Top Insurance Company Stocks to Buy in 2019
Insurance companies are financial institutions that are in the business of risk management. Generally, these companies are either life insurance or property and casualty insurance. The two types have different considerations.
Life Insurance companies are mandated by the government to maintain a certain level of reserve. These companies are thus less leveraged. It is important to note that insurers evaluate assets at market value but liabilities at book value. These life insurance policies have a long term outlook, as benefits are not paid out for many years.
Property and casualty insurance companies have shorter policy duration. Due to the nature of this type of insurance, timing and amount of liabilities are less certain than for life insurance companies. These insurance companies also go through an underwriting cycle.
🚑 Insurance Company
Manulife Financial (MFC-T) Life & Health Insurance
A Canadian multinational insurance company. They announced good earnings and profits, as well as pays a good dividend. They have been growing internationally, with growth particularly in Asia. They pay a dividend of 4.1%
Insanely cheap. Under 8x earnings. Dividend yield 5%. Improved capital ratio dramatically. Lifecos benefit a bit more from rising rates, and they're all trying to reduce their sensitivity to rates by diversifying into wealth management.
Industrial-Alliance Life Ins (IAG-T)
A Quebec City based insurance company with a wealth management business. Their operations are more focused on personal insurance. A more regional insurer. The dividend at 3% is considered safe.
(A Top Pick Nov 13/20, Up 33%) Has started buying back shares and paying dividends. Financials should do well as the yield curve steepens. Valuation is not as compelling as before. Middle of the pack. Has moved to US banks and non-financial banks in Canada.
Sun Life Financial Inc (SLF-T)
One of the largest and oldest life insurance companies in the world. They are diversifying into wealth management and buying real estate. A long-term hold that pays a good dividend at 4%.
Insurance companies have been quite sleepy this year. Stock's been flat since 2019. Not a ton of dividend growth. Good positive exposure to rising rates longer term. Well managed. He owns MFC instead, with more catalysts, cheaper, higher dividend yield. Trimmed weighting to insurance broadly and moved into utilities, renewables, and infrastructure.
Great West Lifeco (GWO-T)
A value pick with low volatility. They operate in North America, Europe and Asia through subsidiaries that are regionally focused. A good long-term hold when interest rates rise. However the short term rate outlook has changed and it has affected the stock. The yield is 5%.
They've made a big push into the U.S. retirement services business, basically a record-keeping market. It's a very defenisive stock, trades at a cheap 10x earnings and pays a 4.5% dividend. GWO will see earnings growth. Pays a 4% dividend. (Analysts’ price target is $40.00)
Fairfax Financial (FFH-T) Property & Casualty Insurance
A financial holding company has activities in property, casualty and life insurance. They also operate in the investment management and insurance claims management sphere. It is well-run and a good long term hold.
Prem Watsa engages in market timing, unlike Warren Buffett. Fairfax is a black box as to what it owns. Challenging business. Stuck in the mud for a while. If you want too look at good capital allocators in the P&C business, look at BRK.B, which he owns.
Intact Financial (IFC-T)
The largest provider of property and casualty insurance in Canada. They have a strong balance sheet and has grown well. Intact is now well-positioned to make acquisitions.
Largest P&C insurer in Canada. 21% market share. Efficient operations. Consistent profitability, 5% above that of industry rivals. Consolidator. Now on the map in the UK and Ireland. Longer term, climate change and rising property values advantage them. Yield is 2%. (Analysts’ price target is $196.08)
St. Paul Travelers Companies Inc. (TRV-N) Property & Casualty Insurance
One of the largest U.S. insurance companies for commercial property casualty insurance and personal insurance. They pay a dividend of 2.12%
First American Corp. (FAF-N)
They are in the home insurance business. This is a play on the US housing market where prices have softened. This has affected the stock performance this year. They have done a good job of consistently raising their dividend which is at 3%.
(A Top Pick Jun 27/18, Up 3%) They are in the home insurance business and more particularly title insurance. In the US housing markets, prices have softened. This has had a negative effect on this name. The title insurance premium charged is based on the price of the home. So this has hampered its stock…
An efficient insurance company that is generating free cash flow. They reduced their share count by half and raised dividends. Low interest rates have been detrimental as premiums are not generating as much income. The yield is at 2.1%
Down 16%, hold or sell? Best P&C insurer in North America. Stock buybacks actually have had an impact. Consistent dividend increases. Great capital allocation. Cheap valuation. Core, long-term hold.
Kingsway Financial Services (KFS-T)
A property and casualty insurer in the United States. They operate through several segments, each covering insurance underwriting, extended warranty, and leased real estate.
Markel Corporation. (MKL-N)
A holding company for insurance that invest its cash in stocks instead of bonds They are getting into wealth management through insurance but there were some hiccups last year. Still, it is a well run company with a good track record.
(A Top Pick Nov 19/19, Down 10%) Similar to Berkshire Hathaway. Would rather invest in a pure play that's easier to understand, so he sold. Good management. Good entry point here.
Progressive Corp Ohio (PGR-N)
The largest provider of car insurance in the U.S. They have low cost operations so their profitability and growth are higher than their peers. It’s enjoyed a long-term uptrend.
Very fine company. One of the best property and casualty companies in the world. Relatively resilient, defensive business model. Long-term, he recommends it. But for short and medium performance, we're exiting a recession, so it makes sense to put more capital into cyclicals.
Aflac Inc (AFL-N) Life & Health Insurance
The largest provider of supplemental insurance in the United States. They pay a dividend of 1.94%. They have consistently beat earnings and are growing. A low volatile name.
Global leaders in supplemental health insurance. Phenomenal track record of growth. A few ups and downs this year, but up nicely. Classic, long-term growth stock. If it drops, consider adding. If it goes to new highs, trim a bit.
A holding corporation for Metropolitan Life Insurance Company. They are buying back stocks. The US retirement portfolio has been doing well, and they are growing in Asia and Europe.
The insurers have been in fire, like MetLife. He believes rates will go higher, so definitely stick with them.
Prudential Financial Inc (PRU-N)
A financial company that has operations in insurance, wealth management and other financial products through their subsidiaries. It has been through a tough couple of years, but it may be changing. It pays a dividend of 4%.
Financials destined to outperform in next 12-24 months. Global, diversified. Second largest lifeco in US. Interest rates moving higher helps. Trades at just over half of book value, a huge discount to peers. Dividend looks solid and will probably grow over time. Yield is 5.09%. (Analysts’ price target is $85.53)