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Insurance companies are one of the main beneficiaries of the rising interest rate environment. The insurance industry is likely to benefit as the Fed is unlikely to cut rates anytime soon. So it might be prudent to buy the fundamentally performing insurance stocks Everest Re Group (RE), Reinsurance Group of America (RGA) and International General Insurance (IGIC). Continue reading….
The Fed has been raising rates since last year, and recently announced its 10th rate hike of 25 basis points, raising the federal funds rate to its highest level. The range is 5% to 5.25%, the highest level since August 2007.. Insurance companies will benefit greatly from higher interest rates as their underlying fixed income investments generate higher returns.
The Fed has suggested it may pause rate hikes, but is unlikely to cut rates later this year. So it might be wise to buy Everest Re Group, which is basically a strong insurance stock (RE), Reinsurance Group of America, Incorporated (RGA), and International General Insurance Holdings Co., Ltd. (IGIC).
Before delving deeper into the fundamentals of these stocks, let me explain why the insurance industry is currently one of the best investment destinations for investors.
Insurance is often thought of as a boring industry to invest in. However, the various types of insurance that protect us from serious financial losses are always in demand, and the industry performs consistently regardless of economic cycles.
Insurance companies generate revenue by collecting premiums from policyholders. These premiums are invested in various financial instruments such as bonds, stocks and real estate. To provide the promised benefits to policyholders, insurance companies invest a significant portion of the premiums they collect in long-term safety bonds.
Their investments generate greater returns in a rising interest rate environment. In addition, insurers will charge higher premiums as the cost of capital rises due to rising interest rates. This will improve underwriting margins.
A rate cut is unlikely this year, so insurers should be able to take advantage of higher interest rates. Investor interest in the insurance industry is evident from the SPDR S&P Insurance ETF (KIE) has returned 5.1% over the last 9 months.
Let’s talk about the fundamentals of the stocks to watch.
Everest Re Group Co., Ltd. (RE)
Headquartered in Hamilton, Bermuda, RE offers reinsurance and insurance products in the United States, Bermuda and internationally. The Company operates through the Reinsurance Business and Insurance Business segments.
with respect to the forward EV/Sales, 1.16x RE is 38.9% lower than the industry average of 1.90x. 1.06x expected price/sales is 44.1% lower than his 1.89x industry average. Similarly, the non-GAAP future PEG of 0.26x is 74.6% lower than the industry average of 1.02x.
RE’s total revenue for the first quarter ended March 31, 2023 was $3.29 billion, up 13.5% year-on-year. Net investment income increased 7% year-on-year to $260 million. The company’s net profit increased 22.5% year-on-year to $365 million.
In addition, EPS was $9.31, up 23.1% year over year. Net cash provided by operating activities increased 25.8% year-on-year to $1.06 billion.
For the quarter ending June 30, 2023, RE’s EPS and revenue are expected to grow 22% and 18.3% year over year to $11.95 billion and $3.57 billion, respectively. Of the four quarters that followed, he beat street EPS expectations in three. Over the past year, the stock has gained 40.8% and closed at $385.88.
RE’s power rating It reflects this forward-looking outlook. RE’s overall rating is B, which is equivalent to “buy” in our own rating system. POWR Ratings values stocks by 118 different factors, each with its own weighting.
Within A rating Insurance – Reinsurance It ranks 3rd out of 9 companies in the industry. Growth potential is A grade, Momentum is B grade. To see other RE ratings for value, stability, sentiment, and quality, visit click here.
Reinsurance Group of America, Incorporated (RGA)
RGA conducts reinsurance business. The Company offers individual and group life and health products such as term life, credit life, universal life, whole life, group life and health, co-survivor and last survivor insurance, critical illness, disability and longevity products. We offer insurance products. Asset-intensive financial reinsurance products. and other capital-driven solutions.
On May 9, 2023, RGA announced that it has completed the transformation of its 2021 acquired Hodge Life Assurance Company Limited (HLAC) business. HLAC’s business was transferred to another group company, OmniLife Insurance Company Limited.
