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Zacks Industry Outlook Highlights: MetLife, American International Group, Cigna, Prudential Financial and Horace Mann Educators Corp

For Immediate Release

Chicago, IL – July 20, 2021 – Today, Zacks Equity Research discusses Insurance - Multi-line, including MetLife Inc. MET, American International Group, Inc. AIG, Cigna Corporation CI, Prudential Financial, Inc. PRU and Horace Mann Educators Corporation HMN.

Link: https://www.zacks.com/commentary/1763544/7-multiline-insurers-to-watch-out-for-as-economic-recovery-gains-traction

Product diversification helps Zacks Multiline Insurance industry players lower concentration risk, ensure uninterrupted revenue generation, and improve retention ratio. Better pricing, prudent underwriting, exposure growth, reopening of the economy with receding impact of the pandemic and increased vaccinations should benefit MetLifeAmerican International GroupCignaPrudential Financial and Horace Mann Educators Corp.

Increasing adoption of technology will help in smooth functioning of the industry. Solid capital level of the multiline insurers will again fuel merger and acquisition (M&A) activities. Though a low-rate environment weighs on investment income and hampers life as well as long tail property and casualty operations, the same makes borrowed funding affordable.

About the Industry

The Zacks Multiline Insurance industry comprises companies that provide a single insurance coverage, bundling automobile, homeowner, long-term care, life and health insurance to individuals and businesses. The insured pays a single premium and is covered for many things through a single contract.

These companies cover commercial and personal properties, automobiles, marine, livestock, aviation, personal accident, life including permanent and term insurance, supplemental accident and health insurance, workers’ compensation, annuity products, private mortgage insurance, et al.

The industry participants also provide risk management services. Since the companies offer single insurance coverage for multiple products, customer retention improves. An insured stands to benefit from lower premium payment, compared to paying individual premium for insuring varied products.

3 Trends Shaping the Future of Multiline Insurance Industry

Diversified portfolio lowers concentration risk:  Given the nature of the business, multiline insurers’ product and service portfolio is diversified, which lowers concentration risk. Per a report published in Insurance Journal, S&P Global Ratings notes that though the pandemic cost $8 billion for 16 global multiline insurers in 2020, they could deliver net profit of $36 billion, given their diversified operations.

Its property and casualty operations will face the fury of active hurricanes (per Colorado State University 2021 is likely to witness above-average hurricane season), which will weigh on underwriting profits. The life insurance business should benefit from lower mortality rates as the pandemic slowly recedes and vaccination programs increase, resulting in lower claim payments.

Merger and acquisitions:  Consolidation in the multi-line insurance industry would continue as players look to diversify their operations into new business lines and geography. Buying businesses in the same lines will be driven by the players’ need to gain a fair market share and grow in their niche areas.

Also, a low interest rate environment makes mergers and acquisitions possible since funding purchases become more affordable. Though deal volume has declined considerably due to the uncertainty surrounding the pandemic in 2020, a better stage is already set for 2021 with reopening of the economy, an optimistic growth outlook and solid capital level of the insurers. Rob Kindler, Global Head of M&A at Morgan Stanley said, “All the elements are there for an active M&A market in 2021, from corporations looking for scale and growth to private equity firms and SPACs looking to invest capital.”

Increased adoption of technology: The industry is witnessing greater use of technology like blockchain, AI, advanced analytics, telematics, cloud computing and robotic process automation to expedite business operations and save costs.  Many life insurers have started selling policies online that appeal to the tech-savvy population.

At the same time, the use of real-time data is making premium calculation easier and reducing risk. The P&C industry, in particular, also witnessed the emergence of insurtech — technology-led insurers — sparking competition for incumbent players. Moreover, adoption of technology has helped in seamless underwriting and claims processing.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong prospects in the near term. The Zacks Multiline Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #111, which places it in the top 44% of 255 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. The industry’s earnings estimates for the current year have been revised upward by 2.1% since April 2021.    

