The insurance industry undertakes a vital responsibility in society by offering security and resources. They provide essential services across numerous segments and with the recent innovations through insurtech, the industry’s outreach to consumers has even improved resulting in surging market demand.
Given the industry’s tailwinds, it could be wise to invest in fundamentally sound insurtech stocks CCC Intelligent Solutions Holdings Inc. (CCCS), Oscar Health, Inc. (OSCR), and SelectQuote, Inc. (SLQT), poised to lead the insurance industry.
According to a recent survey by Mercer, U.S. employers project an average rise of 5.8% in health insurance costs in 2025, owing to the increased cost of medical services and increasing global use. Apart from health insurance, the overall insurance market is also experiencing a rapid surge due to the severity of global risks, climate change, cybercrime, and other uncertainties.
The insurance market functions as society's financial safety net. Further, insurers' transforming approach not only effectively reacts to risks but also prevents losses from happening in the first place and adopts a more customer-centric business model with technological advancements that significantly contribute to growth.
Amid this outlook, insurtech has presented some groundbreaking evolutions that are benefiting the insurance industry. The insurance segment has remained traditional for a long period; therefore, now, with revolutionary innovation to enhance traditional processes, improve efficiencies, and boost the overall industry profitability, the industry is remodeling.
Capital invested in insurtech companies has also peaked in the recent years, and since 2018, investments have remained above $10 billion each year.
Besides, the global online insurance market is projected to reach $6.56 trillion by 2032, exhibiting growth at a notable CAGR of 12.7%. The market is growing with the shift towards digital platforms, the advent of mobile apps and AI technologies, and improving consumer experience.
Given the industry’s robust outlook, investing in quality insurance technology stocks such as CCCS, OSCR, and SLQT could be wise for future gains.
CCC Intelligent Solutions Holdings Inc. (CCCS)
CCCS operates as a software-as-a-service company for the property and casualty insurance economy. Its cloud-based SaaS platform connects trading partners, facilitates commerce, and supports mission-critical, artificial intelligence-enabled digital workflow across the insurance economy.
On September 4, CCCS launched CCC® Payroll, a solution designed to streamline payroll management for collision repair shops. CCC Payroll is integrated into the CCC ONE® platform and allows shops to track production and labor, streamline payroll within a single system, and ease the overall payroll process.
On July 30, CCCS unveiled CCC® Intelligent Reinspection, a solution to help auto insurers streamline the review of incoming repair facility estimates, expediting repairer workflows and claims resolutions. The solution uses AI technology to identify review areas and provides reason codes based on insurer rules, helping the overall review estimates and reducing repair and claim cycle times.
CCCS’ revenues for the second quarter that ended June 30, 2024, increased 9.9% year-over-year to $232.62 million, while its adjusted gross profit grew 12.4% from the year-ago value to $182.08 million. The company’s adjusted operating income of $85.98 million reflects growth of 19.7% from the prior year’s quarter.
Furthermore, net income attributable to CCCS common stockholders came in at $20.22 million and $0.03 per share for the quarter, respectively. Its adjusted EBITDA rose 18.4% year-over-year to $95.80 million.
As per the company’s business outlook, CCCS expects its revenue to range between $236 million and $238 million, and its adjusted EBITDA is expected to be $97 million - $99 million for the third quarter of fiscal 2024.
For the full year 2024, the company expects revenue of $941 million to $945 million and adjusted EBITDA of $391 million to $395 million.
Analysts expect CCCS’ revenue for the third quarter (ending September 2024) to increase 7.3% year-over-year to $237.36 million and its EPS for the same quarter is expected to grow 2% year-over-year to $0.09. Moreover, the company has surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.
Shares of CCCS have surged 3.7% over the past month to close the last trading session at $10.87.
CCCS’ POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CCCS has a B grade for Sentiment and Growth. It is ranked #3 out of 18 stocks in the A-rated Software - SAAS industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of CCCS for Quality, Stability, Momentum, and Value. Get all CCCS ratings here.
Oscar Health, Inc. (OSCR)
OSCR operates as a health insurance company. The company provides health plans in the individual and small group markets. It also provides +Oscar, a technology-driven platform that helps providers and payors directly enable their shift to value-based care.
In terms of forward EV/Sales, OSCR is trading at 0.38x, 88% lower than the industry average of 3.13x. Likewise, the stock’s forward Price/Sales multiple of 0.59 is 79.7% lower than the industry average of 2.89. Also, its forward Price/Cash Flow of 2.20x is 84.9% lower than the industry average of 14.56x.
During the second quarter that ended June 30, 2024, OSCR’s total revenue rose 45.9% year-over-year to $2.22 billion. Its adjusted EBITDA increased 192.7% from the year-ago value to $104.13 million. The company’s net income and EPS came in at $56.31 million and $0.20 for the quarter, respectively.
In addition, the company’s total assets were $5.01 billion as of June 30, 2024, compared to $3.60 billion as of December 31, 2023.
Street expects OSCR’s revenue and EPS for the first quarter (ending March 2025) to increase 23.4% and 3.2% year-over-year to $2.64 billion and $0.64, respectively. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, OSCR’s stock has gained 58.6% and 261.3% over the past year to close the last trading session at $21.93.
OSCR’s sound fundamentals are reflected in its POWR Ratings. The stock has a B grade for Growth and Quality.
Within the A-rated Medical – Health Insurance industry, OSCR is ranked #6 of 10 stocks. Click here to access additional ratings of OSCR for Momentum, Stability, Sentiment, and Value.
SelectQuote, Inc. (SLQT)
SLQT operates a technology-enabled, direct-to-consumer distribution platform that sells insurance policies and healthcare services. The company operates in four segments: Senior; Healthcare Services; Life; and Auto & Home.
On September 4, SLQT announced that SelectRx, its full-service medication management pharmacy serving all 50 states, will open a third fulfillment facility in Olathe, Kansas, to cater to its rapidly expanding customer base, with its existing facilities in Monaca, Pennsylvania, and Indianapolis, Indiana.
For the fourth quarter that ended June 30, 2024, SLQT’s total revenue increased 38.5% year-over-year to $307.21 million, of which its pharmacy revenue rose 77.1% from the year-ago value to $141.55 million. Also, the company’s adjusted EBITDA was $14.36 million for the quarter.
In addition, as of June 30, 2024, the company’s cash and cash equivalents and total assets stood at $42.69 million and $1.19 billion.
For the fiscal year 2025, the company expects revenue in a range of $1.40 billion to $1.50 billion and adjusted EBITDA between $90 million and $120 million.
Analysts expect SLQT’s EPS for the second quarter (ending December 2024) to increase 63.6% year-over-year to $0.18, and its revenue for the same quarter is expected to grow 26.6% year-over-year to $513.20 million. Also, it topped the consensus revenue estimates in each of the trailing four quarters.
SLQT’s stock has surged 27.8% over the past six months and 83.2% over the past year to close the last trading session at $2.07.
SLQT’s POWR Ratings reflect its bright prospects. SLQT has an A grade for Momentum and a B grade for Value and Growth. The stock is ranked #6 among 14 stocks in the Insurance - Brokers industry.
To access SLQT’s other ratings for Sentiment, Quality, and Stability, click here.
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CCCS shares were trading at $10.86 per share on Wednesday afternoon, down $0.01 (-0.09%). Year-to-date, CCCS has declined -4.65%, versus a 19.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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