In this article, we discuss 5 best insurance stocks to buy now. If you want to read our detailed analysis of these stocks, go directly to 10 Best Insurance Stocks To Buy Now.
5. Marsh & McLennan Companies, Inc. (NYSE:MMC)
Number of Hedge Fund Holders: 42
Marsh & McLennan Companies, Inc. (NYSE:MMC) is a professional services firm with core interests in risk assessment and insurance. There is positive hedge fund sentiment around the stock. At the end of the third quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $1.9 billion in Marsh & McLennan Companies, Inc. (NYSE:MMC), up from 41 in the preceding quarter worth $2.5 billion.
Marsh & McLennan Companies, Inc. (NYSE:MMC) posted earnings for the fourth quarter of 2021 on January 27, reporting earnings per share of $1.36, beating estimates by $0.01. The revenue over the period was $5.1 billion, up 16.6% year-on-year.
4. Aon plc (NYSE:AON)
Number of Hedge Fund Holders: 47
Aon plc (NYSE:AON) is an Irish firm that provides insurance services. The company has paid a dividend to shareholders for nine consecutive years. On January 10, it declared a quarterly dividend of $0.51 per share, in line with previous. The forward yield was 0.72%.
Top hedge funds hold large stakes in Aon plc (NYSE:AON). At the end of the third quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $6 billion in Aon plc (NYSE:AON), down from 68 in the preceding quarter worth $8 billion.
3. Cigna Corporation (NYSE:CI)
Number of Hedge Fund Holders: 58
Cigna Corporation (NYSE:CI) provides insurance and related products. Wall Street is bullish on the future prospects of the stock. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Glenview Capital is a leading shareholder in Cigna Corporation (NYSE:CI), with 1.3 million shares worth more than $264 million.
Cigna Corporation (NYSE:CI) stock has gained in the past few weeks on the back of reports that Medicare rates are expected to rise in 2023. The proposed rates call for an 8% increase in private Medicare plans.
In its Q4 2020 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Cigna Corporation (NYSE:CI) was one of them. Here is what the fund said:
“New purchases include Cigna. Cigna is a leading managed care company which operates through the following major segments: health services, integrated medical, international markets and group disability. It’s one of the few managed care organizations in the United States with the scale and size to compete effectively. Cigna has recently focused on deleveraging its balance sheet and further diversifying its business, after completing the Express Scripts acquisition in late 2018. Additionally, the company has partnered with Amazon, which will offer two new pharmacy options—including a self-pay offering. Cigna will administer the self-pay option through its health services division Evernorth. The partnership should be one of many strong earnings drivers for Cigna, which we believe is currently trading at an attractive valuation.”
2. Humana Inc. (NYSE:HUM)
Number of Hedge Fund Holders: 60
Humana Inc. (NYSE:HUM) operates as a health and well-being firm. On January 11, Bernstein analyst Lance Wilkes kept a Market Perform rating on the stock with a price target of $431. The firm also recently beat market estimates on earnings for the fourth quarter of 2021, driving guidance above expectations for 2022 as well.
Hedge funds are bullish on Humana Inc. (NYSE:HUM). At the end of the third quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $2.9 billion in Humana Inc. (NYSE:HUM), up from 59 in the preceding quarter worth $3.2 billion.
In its Q1 2021 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Humana Inc. (NYSE:HUM) was one of them. Here is what the fund said:
“The third new purchase was Humana, the industry leader and near pure play in the fastest growing sector of managed care, Medicare Advantage. Each year, more seniors choose Medicare Advantage over traditional Medicare due to the compelling combination of lower costs and expanded benefits. Humana’s scale advantages and focus on senior care allow the company to make targeted investments in its members’ health, resulting in fewer unnecessary hospitalizations and lower chronic care costs. Much of these savings are then reinvested in the health plan, resulting in a continuously improving customer value proposition. The company’s brand also resonates well in the marketplace and has helped drive double-digit annual membership growth over the past decade—well above the rest of the industry. Further, we believe Humana has a long runway ahead as it benefits from an aging population and continued conversion of the approximately 60% of seniors who are still enrolled in traditional Medicare. Yet Humana’s shares are currently trading at a nearly 20% discount to the S&P 500 earnings multiple, which we believe doesn’t give the company enough credit for its durable competitive advantages and strong secular growth outlook.”
1. Willis Towers Watson Public Limited Company (NASDAQ:WTW)
Number of Hedge Fund Holders: 75
Willis Towers Watson Public Limited Company (NASDAQ:WTW) is a London-based insurance firm. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in Willis Towers Watson Public Limited Company (NASDAQ:WTW), with 4.7 million shares worth more than $1.1 billion.
Willis Towers Watson Public Limited Company (NASDAQ:WTW) has an impressive dividend history stretching back almost two decades. On December 8, it declared a quarterly dividend of $0.80 per share, in line with previous. The forward yield was 1.38%.
In its Q3 2021 investor letter, Alluvial Capital Management, an asset management firm, highlighted a few stocks and Willis Towers Watson Public Limited Company (NASDAQ:WTW) was one of them. Here is what the fund said:
“The second position is much larger and was thrown into our hands by an unexpected turn of events. It is the stock of Willis Towers Watson. This is a British company with roots dating back to 1828. WLTW is the third-largest insurance broker in the world. This is a sector with which we are very familiar, as some time ago we held in our portfolio shares of its slightly larger competitor AON.
It was AON in fact that announced last spring it had agreed to merge with WLTW. In the merger, WLTW shareholders would have received AON shares. As is usually the case with such announcements, investors stepped in to conduct what is known as merger arbitrage. In this particular case, they bought WLTW shares and sold short AON shares in order to profit from the fact that the prices of the two stocks did not yet fully reflect the exchange ratio in the merger. Moreover, merger arbitrage commonly makes extensive use of leverage in order to increase profits.
This summer, however, AON and WLTW jointly announced that they were pulling out of the planned merger because they had not received approval from the US Department of Justice. The regulator had feared that in an already quite concentrated industry, a merger of the second- and third-largest players would restrict competition too much. The immediate reaction to this announcement was, of course, closing of positions from the merger arbitrage. This brought an immediate increase in the price of AON shares and decline in the price of WLTW shares. We saw this as an excellent buying opportunity in WLTW stock. (In addition, WLTW had received a USD 1 billion breakup fee from AON.) Because we knew the industry and the two companies well from earlier years, we were able to react immediately, and a new, very attractive investment appeared in Vltava Fund’s portfolio rather unexpectedly and quickly.
Insurance brokerage is a very good business. Simply put, insurance brokers are intermediaries who sell, find, or negotiate insurance on behalf of a client for a fee. They do not bear the insurance risk themselves and thereby do not risk their own capital. They live from commissions and the fact that this is a large and recurring business. Just to give you a sense of this, I will note, for example, that of the 500 companies in the Fortune Global 500 list, more than 90% are clients of WLTW. The entire industry is very concentrated and has relatively high barriers to entry. WLTW is the third-largest global player, has very high free cash flow, low capital investment requirements, and a very valuable client base. The business as a whole also provides some long-term inflation protection, as the speed at which the volume of total premiums grows follows the speed at which the economy and asset prices grow in nominal terms. I have to say we are very happy that circumstances have passed this investment on to us.”
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