Insurance is essential for safeguarding individuals or businesses against unexpected losses. The growing global economy, coupled with urbanization, are some of the significant drivers of the insurance market.
Given this backdrop, it could be wise to consider fundamentally strong insurance stocks such as MetLife, Inc. (MET), Mercury General Corporation (MCY), and Mid Tiptree Inc. (TIPT) before the third quarter ends.
In the United States, the life insurance market is experiencing increased use of digital platforms for purchasing customizable policies and processing claims. Insurers are utilizing technology to improve customer experience and optimize their operations. The global life insurance market worldwide is projected to reach a market size of $3.67 trillion in 2024.
Additionally, growing urbanization is driving the property and casualty insurance market by concentrating properties and businesses in urban areas. As more people move to cities and urban infrastructure expands, the demand for insurance coverage on properties, homes, commercial enterprises, and vehicles is expected to rise.
Given these favorable industry trends, let’s look at the fundamentals of the insurance stock picks.
MetLife, Inc. (MET)
MET is a financial services company that provides insurance, annuities, employee benefits, and asset management services worldwide. It operates through six segments: Retirement and Income Solutions; Group Benefits; Asia; Latin America; Europe, the Middle East and Africa; and MetLife Holdings.
In terms of forward non-GAAP P/E, MET is trading at 8.13x, 26.8% lower than the industry average of 11.09x. Likewise, the stock’s forward EV/Sales and Price/Sales multiples of 1.05 and 0.67 are 67% and 74.9% lower than their respective industry averages of 3.17 and 2.69.
For the second quarter that ended June 30, 2024, MET’s total revenues increased 7.2% year-over-year to $17.82 billion. The company’s adjusted earnings increased 9% year-over-year to $1.63 billion. Additionally, its adjusted earnings per share increased 18% year-over-year to $2.28.
Street expects MET’s revenue for the third quarter (ending September 2024) to increase 17.1% year-over-year to $18.58 billion. Its EPS for the same quarter is expected to grow 16.2% year-over-year to $2.29. The company has surpassed EPS estimates in each of the trailing four quarters.
MET’s stock has gained 16.5% over the past nine months to close the last trading session at $70.41.
MET’s solid 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. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Growth and Momentum and a B for Sentiment. MET is ranked #6 among 26 stocks in the B-rated Insurance - Life industry.
Click here to access additional MET ratings (Quality, Value, and Stability).
Mercury General Corporation (MCY)
MCY engages in writing personal automobile insurance in the United States. The company also writes homeowners, commercial automobiles, commercial property, mechanical protection, and umbrella insurance products.
MCY’s total assets grew at a CAGR of 4.9% over the past three years. Similarly, its revenue grew at a CAGR of 7.1% during the same period.
In terms of forward non-GAAP EV/Sales, MCY is trading at 0.62x, 80.5% lower than the industry average of 3.17x. Likewise, the stock’s forward Price/Sales multiple of 0.62 is 76.9% lower than their respective industry average of 2.69.
MCY’s net premiums earned for the second quarter, which ended June 30, 2024, increased 19.5% year-over-year to $1.24 billion. Its net income came in at $62.57 million and $1.13 per share, compared to net loss and net loss per share of $15.63 million and $0.75, respectively.
Analysts expect MCY’s EPS for the third quarter ending September 2024 to increase marginally year-over-year to $1.15. Its revenue for the same quarter is expected to increase 13.4% year-over-year to $1.37 billion. The company has surpassed EPS estimates in each of the trailing four quarters.
MCY’s stock has gained 10.3% over the past month to close the last trading session at $60.05.
MCY’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
MCY has an A grade for Growth and Momentum and a B for Sentiment. It is ranked first out of 55 stocks in the A-rated Insurance - Property & Casualty industry.
In addition to the POWR Ratings we’ve stated above, we also have MCY ratings for Quality, Value, and Stability. Get all MCY ratings here.
Tiptree Inc. (TIPT)
TIPT provides specialty insurance products and related services primarily in the United States. It operates through two segments: Insurance and Mortgage.
TIPT’s total assets grew at a CAGR of 18.2% over the past three years. Similarly, its revenue grew at a CAGR of 20.9% during the same period.
In terms of trailing-12-month EV/EBIT, TIPT is trading at 5.30x, 52.7% lower than the industry average of 11.23x. Likewise, the stock’s forward dividend yield of 1.30% is 61.8% lower than their respective industry average of 3.40%.
TIPT’s total revenues for the second quarter, which ended June 30, 2024, increased 19.5% year-over-year to $546.67 million. Its net income attributable to common stockholders came in at $12.85 million and $0.31 per share, up 114.5% and 93.8% year-over-year, respectively.
TIPT’s stock has gained 6.7% over the past month to close the last trading session at $18.47.
TIPT’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
TIPT has an A grade for Growth and Momentum and a B for Sentiment. It is ranked first out of 26 stocks in the Insurance - Life industry.
Click here to access additional ratings of TIPT for Value, Stability, and Quality.
What To Do Next?
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MET shares were trading at $71.16 per share on Wednesday afternoon, up $0.75 (+1.07%). Year-to-date, MET has gained 10.19%, versus a 15.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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