Insurance stocks that have good value.
Buying insurance is a way to gain financial peace of mind, and buying the right insurance stocks can do the same when it comes to your investment portfolio. Insurance stocks don't typically perform as well when interest rates are low, making stock selection within the group critical. Investors who look hard enough can find insurance stocks with strong core businesses, attractive valuations and even appealing dividends. They may not be the most exciting investments, but top insurance stocks certainly have market-beating potential. Here are eight insurance stocks with earnings multiples below 14 that CFRA says are worth a look.
Arch Capital (ticker: ACGL)
Arch Capital is a global property-casualty insurance and reinsurance company based in Bermuda. Analyst Cathy Seifert says Arch shares are undervalued both relative to its peer group and to its own historic levels. Seifert says the company's opportunistic underwriting approach yields superior results to its competitors. CFRA is forecasting between 12% and 15% operating revenue growth in 2020, up from 6.9% in 2018. In addition, Seifert estimates earnings per share will rise from $2.20 in 2018 to $3.15 in 2021. CFRA has a "buy" rating and $48 target for ACGL stock.
Allstate Corp. (ALL)
Allstate is the largest public personal lines insurance company. Seifert says Allstate's distribution capabilities and underwriting performance have significantly improved in recent years. As a result, revenue growth has started to accelerate, highlighting the stock's undervaluation relative to peers. CFRA is forecasting between 4% and 6% revenue growth and $10.25 in operating EPS in 2020. Seifert says the stock's 1.8% dividend, its attractive valuation, its growth outlook and its relatively low exposure to macroeconomic headwinds is a winning recipe for investors. CFRA has a "buy" rating and $123 price target for ALL stock.
Hartford Financial Services (HIG)
Hartford Financial Services is a diversified insurance and financial services company that offers all major lines of property-casualty insurance. Seifert says Hartford's 12% revenue growth and 55% increase in core operating profits in 2018 are an indication of the positive impact from the company's multiyear restructuring plan. Hartford is now focused on its core property-casualty insurance, group benefits and mutual fund businesses. CFRA is projecting $5.85 in operating EPS and between 6% and 8% revenue growth in 2020. CFRA has a "buy" rating and $68 price target for HIG stock.
China Life Insurance (LFC)
China Life Insurance is the largest life insurer in China, with more than 20% market share. Analyst Siti Rudziah Salikin says China Life's dominant presence in higher-growth Chinese provinces and its strong balance sheet will allow it to benefit from the broad growth of China's life insurance industry and gain market share from competitors. CFRA is projecting 5% revenue growth in 2020 due in large part to rising premium income. Salikin says operational efficiency improvements will also help support EPS growth. CFRA has a "buy" rating and $17 price target for LFC stock.
MetLife is one of the largest U.S. life insurers and has expanded into international markets as well. Seifert says Metlife is undervalued relative to its peers, trading at a forward earnings multiple of under 9. While the flatter yield curve is weighing on MetLife's investment margins, Seifert says a strong U.S. labor market should boost group life sales. In addition, retirement products should contribute to earnings growth. CFRA is projecting between 4% and 7% operating revenue growth in 2020. CFRA has a "buy" rating and $52 price target for MET stock.
Manulife Financial Corp. (MFC)
Manulife is a financial services company that provides insurance products and services in Asia, Canada, the U.S. and other regions. Seifert says Manulife won a key legal victory against Mosten Investments in March 2019, eliminating a major source of near-term risk. Manulife reported mixed geographical trends in the most recent quarter, which Seifert says may cap upside. However, she says the stock is cheap compared to its peers. Manulife's 6.3 forward earnings multiple is the lowest among the stocks on this list. CFRA has a "buy" rating and $23 price target for MFC stock.
Progressive Corp. (PGR)
Progressive is one of the largest personal auto insurance companies in the U.S. Seifert says Progressive's technology and marketing prowess differentiate it from its peer group. Unlike other stocks on this list, she says Progressive trades at a slight earnings multiple premium to its peers, but the company is also leaving competitors in the dust with its growth numbers. CFRA projects operational revenue growth of between 12% and 15% in 2020. Progressive's longer-term insurance obligations are also relatively insulated from near-term interest rate risk. CFRA has a "buy" rating and $85 price target for PGR stock.
Prudential Financial (PRU)
Prudential is a global life insurance company primarily focused on the U.S. and Japan. Seifert says Prudential's foreign exchange exposure and capital reserve levels create challenges for the company, but interest rate risk and regulatory headwinds appear to be easing. Seifert says Prudential is undervalued trading at a forward earnings multiple of 7.5. CFRA is projecting 6.1% EPS growth in 2020. Yield seekers will also appreciate Prudential's 4.2% dividend, highest among all eight insurance stocks mentioned. CFRA has a "buy" rating and a $100 price target for PRU stock.
Best insurance stocks for your portfolio:
-- Arch Capital (ACGL)
-- Allstate Corp. (ALL)
-- Hartford Financial Services (HIG)
-- China Life Insurance (LFC)
-- MetLife (MET)
-- Manulife Financial Corp. (MFC)
-- Progressive Corp. (PGR)
-- Prudential Financial (PRU)