When it comes to investing, the flashiest sectors often grab the headlines—think cutting-edge tech, electric vehicles, or artificial intelligence. However, some of the most reliable and profitable opportunities lie in industries that are often considered boring and mundane.
Insurance, for example, is essential for businesses and individuals alike, yet it doesn’t inspire the same excitement as other sectors. Despite this, some of the top-performing stocks in the market come from the insurance industry, thanks to robust business models and steadily growing earnings.
The Insurance – Property and Casualty Industry currently sits in the top 8% (20 out of 25), demonstrating considerable strength. This is further shown by the industry’s stocks broadly outperforming market indexes year-to-date (YTD).
Here, I will share two top-ranked insurance stocks, The Progressive (PGR) and Axis Capital Holding (AXS) that enjoy reasonable valuations, strong earnings growth forecasts and stock price momentum.
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The Progressive (PGR): A Leading Insurance Stock
Progressive has seen remarkable growth in recent years, climbing from the third largest to the second-largest auto insurer in the U.S., now trailing only State Farm. Progressive holds a market share of 15.24%, surpassing Warren Buffett’s GEICO at 12.31%. In 2022, Progressive's direct premiums written for personal auto insurance grew by 8.6% to $38.93 billion, far outpacing GEICO's 1.9% increase to $38.12 billion.
Progressive has managed to beat the odds and overtake Geico in recent years, which has resulted in profits growing considerably faster than many had initially expected. Not surprisingly, this has earned Progressive a Zacks Rank #1 (Strong Buy) rating, thanks to its consistent earnings upgrades.
The earnings revision trend along with its stock price has climbed steadily higher over the last year with the current quarter earnings estimates rising by 25% in the last two months and the stock appreciating by 60.5%. PGR stock has been an incredible long-term performer having grown at an annual pace of 25.9% annually over the last decade.
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Even with the incredible stock appreciation in the last year, The Progressive still has a reasonable valuation. The company is trading at a one year forward earnings multiple of 20X, which although above its 10-year median of 17.2x is still below the industry average.
Furthermore, with EPS growth forecasts of 27.6% annually over the next 3-5 years, Progressive trades at a PEG ratio of 0.72, which is a discount based on the metric.
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Axis Capital Holding (AXS): Appealing Valuation
Axis Capital Holdings is a lesser-known name in the insurance industry but an important player in the reinsurance space. Reinsurance companies provide insurance to insurers, helping them manage their risk exposure. This is a crucial part of the financial ecosystem, and Axis Capital has established itself as a reliable partner in the space.
The company has a diversified portfolio across various lines of business, including property, casualty, and specialty reinsurance. It has consistently delivered solid earnings growth, driven by favorable pricing trends and disciplined risk management. Axis Capital has also benefited from a hardening insurance market, where rising premiums improve profitability across the industry.
In recent years Axis Capital Holdings has seen a significant and sustained rise in company profits, which has coincided with a strong move higher in the stock price. Although AXS had underperformed the industry over the last ten years, things have picked up and with eps rising the stock became an outperformer over the last one and three years.
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Axis Capital Holdings has seen continuous revisions higher to its earnings estimates over the last year and thus currently has a Zacks Rank #1 (Strong Buy) rating. FY24 earnings have climbed by 7% and FY25 by 5.5%, while all but one analyst has revised earnings higher over the last two months.
Axis Capital Holdings seems to be trading at a handsome discount ay 7.3x forward earnings. This is well below both its 10-year median of 12.1x and the industry average 29.7x. With earnings growth projections of 27.8% annually over the next three to five years AXS has an exceptionally low PEG Ratio of 0.26. Finally, Axis pays a tidy 2.25% dividend.
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Should Investors Buy PGR and AXS Shares?
Both Progressive (PGR) and Axis Capital Holdings (AXS) offer compelling opportunities for investors seeking value and growth in a traditionally “boring” industry. Insurance may not generate the same excitement as tech or AI, but the strong fundamentals and momentum of these companies are hard to ignore.
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The Progressive Corporation (PGR) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
