are We Bullish on PLMR?
- Net premiums earned surged by 55.8% annually over the past two years, reflecting strong market share gains this cycle
- Impressive 34% annual book value per share growth over the last two years indicates it’s building equity value this cycle
- Book value per share outlook for the upcoming 12 months is outstanding and shows it’s on track to build significant equity value
Palomar Holdings is trading at $145.54 per share, or 3.3x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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