3 Insurance Stocks With Promising Growth and Momentum

NYSE: BRK.B | Berkshire Hathaway Inc. New  News, Ratings, and Charts

BRK.B – The insurance industry shows significant prospects in its property and casualty segment. Therefore, insurance stocks Berkshire Hathaway (BRK.B), Old Republic International (ORI), and Mercury General (MCY), which possess solid growth and momentum attributes, could be worth adding to your watchlist now. Read on….

Insurance companies tend to do well in a rising interest rate environment. The Fed’s commitment to curb inflation has increased the likelihood of additional interest rate hikes. To that end, it could be wise to watch insurance stocks Berkshire Hathaway Inc. (BRK.B), Old Republic International Corporation (ORI), and Mercury General Corporation (MCY), given their robust growth and accelerating momentum.

The significance of the insurance industry cannot be understated. It provides critical risk management solutions, safeguarding enterprises, establishments, and individuals from prospective loss, and compensates policyholders during disaster, injury, or loss.

The insurance sector constitutes a pivotal part of the economy, given its voluminous premiums, its substantial investment reach, and, notably, its fundamental socio-economic function in cushioning personal and commercial risks. As per Swiss Re, the robustness of the insurance industry is projected to showcase resilience over the next couple of years. Global insurance premiums are expected to grow by 1.1% and 1.7% in 2023 and 2024, respectively.

According to a report by Allianz Trade, last year, the Property & Casualty (P&C) segment grew at a robust 8.7%, and more than half, or €77.5 billion ($84.76 billion) of 2022’s global increase came from North America alone.

In addition, the National Centers for Environmental Information has documented 12 weather and climate disaster events causing damages exceeding $1 billion in the United States as of July 11, 2023.

From 2022 to 2023, wildfire damage across the U.S. amounted to more than $3.2 billion, underscoring the necessity of appropriate insurance to assist policyholders in absorbing these costs. These expensive catastrophes are likely to stimulate growth in the U.S. P&C insurance market, which is anticipated to grow at a CAGR of 6% between 2023 and 2028.

Further influencing the sector’s development is the burgeoning adoption of digital solutions. The consumers’ growing tendency to opt for digital channels when purchasing and managing insurance has compelled P&C insurers to enhance their digital, automation, AI, and advanced analytics capabilities. McKinsey forecasts that by 2030, up to half of all routine claims will be digitally processed.

The $1.56 trillion P&C insurance market presents a strategic opportunity for those leveraging advanced technologies. The increased use of AI tools such as geospatial analytics and computer vision can expedite accurate risk assessment and pricing, resulting in tailored insurance coverage.

Moreover, AI also serves as a deterrent to insurance fraud, an issue that currently burdens American customers with over $308.60 billion in damage each year.

The global P&C insurance market is expected to reach $2.47 trillion in 2027, growing at a CAGR of 7.6%.

Furthermore, the financial environment has grown more hospitable for insurers. The Fed’s recent approval of a quarter-percentage point increase to counteract inflation raised the Fed funds rate to a target range of 5.25%-5.5%, the highest over two decades.

Since insurance companies earn revenue through charging premiums and investing these premiums in interest-generating assets, the higher interest rates make for a favorable setting. Higher interest rates increase their return on investment, boosting their financial performance.

Given this backdrop, insurance stocks BRK.B, ORI, and MCY, which display robust momentum and growth, make them worth watching.

Berkshire Hathaway Inc. (BRK.B)

BRK.B engages in insurance, freight rail transportation, and utility businesses worldwide. It provides property, casualty, life, accident, health insurance, and reinsurance; and operates railroad systems in North America.

Over the past three years, BRK.B’s revenue and total assets have grown at 7.5% and 9.5% CAGRs. The company’s tangible book value has increased at CAGRs of 13.9% and 10.4% over the past three and five years, respectively.

BRK.B’s trailing-12-month asset turnover of 0.32x is 60.1% higher than the industry average of 0.20x. Its trailing-12-month cash from operations of $39.09 billion is significantly higher than the industry average of $141.34 million.

For the fiscal second quarter that ended June 30, 2023, BRK.B’s total revenues increased 21.4% year-over-year to $92.50 billion. The company’s Insurance and Other segment revenues rose 4.1% from the year-ago value to $65.61 billion.

Its operating earnings increased 6.6% year-over-year to $10.04 billion. Net earnings attributable to BRK.B shareholders stood at $35.91 billion, compared to a net loss of $43.62 billion in the year-ago quarter. 

Its net cash flows from operating activities for the six months that ended June 30, 2023, was $21.13 billion, up 37.6% year-over-year. Moreover, cash and cash equivalents and restricted cash at the end of the second quarter stood at $50.65 billion, up 62.2% year-over-year.

Analysts expect BRK.B’s revenue and EPS for the fiscal third quarter ending September 2023 to increase 7% and 18.9% year-over-year to $82.33 billion and $4.19, respectively. Moreover, it surpassed the consensus EPS estimates in three of the trailing four quarters, which is promising.

