Insurance providers use their expertise in risk assessment to help protect assets while offering consumers peace of mind through comprehensive coverage options. But worries about an economic slowdown and potential claims deterioration have kept sentiment in check, and over the past six months, the industry’s 2.6% return has trailed the S&P 500 by 5.1 percentage points.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one insurance stock boasting a durable advantage and two we’re swiping left on.
Two Insurance Stocks to Sell:
Root (ROOT)
Market Cap: $910.8 million
Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ: ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.
Why Do We Think Twice About ROOT?
- Products and services are facing significant credit quality challenges during this cycle as book value per share has declined by 158% annually over the last five years
- Push for growth has led to negative returns on capital, signaling value destruction
Root’s stock price of $58.57 implies a valuation ratio of 2.9x forward P/B. Check out our free in-depth research report to learn more about why ROOT doesn’t pass our bar.
CNA Financial (CNA)
Market Cap: $13.14 billion
With roots dating back to 1853 and majority ownership by Loews Corporation, CNA Financial (NYSE: CNA) is a commercial property and casualty insurance provider offering coverage for businesses, including professional liability, surety bonds, and specialized risk management services.
Why Should You Dump CNA?
- Outsized scale creates growth headwinds as its 7.2% annualized net premiums earned increases over the last two years underperformed other financial institutions
- Annual earnings per share growth of 2.2% underperformed its revenue over the last two years, showing its incremental sales were less profitable
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 1.7% annually over the last five years
CNA Financial is trading at $49.50 per share, or 10.7x forward P/E. If you’re considering CNA for your portfolio, see our FREE research report to learn more.
One Insurance Stock to Watch:
Cincinnati Financial (CINF)
Market Cap: $25.4 billion
Founded in 1950 by independent insurance agents seeking stable market options for their clients, Cincinnati Financial (NASDAQ: CINF) provides property casualty insurance, life insurance, and related financial services through independent agencies across 46 states.
Why Is CINF on Our Radar?
- Strong 12% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
- Forecasted revenue growth of 8.4% for the next 12 months indicates its momentum over the last two years is sustainable
- Share buybacks propelled its annual earnings per share growth to 19.4%, which outperformed its revenue gains over the last five years
At $163.86 per share, Cincinnati Financial trades at 1.5x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
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