5 Insurance Stocks Set To Keep Winning Streak Alive In 2019

Though the insurance space has been battered by catastrophic activities, occasional breathers helped industry players outperform the broader market. The industry benefited from an improving rate environment, prudent underwriting standards and sturdy capital. These should also benefit the industry in 2019.

A rising rate environment is a boon for the insurance industry as the players invest a portion of the premiums collected. A better rate of interest increases net investment income, which is an important component of insurers’ top line.  

Strengthening of the economy, strong labor market, declining employment and inflation reaching targeted 2% induced the Federal Reserve to raise interest rate consistently. The Fed has also indicated three rate increases for 2019.

In its September FOMC meeting, the Fed estimated GDP to be 2.5% for 2019. An expanding economy should help increase insured exposures.

Though catastrophe activities have weighed on property and casualty insurers’ profitability, the same helped them improve pricing. After witnessing 19 back-to-back quarters of soft pricing market, insurers started to increase prices from the fourth quarter of 2017  

Per excerpts from Insurance Marketplace Realities 2019 by Willis Towers Watson, rates are expected to increase in low single-digit to low double-digit range across most insurance lines in 2019, except for U.S. workers compensation and international liability programs.

Improvement in pricing should drive premiums higher and support the company in payment of claims. Property and casualty insurers are also taking reinsurance covers to safeguard their profits.

Following the implementation of the Tax Cuts and Jobs Act of 2017, the tax rate dropped to 21% from 35% effective January 2017. Companies across the board largely benefited from lower tax and the same should continue to boost the bottom line in 2019.

Though the insurance industry underperformed the Zacks S&P 500 composite, it has fared better than its sector year to date. The insurance industry decreased 9.5% while the Finance sector declined 14% and the Zacks S&P 500 composite lost 4.8%.

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