With the possibility of inflation returning to target levels next year and solid economic growth prospects, the overall insurance industry is expected to experience expansion. Further, technological advancements, and shifting economic dynamics, and changing customer expectations open new opportunities.
Given the industry’s bright prospects and fundamentally sound insurance stocks, The Hartford Financial Services Group, Inc. (HIG), The Allstate Corporation (ALL), and The Hanover Insurance Group, Inc. (THG) could be ideal additions offering stability and growth.
In nearly seven years, global commercial insurance rates came in flat for the first time in the second quarter of 2024 due to increased competition among insurers in the global property market. Rates grew by 1% in the U.S. and Europe, whereas in Latin America and the Caribbean, India, the Middle East, and Africa, rates increased 4%.
Despite geopolitical tensions and higher inflation concerning the world, the global economy has remained resilient, setting robust growth and improved profitability prospects across the insurance industry. Major economies remain resilient, with global GDP growth forecast expectations set at 2.7% in real terms in 2024.
According to the Swiss Re Institute, global GDP is expected to grow by 2.7% in real terms in 2024 and is expected to grow at 2.8% in real terms in 2025. Regionally, the US forecast is set at 2.5% in 2024. With this, the non-life premium volume is expected to reach $4.6 trillion in 2024 and $4.8 trillion in 2025.
Moreover, driven by technological advancements advancing core processes, Artificial Intelligence (AI), and data analytics enhancing precision, claims efficiency, and risk assessment accuracy, the property and casualty insurance market is anticipated to grow from $2.00 trillion in 2024 to $3.79 trillion by 2032, growing at a CAGR of 8.3% during the forecast period.
Moreover, investors’ interest in insurance stocks is evident from Invesco KBW Property & Casualty Insurance ETF’s (KBWP) 25.5% returns over the past year.
Considering the encouraging market trends, let’s delve into the fundamentals of the top three Insurance – Property & Casualty stocks, beginning with the third choice.
Stock #3: The Hartford Financial Services Group, Inc. (HIG)
HIG provides insurance and financial services to individual and business customers internationally. The company operates through Commercial Lines segment; Personal Lines segment; Property & Casualty Other Operations segment; Group Benefits segment; and Hartford Funds segment.
HIG’s revenue and EBITDA have grown at respective CAGRs of 6.4% and 10% over the past three years. The company’s EBIT has increased 14.2% over the same timeframe, while its net income and EPS have improved at CAGRs of 16.7% and 23.3%, respectively.
On July 17, HIG’s Board of Directors declared a dividend of $0.47 per share of common stock, payable on October 2 to common stock shareholders of record at the close of business on September 3.
The Board also declared a dividend of $375 on each of the shares of Series G preferred stock (equivalent to $0.375 per depository share), payable on November 15 to Series G preferred stock shareholders of record at the close of business on November 1.
HIG pays an annual dividend of $1.88, which translates to a yield of 1.84% at the current share price. Its four-year average dividend yield is 2.24%. Moreover, the company’s dividend payouts have increased at a CAGR of 10.8% over the past three years. HIG has raised its dividends for 11 consecutive years.
During the first quarter that ended March 31, 2024, HIG’s total revenues increased 8.6% year-over-year to $6.42 billion. The company’s core earnings came in at $709 million and $2.34 per share, indicating growths of 32.3% and 39.3% from the prior year’s quarter, respectively.
In addition, the company’s book value per share rose 10.3% over the prior-year quarter to $60.18.
Analysts expect HIG’s revenue and EPS for the second quarter (ended June 2024) to increase 8.5% and 19.6% year-over-year to $6.56 billion and $2.25, respectively. Further, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past six months, HIG’s stock has gained 18% and 36.2% over the past year to close the last trading session at $101.94.
HIG’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Momentum and a B for Growth and Stability. Within the B-rated Insurance – Property & Casualty industry, HIG is ranked #12 out of 56 stocks.
Click here to access additional ratings of HIG (Value, Sentiment, and Quality).