Before we present a few multiline insurance stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Underperforms Sector and S&P 500

The Multiline Insurance industry has underperformed both the Zacks S&P 500 composite and its sector over the past year. The stocks in this industry have collectively rallied 32.2% in the past year compared with the Finance sector’s increase of 40.2%. Notably, the Zacks S&P 500 composite has gained 34.5% in the same time frame.

Current Valuation

On the basis of its trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 1.55X compared with the S&P 500’s 7.19X and the sector’s 3.18X.

Over the past five years, the industry has traded as high as 1.98X, as low as 0.85X and at the median of 3.28X.

5 Multiline Insurance Stocks to Keep an Eye on

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Prudential: Headquartered in Newark, NJ, this Zacks Rank #2 insurer offers an array of financial products and services including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services. Prudential continues to benefit from solid asset-based businesses, improved margins in Group Insurance business, and international operations. Its high-performing asset management business and deeper reach in the pension risk transfer market are catalysts for long-term growth.

The Zacks Consensus Estimate for 2021 indicates year-over-increase of 29.4% from its prior-year reported numbers. The expected long-term earnings (three to five years) growth rate stands at 11%.

MetLife: This New York, NY-based insurance-based global financial services company provides protection and investment products to a range of individual and institutional customers. Its focus on businesses with growth potential and strategies to control cost and increase efficiency bode well for growth. It carries a Zacks Rank #2. 

The Zacks Consensus Estimate for 2021 indicates year-over-increase of 16.9% from its prior-year reported numbers and has moved up about 1% in the past 30 days. The expected long-term earnings growth rate is pegged at 4.8%.

Horace Mann Educators Corp.: This Springfield, IL based company boasts being the largest financial services company focused on providing America’s educators and school employees with insurance and retirement solutions. Transformational actions, profitability initiatives and niche market focus place it well for growth. 

The Zacks Consensus Estimate for 2021 and 2022 earnings of this Zacks Rank #2 company has moved up 8.5% and 2.1%, respectively, in the past 30 days. The Zacks Consensus Estimate for 2021 indicates year-over-increase of 5.3%.  The company delivered a four-quarter average earnings surprise of 33.43%.

AIG: Headquartered in New York, this Zacks Rank #3 insurer provides insurance products for commercial, institutional, and individual customers in North America and internationally. Strategic business de-risking and acquisitions, cost control efforts, and accelerated capital deployment will drive growth.

The Zacks Consensus Estimate for 2021 and 2022 indicates year-over-increase of 80.6% and 15.2% respectively from its prior-year reported numbers. The Zacks Consensus Estimate for 2021 of this Zacks Rank #3 company has moved up 1.5% in the past 30 days.  The expected long-term earnings growth rate is 10%.

Cigna: This Bloomfield, CT based company provides insurance and related products and services.  Acquisition of Express Scripts, strong international operations and growing medical membership auger well for growth of this Zacks Rank #3 company.

The Zacks Consensus Estimate for 2021 and 2022 indicates year-over-increase of 10.8% and 13.8%, respectively from the prior-year reported numbers. The expected long-term earnings growth rate is 11.5%. The company delivered a four-quarter average earnings surprise of 5.43%.

Assurant: Headquartered in New York, Assurant is a global provider of risk management solutions in the housing and lifestyle markets. Strong performing Global Lifestyle business, growing Service business, and solid capital management should drive growth at the company. 

The Zacks Consensus Estimate for 2021 and 2022 of this Zacks Rank #3 company indicates 12.6% and 24.7% year-over-year growth. The expected long-term earnings growth rate is pegged at 17.8%, better than the industry average of 13.2%. The company delivered a four-quarter average earnings surprise of 21.71%.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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American International Group, Inc. (AIG): Free Stock Analysis Report

MetLife, Inc. (MET): Free Stock Analysis Report

Prudential Financial, Inc. (PRU): Free Stock Analysis Report

Cigna Corporation (CI): Free Stock Analysis Report

Horace Mann Educators Corporation (HMN): Free Stock Analysis Report

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