The stock has gained 22.4% over the past year to close the last trading session at $349.99. Over the past six months, it gained 13.5%. The stock is trading above its 50-day and 100-day moving averages of $338.99 and $327.69, respectively, indicating an uptrend.

BRK.B’s POWR Ratings reflect its outlook. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

BRK.B has a B grade for Growth, Stability, and Momentum. It is ranked #40 within the B-rated 57-stock Insurance – Property & Casualty industry.

For additional BRK.B ratings for Value, Sentiment, and Quality, click here.

Old Republic International Corporation (ORI)

ORI engages in the insurance underwriting and related services business, primarily in the United States and Canada. It operates through three segments: General Insurance, Title Insurance, and the Republic Financial Indemnity Group Run-off Business.

On June 15, ORI paid the shareholders a regular quarterly dividend of $0.245 per common share. The company pays a $0.98 per share dividend annually, translating to a 3.50% yield on the current share price. Its four-year average dividend yield is 9.71%. The company’s dividend payouts have grown at a CAGR of 5% over the past three years and 4.3% over the past five years.

The current annualized rate marks the 42nd consecutive year that ORI has increased this rate, and 2023 becomes the 82nd year of uninterrupted regular dividend payments.

ORI’s revenue grew at CAGRs of 4.2% and 4% over the past three and five years, respectively. In addition, its total assets grew at 6.1% and 5.9% CAGRs over the past three and five years, respectively.

ORI’s trailing-12-month asset turnover of 0.30x is 48.2% higher than the industry average of 0.20x. Its trailing-12-month cash from operations of $1.05 billion is 642% higher than the industry average of $141.34 million.

For the fiscal second quarter that ended June 30, 2023, ORI’s total operating revenues stood at $1.83 billion, whereas its total revenues came at $1.80 billion. The company’s net income stood at $155.50 million, compared to a net loss of $40.10 million in the prior-year quarter. Its net income per share came in at 0.62.

Also, its net premiums and fees earned and underwriting and related services income for the quarter stood at $1.65 billion and $108.60 million, respectively.

For the fiscal year ending December 2023, Street expects ORI’s revenue and EPS to come at $7.46 billion and $2.53, respectively. Moreover, it surpassed the consensus EPS estimates in all the trailing four quarters.

The stock has gained 24% over the past year to close the last trading session at $27.97. Over the past three months, the stock gained 9.8%. The stock is trading above its 50-day and 100-day moving averages of $25.54 and $25.25, respectively.

ORI’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

It has a B grade for Growth and Momentum. It is ranked #12 within the Insurance – Property & Casualty industry.

Click here to see the other ratings of ORI for Value, Stability, Sentiment, and Quality.

Mercury General Corporation (MCY)

MCY writes personal automobile insurance in the United States, along with homeowners, commercial automobile, commercial property, mechanical protection, and umbrella insurance products. The company sells its policies through a network of independent agents, insurance agencies, and directly through internet sales portals.

The company’s Board of Directors recently declared a quarterly dividend of $0.3175 per share, payable to shareholders on September 28. It pays a $1.27 per share dividend annually, translating to a 4.16% yield on the current share price. Its four-year average dividend yield is 5.28%. 

MCY’s revenue grew at CAGRs of 4.8% and 4.6% over the past three and five years, respectively. In addition, its total assets grew at 4.2% and 5.2% CAGRs over the past three and five years, respectively.

MCY’s trailing-12-month asset turnover of 0.64x is 219.8% higher than the industry average of 0.20x. Its trailing-12-month cash from operations of $263.04 million is 86.1% higher than the industry average of $141.34 million.

For the fiscal second quarter that ended June 30, 2023, MCY’s total revenues stood at $1.08 billion, up 37.9% year-over-year. Its net premium earned was $1.03 billion, up 4.8% year-over-year.

MCY’s total receivables stood at $655.91 million as of June 30, 2023, compared to $629.94 million as of December 31, 2022. For the six months that ended June 30, 2023, its cash at the end of the period increased 23.4% year-over-year to $357.72 million.

For the fiscal years ending December 2023 and December 2024, the consensus revenue estimates of $4.03 billion and $4.20 billion represent 1.2% and 4.4% year-over-year improvements, respectively. For the fiscal year 2024, its EPS is expected to come at $1.50.

The stock has gained 5.8% over the past month to close the last trading session at $30.53. Over the past three months, the stock gained 3.4%. The stock is trading above its 50-day and 100-day moving averages of $30.17 and $30.45, respectively.

It is no surprise that MCY has an overall rating of B, equating to a Buy in our POWR Ratings system.

MCY has a B grade for Growth, Momentum, and Sentiment. It is ranked #10 within the same industry.

In addition to the POWR Ratings highlighted above, one can see MCY’s Value, Stability, and Quality ratings here.

43 Year Investment Pro Shares Top Picks

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BRK.B shares rose $4.81 (+1.37%) in premarket trading Monday. Year-to-date, BRK.B has gained 13.30%, versus a 17.72% rise in the benchmark S&P 500 index during the same period.


About the Author: Sristi Suman Jayaswal


The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More...


More Resources for the Stocks in this Article

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