Stock #2: The Allstate Corporation (ALL)
ALL offers property and casualty, and other insurance products. The company operates through five segments: Allstate Protection; Protection Services; Allstate Health and Benefits; Run-off Property-Liability; and Corporate and Other segments.
ALL’s revenue has grown at CAGR of 9.6% over the past three years. Also, the company’s revenue and levered free cash flow have improved 7.4% and 19.9% over the past five years, respectively.
On May 30, ALL declared about $29.3 million in aggregate dividends on three series of its preferred stock for the dividend period from April 15, 2024, to July 14, 2024. All the preferred dividends were paid on July 15, 2024, to stockholders of record at the close of business on June 28, 2024.
The dividend was paid as follows: Dividend of $0.32 on Series H, Dividend of $0.29 on Series I, and Dividend of $0.46 on Series J preferred stocks.
ALL pays an annual dividend of $3.68, which translates to a yield of 2.14% at the current share price. Its four-year average dividend yield is 2.49%. Moreover, the company’s dividend payouts have increased at a CAGR of 13.5% over the past five years. ALL has raised its dividends for 13 consecutive years.
ALL’s consolidated net revenues increased 10.7% year-over-year to $15.26 billion for the first quarter ended March 31, 2024. Its adjusted net income came in at $1.37 billion and $5.13 per share, against adjusted net loss of $342 million and $1.30 per share in the prior year’s quarter, respectively.
Also, the company’s book value per common share grew 6.2% from the year-ago value to $62.27.
Analysts expect ALL’s revenue for the third quarter (ending September 2024) to increase 8.4% year-over-year to $15.71 billion, and its EPS is expected to grow 269.4% year-over-year to $2.99 for the same quarter. Furthermore, the company topped the consensus revenue estimates in all of the trailing four quarters.
The stock has surged 9.5% over the past six months and 53.7% over the past year to close the last trading session at $172.34.
ALL’s POWR Ratings reflect its bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
ALL has an A grade for Momentum. The stock also has a B grade for Sentiment, Growth, and Stability. It is ranked #6 among 56 stocks within the B-rated Insurance – Property & Casualty industry.
To see the other ratings of ALL for Quality, and Value, click here.
Stock #1: The Hanover Insurance Group, Inc. (THG)
THG provides various property and casualty insurance products and services. The company operates in four segments: Core Commercial; Specialty; Personal Lines; and Other.
THG’s revenue has grown at respective CAGR of 6.5% over the past three years. Also, the company’s total assets has increased 2.8% over the same timeframe.
On June 3, THG’s Board of Directors declared a quarterly dividend of $0.85 per share its outstanding common stock, paid on June 28, 2024, to shareholders of record at the close of business on June 14, 2024.
THG pays an annual dividend of $3.40, which translates to a yield of 2.59% at the current share price. Its four-year average dividend yield is 2.59%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.5% over the past five years. THG has raised its dividends for 16 consecutive years.
During the first quarter that ended on March 31, 2024, THG’s net premiums earned increased 5% year-over-year to $1.45 billion. Its total revenues grew 7.4% from the year-ago value to $1.55 billion. The company’s net income came in at $115.50 million and $3.18 per share for the quarter, respectively.
Moreover, the company’s book value per share rose 5% from the prior year’s quarter to $70.22.
Street expects THG’s EPS for the third quarter (ending September 2024) to increase 1240% year-over-year to $2.55. Its revenue is expected to grow 4% year-over-year to $1.66 billion for the same quarter. Moreover, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of THG have gained 5.9% over the past month and 15.7% over the past year to close the last trading session at $131.15.
THG’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
THG has an A grade for Momentum. The stock also has a B grade for Sentiment, Stability, and Growth. It is ranked #5 among 56 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have THG’s ratings for Value and Quality. Get all THG ratings here.
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ALL shares were trading at $174.97 per share on Thursday afternoon, up $2.63 (+1.53%). Year-to-date, ALL has gained 26.43%, versus a 15.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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