We recently compiled a list of the 8 Undervalued Insurance Stocks To Invest In. In this article, we are going to take a look at where Chubb Limited (NYSE:CB) stands against the other undervalued insurance stocks.
The State of the US Insurance Market: What Investors Need to Know
The insurance industry is currently facing significant challenges, particularly in regions prone to extreme weather events. Recent hurricanes, including Helene and Milton, have caused substantial damage in Florida, leading to billions in insurance losses.
Florida has faced significant challenges in its insurance market due to the impact of 4 major hurricanes in the past 4 years. On October 17, Reuters reported that homeowners contacted by Reuters in areas including both Florida coasts and the Keys are increasingly worried about rising premiums and the possibility of losing their insurance coverage altogether. Average homeowner premiums in Florida surged nearly 60% from 2019 to 2023. The state-backed insurer, Citizens Property Insurance Corp., has seen its policies increase from about 1.14 million at the end of 2022 to over 1.2 million as of June 2024, indicating a growing reliance on this insurer of last resort.
Analysts and experts predict that the recent back-to-back hurricanes, Helene and Milton, will further worsen the situation. Analysts warn that these storms will likely lead to even higher insurance costs and stricter coverage exclusions. Marc Ragin, an associate professor of risk management and insurance at the Terry College of Business at the University of Georgia, expressed concerns that insurers may become hesitant to continue offering policies in Florida due to the increasing frequency of severe weather events. As a result, many homeowners are left feeling anxious about their insurance options and financial security.
Ken Gregg, CEO of Orion180, told Reuters that the hope for a softer insurance market has vanished following Helene and Milton. Brian Schneider, senior director of insurance at Fitch Ratings, noted that price increases from reinsurers are forcing primary insurance companies to raise their rates as well. Despite these challenges, some private insurers remain committed to the Florida market, but homeowners continue to feel the pressure as they navigate an uncertain insurance landscape.
Resilience of the Insurance Market
Overall, the US insurance industry is proving resilient in the face of adversity. According to Mordor Intelligence, the US life and non-life insurance market’s size in terms of net written premiums was valued at $2.02 trillion in 2024. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 6.95% during 2024-2029 to reach $2.83 trillion by the end of the forecast period.
The insurance market is experiencing significant growth driven by several key trends that enhance its resilience despite facing catastrophic events. One of the primary factors is the rapid digital transformation within the industry, which has improved operational efficiency and customer engagement. Insurers are increasingly adopting technologies like artificial intelligence (AI) and big data analytics to streamline processes, personalize offerings, and enhance risk assessment.
Here’s a short excerpt from our article “7 Hot Insurance Stocks To Buy Right Now” that discusses this in more detail:
“Advancements in artificial intelligence (AI) continue to revolutionize how insurers assess risk and manage claims. AI technologies enable better data analysis and faster decision-making processes, which can enhance customer service and operational efficiency.
On October 22, CNBC reported that Near Space Labs, a Brooklyn, New York-based startup, has developed innovative technology to enhance the insurance claims process following natural disasters like hurricanes Helene and Milton. Their invention, called “Swifts,” consists of AI-enabled cameras mounted on weather balloons that fly at altitudes higher than airplanes. This allows them to capture high-resolution images over vast areas quickly, significantly speeding up damage assessments from weeks to just days. CEO Rema Matevosyan highlighted that their technology can gather data equivalent to what 800,000 drones would capture in one flight. The company has already conducted over 1,000 missions and is scaling operations to respond immediately to climate-related disasters, aiming to provide insurance companies with timely information for risk analysis and claims processing.”
Overall, these trends indicate that the insurance market is poised for growth and capable of withstanding challenges, making it an attractive sector for investors.
Our Methodology
To compile our list of the 8 undervalued insurance stocks to invest in, we used the Finviz and Yahoo stock screeners to find the largest insurance companies. We also reviewed our own rankings and consulted various online resources.
From an initial pool of over 30 insurance stocks, we focused on those trading at under 15 times their forward earnings as of October 25. We further narrowed down our selection by looking for insurance stocks expected to show positive earnings growth this year.
Next, we focused on the top 8 stocks most favored by institutional investors and ranked the best insurance stocks based on hedge fund holdings. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 8 undervalued insurance stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A business executive reviewing insurance policy documents with a customer.
Chubb Limited (NYSE:CB)
Forward P/E: 11.85
Earnings Growth: 8.10%
Number of Hedge Fund Holders: 46
Chubb Limited (NYSE:CB) is a leading global insurance company that ranks among the top 3 on our list of the 8 undervalued insurance stocks to invest in. With operations in 54 countries, the company provides a wide range of insurance products, including commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance, and life insurance to individuals, families, and businesses of all sizes.
During the second quarter of 2024, the company closed two acquisitions of Healthy Paws, a US-based pet insurance company, and Catalyst Aviation Insurance, a Melbourne-based managing general agent specializing in general aviation insurance. This highlights Chubb Limited’s (NYSE:CB) strategic focus on expanding its market presence and diversifying its product offerings.
In Q2 2024, Chubb Limited (NYSE:CB) reported impressive financial results, with net income reaching $2.23 billion, a 24.3% increase from the previous year. Core operating income also rose to $2.20 billion, up 7.5%. For the first half of 2024, net income was $4.37 billion, reflecting an 18.7% increase, while core operating income hit a record $4.41 billion, up 13.5%. This growth is reflective of the company’s effective business strategies and strong market demand.
Total net premiums increased by 11.8% in Q2 2024 year-over-year, driven by a 24.5% rise in life insurance premiums and an 11.2% increase in global property and casualty (P&C) insurance. In North America, high-net-worth personal insurance grew by 12.3%, while commercial lines saw a 6.7% increase. Internationally, premiums were up over 15.5%, with notable growth in Asia-Pacific.
Chubb Limited’s (NYSE:CB) solid underwriting and investment results continue to generate significant capital and positive cash flow. The company reported an adjusted operating cash flow of $3.6 billion for the quarter and a record $7.2 billion for the first half of the year. Additionally, Chubb Limited (NYSE:CB) returned $939 million to shareholders through share repurchases and dividends in Q2 2024.
Over the past 5 years, Chubb Limited (NYSE:CB) has increased its revenue at a rate of 10% each year. At the same time, its net income has grown even faster, with a 20% annual growth rate.
With its robust financial performance, diverse product offerings, and strategic acquisitions, Chubb Limited (NYSE:CB) presents a compelling investment opportunity for those looking to invest in the insurance sector.
Chubb Limited (NYSE:CB) is one of the best insurance stocks to buy. As of the second quarter of 2024, the stock is held by 46 hedge funds.
Overall, CB ranks 3rd on our list of the undervalued insurance stocks to invest in. While we acknowledge the potential of CB as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.