The stock market has been volatile of late owing to rising inflation. The Consumer Price Index rose 6.2% in October from a year earlier, its biggest jump in more than 30 years. While the inflationary environment may not be favorable for all sectors, it could bode well for a few, such as insurance. Since high inflation usually leads to higher interest rates, it helps insurers earn more on their investments, thereby enhancing their profitability.
According to personal finance expert Suze Orman, “Only stocks have a track record of earning more than inflation.” During times like these, insurance companies, being of a defensive nature, can help combat inflation. Furthermore, according to an Insurance Journal report, the global insurance market is expected to exceed $7 trillion in premiums for the first time by mid-2022, which is earlier than expected.
So, to help protect one’s portfolio from inflation, we think it could be wise to scoop up quality insurance stocks—The Hartford Financial Services Group, Inc. (HIG), Fairfax Financial Holdings Limited (FRFHF), and Alleghany Corporation (Y).
The Hartford Financial Services Group, Inc. (HIG)
Hartford, Conn.-based HIG is a holding company in the insurance business whose business segments include commercial lines; personal lines; property & casualty other operations; group benefits; and Hartford funds. The company is a leader in property and casualty insurance, group benefits, and mutual funds.
On October 26, 2021, HIG announced that it was ranked number one for its digital capabilities in the Keynova Group’s Small Commercial Insurance Scorecard. It was evaluated across four categories, and evaluated tasks included functionality, ease of use, privacy and security, and support and access. HIG’s digital advancements have helped its clients and prospects make claims, obtain an online quote, or buy small insurance online.
For its fiscal third quarter, ended September 30, 2021, HIG’s total revenues increased 10% year-over-year to $5.68 billion. The company’s net income available to common shareholders increased 5% year-over-year to $476 million. Also, its adjusted EPS came in at $1.36, representing an 8% increase year-over-year.
Analysts expect HIG’s EPS for the quarter ending March 31, 2022, to increase 189.3% year-over-year to $1.62. Its revenue for its fiscal year 2021 is expected to increase 6.8% year-over-year to $21.92 billion. It has surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 54.8% in price to close yesterday’s trading session at $71.11.
HIG’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a B grade for Stability and Sentiment. In the 54-stock Insurance – Property & Casualty industry, it is ranked #5. To check the additional ratings of HIG for Growth, Value, Momentum, and Quality, click here.
Fairfax Financial Holdings Limited (FRFHF)
Headquartered in Toronto, Canada, FRFHF provides property & casualty insurance and reinsurance, investment management services in the U.S., Canada, Asia, and internationally. It operates through insurance and reinsurance; run-off; and non-insurance company segments.
For the third quarter, ended September 30, 2021, FRFHF’s net earnings increased 1,278.2% year-over-year to $576.10 million. The company’s cash provided by operating activities increased 1,087% year-over-year to $3.71 billion. Also, its adjusted EPS increased 270.2% year-over-year to $16.44.
Analysts expect FRFHF’s EPS and revenue for its fiscal year 2021 to increase 760.4% and 24.5%, respectively, year-over-year to $55.45 and $24.65 billion. The stock has gained 34.7% in price year-to-date to close yesterday’s trading session at $459.15.
FRFHF’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Value and Stability, and a B grade for Growth and Sentiment. It is ranked #1 in the Insurance – Property & Casualty industry. To check the additional ratings of FRFHF for Momentum and Quality, click here.
Alleghany Corporation (Y)
New City-based Y provides property and casualty reinsurance and insurance products internationally. The company operates in three segments: Reinsurance; Insurance; and Alleghany Capital. In addition, it owns and manages improved and unimproved commercial land and residential lots.
On October 18, 2021, Alleghany Capital (a subsidiary of Y) announced that its subsidiary, Integrated Project Services, acquired Anchorbuoy Limited. The President and CEO of Alleghany Capital, David Van Geyzel, said, “We look forward to supporting IPS and Linesight as they continue to expand their businesses globally and capitalize on the opportunities that result from this transaction.”
Y’s total revenues for the quarter ended September 30, 2021, increased 13.6% year-over-year to $2.87 billion. The company’s net premiums written increased 21.1% year-over-year to $1.98 billion. Also, its net investment income came in at $133 million, representing a rise of 2.9% year-over-year.
For its fiscal year 2021, analysts expect Y’s EPS to increase 167.5% year-over-year to $42.50. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 14.8% in price so far this year to close at $693.17.
Y’s strong fundamentals are reflected in its POWR Ratings. It has a B grade for Stability and Sentiment. It is ranked #13 in the Insurance – Property & Casualty industry. Click here to check the additional ratings of Growth, Value, Momentum, and Quality for Y.
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HIG shares were trading at $70.68 per share on Thursday morning, down $0.43 (-0.60%). Year-to-date, HIG has gained 46.83%, versus a 26.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
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|Y||Get Rating||Get Rating||Get Rating|