RGA UK Managing Director Peter Bunthorpe said: “OmniLife is RGA’s UK integration vehicle with strategic plans to acquire additional insurance portfolios. The acquisition of HLAC is OmniLife’s second acquisition. The transaction and the timely completion of the transfer of Part VII further demonstrate the OmniLife team’s ability to execute.” And to consolidate these deals. “
In terms of future EV/sales, RGA’s 0.63x is 66.8% lower than the industry average of 1.90x. The company’s future EV/EBIT of 6.33x is 40.9% lower than the industry average of 10.71x. Similarly, his 0.66x non-GAAP futures PEG is 35.5% lower than the industry average of 1.02x.
In the first quarter ended March 31, 2023, RGA’s net premiums increased 7.3% year-on-year to $3.39 billion. Adjusted operating profit increased 23.3% year-on-year to $349 million. The company’s adjusted return on equity (excluding AOCI) was 11.2%, compared with 7.1% in the same period last year.
Total revenue increased 8.5% year-on-year to $4.25 billion. Additionally, net income available to RGA shareholders increased 27.9% year-on-year to his $252 million.
RGA’s revenue for the quarter ending June 30, 2023 is expected to grow 10.8% year-on-year to $4.31 billion. FY2023 EPS is expected to grow 20.2% year-on-year to $17.35. Of the four quarters that followed, he beat consensus EPS expectations in three. Over the past year, the stock has surged 29.9% to close at $148.44.
RGA’s POWR rating reflects a solid outlook. The overall rating is B, which is equivalent to “Buy” in our own rating system.
It ranks first in the industry. Sentiment is an A grade, Growth and Momentum is a B grade. click here To see other RGA ratings for value, stability and quality, visit
International General Insurance Holdings Co., Ltd. (IGIC)
Headquartered in Amman, Jordan, IGIC provides specialty insurance and reinsurance solutions worldwide. The company operates through three segments: Specialty Longtail, Specialty Shorttail and Reinsurance. The firm underwrites specialty risk portfolios including energy, real estate, construction and engineering, ports and terminals, general aviation, political violence, marine, contingencies, treaties and property and casualty reinsurance.
On March 15, 2023, IGIC announced the completion of the acquisition of Norway-based management general agency Energy Insurance Oslo AS (EIO).
“We are delighted to welcome the EIO team to the IGI Group,” said IGIC Chairman and CEO Wassef Jabshe. , we can leverage that relationship to expand our presence.” Also in the Nordic market across other business areas. “
For non-GAAP future P/E, IGIC’s 5.03x is 37.7% lower than the industry average of 8.08x. Its 0.60x expected price/sales is 68.1% lower than the industry average of 1.89x. Similarly, the company’s future EV/sales of 0.42x is 77.9% lower than the industry average of 1.90x.
In the fourth quarter ended December 31, 2022, IGIC net premiums increased 12.5% year-over-year to $97 million. Net income increased 182.4% year-over-year to $25.7 million. EPS was $0.53, up 178.9% from the previous year.
Analysts expect IGIC’s revenue to grow 5% year over year to $134.5 million for the quarter ending March 31, 2023. His EPS in 2024 is expected to be his $1.85, up 12.1% year over year. Of the four quarters that followed, he beat street EPS expectations in three. Over the past year, the stock has gained 9.4% and closed at $8.30.
IGIC’s strong fundamentals are reflected in its POWR rating. The overall rating is B, which is equivalent to “Buy” in our own rating system.
Insurance – Ranked #4 in the reinsurance industry. A B rating for Value, Momentum, Stability, and Sentiment. To see other IGIC ratings on growth and quality, visit click here.
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Revision: Stock Market Outlook 2023 >
RE shares were unchanged in pre-market trading on Monday. Year-to-date, the RE is up 17.02%, while the benchmark S&P 500 index is up 8.24% over the same period.
About the author: Dipanjan Benture
Dipanjan has been interested in the stock market since elementary school. This earned him a master’s degree in Finance and Accounting. Today, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in financial markets.
post 3 insurance stocks worth buying in May first appeared in stocknews.com
