There was 5,929 insurance companies in the US in 2020, according to the National Association of Insurance Commissioners, including 2,476 property casualty companies, 843 life/annuity companies, 995 health companies, 81 fraternal insurance companies, 62 title insurance companies, 245 retention groups risks and 1,227 others.
Total property casualty cash and invested assets were $2 trillion in 2020, according to S&P Global Market Intelligence. Life/annuity cash and invested assets totaled $4.7 trillion in 2020 and separate account assets and other investments totaled $3 trillion. Cash and invested assets for both sectors were $9.7 trillion.
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Sounds like an industry worth following during these tough times, right? Let’s discuss why you might want to buy insurance stocks.
Why buy insurance stocks?
During times of inflation, insurance companies can be good investments because insurance stocks can rise as interest rates rise. (The relationship between interest rates and insurance companies is like this: the higher the rate, the higher the growth).
The insurance industry always works in strong economies, during recessions, and always has the potential to increase long-term returns. In addition, insurance companies can generate cash at a low cost of capital to convert to other forms of income.
3 insurance stocks to buy
Let’s take a look at three insurance stocks to consider adding to your portfolio.
Humana Inc., based in Louisville, Kentucky, is a health and wellness company that offers medical and supplemental benefit plans. The company:
- Contracts with the Centers for Medicare & Medicaid Services to administer the Transitional Newly Eligible Limited Income Prescription Drug Plan program.
- Contracts with various states to provide long term support services, dual eligibility and Medicaid benefits.
- Offers fully insured specialty health and medical insurance business benefits including dental, vision and other supplemental health benefits.
- Offers administrative services-only products to individuals and employer groups.
- Offers military services, such as the TRICARE T2017 Eastern Region contract.
The company also offers pharmacy solutions, provider services, and home solution services, such as home health care and other services for members of its health plan and third parties.
Humana’s results in the fourth quarter of 2021 and full year 2021 continued to be influenced by the continuing effects of the COVID-19 pandemic. The company reported fourth quarter 2021 loss per common share of $0.11 under GAAP and adjusted EPS of $1.24. Full year EPS was $22.67 on a GAAP basis and $20.64 on an adjusted basis, $23.08.
As of December 31, 2021, the company had cash, cash equivalents and investment securities of $17.37 billion, a decrease of $1.75 billion from $19.12 billion in September 2021. The company paid cash dividends to shareholders of $91 million in the fourth quarter of 2021 compared to $84 million compared to the last quarter.
Progressive Corporation, based in Mayfield, Ohio, is an insurance holding company that provides:
- personal auto insurance
- commercial auto insurance
- Residential and commercial personal property
- Overall responsibility
- Other specialized property and casualty insurance products and related services
The company is divided into three segments, which includes underwriting personal auto and recreational vehicle (RV) insurance, personal auto insurance, and specialty lines products, including insurance for motorcycles, ATVs, RVs, boats, snow and related products.
The company also offers auto-related primary liability and physical damage insurance and business-related property and general liability insurance for cars, vans, pickup trucks, dump trucks, tractors, trailers and more. The company also covers tow trucks and wreckers used in towing services and gas/service station businesses, as well as non-fleet and airport taxis and black car services.
The company also writes residential property insurance for homeowners, other homeowners and renters, as well as personal general insurance and primary and excess flood insurance. The company also offers policy underwriting and claims adjustment services and acts as an agent for homeowners general liability, workers’ compensation insurance and other products.
Fourth-quarter 2021 profit at Progressive Corp. fell 43% despite a 13% increase in net premiums in the last quarter of 2021. Net income for the full year reached $3.35 billion, a drop of 41% from about $5.7 billion in 2020 and net premiums increased 14%. Net income fell 44% to $393.3 million in December alone.
However, Progressive has consistently attempted to cross-sell auto policies and Progressive Home Advantage, which contributes to its incredible return of 3,260% since 2000. It also reports monthly earnings, one of the few companies to do so. For example, Progressive reported an 83% year-over-year drop in February 2022 due to higher expenses and net realized losses on securities, offering transparent consistency you won’t find anywhere else.
Allstate Corporation, headquartered in Northbrook, Illinois, offers property and casualty insurance and other insurance products in the United States and Canada. The company offers:
- Private passenger car and homeowners insurance
- Special products for automobiles
- Other personal line products
- Manufactured Housing and Independent Scheduled Personal Property
- Products commercial lines
It also offers consumer product protection plans and related technical support for mobile phones, consumer electronics, furniture and appliances, as well as financial and insurance products, roadside assistance, mobile data collection devices and services, and more.
The company also offers life, accident, critical illness, short-term disability and other health insurance products through call centers, agencies, financial specialists, independent agents, brokers, wholesale partners through mobile apps and online. line.
For the full year 2021, the company’s adjusted net income return on shareholders’ equity was 16.9% in 2021, reflecting higher net investment income from strong results based on the performance. Net investment income of $3.3 billion in 2021 exceeded prior year by $1.7 billion due to exceptional performance-based results.
In the fourth quarter, Allstate posted $13 billion in total revenue, an increase of 18.7% compared to the prior year quarter. Net income applicable to common shareholders grew by $790 million in the fourth quarter of 2021, which decreased by $1.8 billion compared to the prior year quarter.
Adjusted net income was $796 million, or $2.75 per diluted share, but down from the $1.6 billion generated in the prior year quarter. The loss was due to non-catastrophic losses, partially offset by higher earned premiums.
Get on board with insurance stocks
People still need insurance, even during down economic cycles. Therefore, it is worth taking a look at various insurance giants. However, do your research and make sure these companies are a good fit for your larger portfolio.
Before you consider Allstate, you’ll want to hear this.
MarketBeat tracks Wall Street’s top-rated and top-performing research analysts daily and the stocks they recommend to their clients. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market realizes it…and Allstate wasn’t on the list.
While Allstate currently has a “Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.
Article by Melissa Brock, MarketBeat