Insurance providers use their expertise in risk assessment to help protect assets while offering consumers peace of mind through comprehensive coverage options. These institutions have benefited from improved pricing power and robust premium growth, so it’s no surprise the industry has posted a 3.4% gain over the past six months, nearly mirroring the S&P 500.
Although insurers have produced good results, only a handful will thrive over the long term as insurtech disruptors are rapidly taking market share from the incumbents. With that said, here is one insurance stock boasting a durable advantage and two we’re swiping left on.
Two Insurance Stocks to Sell:
Prudential (PRU)
Market Cap: $33.54 billion
Recognized by its iconic Rock of Gibraltar logo symbolizing strength and stability since 1896, Prudential Financial (NYSE: PRU) provides life insurance, annuities, retirement solutions, investment management, and other financial services to individual and institutional customers globally.
Why Are We Out on PRU?
- Net premiums earned plateaued over the last five years, signaling weak incremental demand for its insurance policies
- Annual book value per share declines of 11.3% for the past five years show its capital management struggled during this cycle
- Elevated debt-to-equity ratio of 1.3× suggests the firm is overleveraged and may struggle to secure additional financing
Prudential’s stock price of $96.22 implies a valuation ratio of 1x forward P/B. If you’re considering PRU for your portfolio, see our FREE research report to learn more.
Radian Group (RDN)
Market Cap: $5.03 billion
Founded during the housing boom of 1977 and weathering multiple real estate cycles since, Radian Group (NYSE: RDN) provides mortgage insurance and real estate services, helping lenders manage risk and homebuyers achieve affordable homeownership.
Why Do We Think Twice About RDN?
- Sales tumbled by 2.3% annually over the last five years, showing market trends are working against its favor during this cycle
- 3.2% annual declines in net premiums earned for the past five years indicates policy sales struggled this cycle
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 3.9% annually
At $37.31 per share, Radian Group trades at 0.9x forward P/B. To fully understand why you should be careful with RDN, check out our full research report (it’s free).
One Insurance Stock to Watch:
RenaissanceRe (RNR)
Market Cap: $13.11 billion
Born in Bermuda after the devastating Hurricane Andrew created a crisis in the catastrophe insurance market, RenaissanceRe (NYSE: RNR) provides property, casualty, and specialty reinsurance and insurance solutions to customers worldwide, primarily through intermediaries.
Why Are We Positive On RNR?
- Net premiums earned expanded by 17.4% annually over the last five years, demonstrating exceptional market penetration this cycle
- Pre-tax profit margin improvement of 27.8 percentage points over the last five years demonstrates its ability to scale efficiently
- Share repurchases over the last five years enabled its annual earnings per share growth of 270% to outpace its revenue gains
RenaissanceRe is trading at $303.85 per share, or 1.1x forward P/B. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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