Best Insurance Stocks for 2024
Did you know the insurance industry generates more than $5 trillion in revenue each year?
More and more investors are now investing in insurance companies as it’s a business model that generally works when the economy is strong or weak.
Read on to discover some of the best insurance stocks for this year, the different types of insurance company stocks available and how to get started!
Table of Contents
What are Insurance Stocks?
What are insurance stocks? Insurance stocks are companies whose job is to provide insurance for individuals and businesses. One of the most obvious revenue streams for insurance companies is through the selling of insurance policies to collect regular premiums from the customer. Many insurance companies would make more in premiums than they would payout as a claim, a concept called ‘underwriting profit.’
Another big revenue stream for most insurance companies is the profits they receive from investing the premium collected from the customer. Most insurance companies would keep their customers’ premiums invested in safe products such as bonds, in case a claim ever needs to be paid out.
The money insurance companies invest in the market is known as the ‘float.’ As insurance companies grow they have a bigger float - free money to invest in the market. There’s a reason why billionaire investor Warren Buffett has made insurance the cornerstone of his empire at Berkshire Hathaway, as we discuss in a bit more detail next!
Insurance Stocks and Warren Buffett
Warren Buffett’s Berkshire Hathaway company holds stakes in more than 60 different businesses including Apple, Amazon, Bank of America, Procter & Gamble, Visa and many others. His portfolio of companies is worth nearly $300 billion. However, in 2018 the company appointed two CEOs for the two parts of the company it was divided into - insurance and everything else.
Because of Berkshire Hathaway’s insurance operations, they have more than $110 billion of float available to invest. While most insurance companies would invest it in high-quality government bonds, Berkshire uses this to buy more shares of companies it owns or fund new acquisitions.
It’s just one reason why Berkshire Hathaway is the largest insurance company in the world!
While there are other revenue streams insurance companies have, one reason Warren Buffett has made the insurance industry the hallmark of his more than $200 billion portfolio, is that most insurance companies earn on what they invest in.
Of course, the way Berkshire Hathaway run the business is pretty unique. Most people would not even think of the company being involved in insurance. Let’s have a look at some of the different types of insurance companies there are before we look at the best insurance stocks for this year.
The Different Types of Insurance Stocks
The insurance industry can be divided into several different categories. You will find a few more familiar names within these categories as most individuals tend to focus on specific types of insurance when buying a policy.
Below is a list of the different types of insurance there are.
▶️ Life Insurance
This type of insurance is designed to pay a sum of money to a designated beneficiary when the insured person dies. It’s a policy designed to protect loved ones with financial support in the case of death. The insurance company will collect premiums over the insured person’s lifetime to pay out a certain sum in the event of death.
The top three biggest life insurance companies in the world from direct premiums are MetLife Inc, Prudential Financial Inc, Equitable Holdings.
▶️ Property and Casualty Insurance
These insurers write policies that aim to provide liability protection and cover property damage. Examples of these would be car insurance and home insurance. This is one of the most common types of insurance policies available.
Some of the top property and casualty insurance companies by net premiums written include Berkshire Hathaway, Liberty Mutual and Travelers Group.
▶️ Health Insurance
This type of insurance is designed to help cover any healthcare costs for the insured person.
These types of policies can be purchased individually or through an employer. Many governments act as health insurance providers, such as the United States with its Medicare program.
Some of the biggest health insurance stocks in the world include United Healthcare, Aetna, CIGNA Corp and others.
There are also other types of insurance companies that are involved in speciality insurance, travel and business insurance, as well as reinsurance.
How to Start Investing in Insurance Stocks
To start investing in insurance companies' stock, just follow the steps below. ▼▼▼
- Open your MetaTrader 5 trading platform provided by Admirals or start your free download here.
- From the options at the top of the platform, select View and Market Watch.
- In this window, right-click and select Symbols. Here you can search from the +3,000 instruments available to trade via Admirals.
- Once you’ve chosen your stock, press OK to add it to your Market Watch list.
- To view a live price chart of the stock, drag the name from the Market Watch window onto the chart.
- To open a trading ticket, right-click on the chart and select Trading and then New Order. A trading ticket will open up for you to input your own entry, stop loss and take profit levels as well as your position size.
Best Insurance Stocks for This Year!
Now you know a bit more about the different types of insurance stocks available and how they make their income, let’s have a look at some of the best insurance stocks for this year. Of course, we can never really know the best beforehand but we can put probabilities in our favour by thorough research and analysis and proper risk management.
There are many different ways to find the top insurance stocks to invest in. Some investors will use fundamental analysis and some will rely solely on technical analysis. Using a combination of both can be powerful.
Some investors may also choose to focus on high-momentum, growth-based insurance stocks for short-term trading. Some investors may choose to focus on value-based insurance stocks which exhibit longer-term investing characteristics.
The selection below will cover a wide range of ideas to get started with. Let’s begin! ▼▼▼
#1. Berkshire Hathaway (BRKB)
Berkshire Hathaway is considered the largest insurance company in the world. But the business also has a lot of other interests, as it is the investment vehicle of choice for legendary investor Warren Buffett. The company holds stakes in well-known companies such as Apple, Coca-Cola, Bank of America, American Express and many more.
Berkshire is also considered to be the largest financial services company in the world, as well as the eighth-largest public company in the world although this will change over time. While the company has interests in insurance and reinsurance businesses, they also operate in the utilities and energy sector, as well as manufacturing and retailing.
Before the coronavirus pandemic, the stock price was held in a range between ~$228.00 and ~$186.00. However, in early 2021, the price managed to break through the range and it has been in a strong uptrend ever since breaking to new record highs in early 2022.
Interestingly, research shows that there has been an unusual amount of buying in Berkshire Hathaway’s Class A shares - which are mainly used by institutional investors. With the net premiums for insurance companies forecasted to increase Berkshire Hathaway is in an interesting position to capitalise on this and on an economic recovery given its diverse portfolio of shares.
#2. UnitedHealth (UNH)
UnitedHealth was founded in 1977 and is now one of the largest health insurers in the United States. In 2020, revenue was more than $257 billion with the company serving more than 75 million people from its 350,000 employees. The company has been an industry leader for decades and is part of the Dow Jones 30 index.
Perhaps more interestingly, UnitedHealth could be considered one of the best insurance dividend stocks as it has increased its dividend every year since 2010. While the company gave conservative guidance in early 2021, the company is still forecasting earnings per share (EPS) growth of 13% to 16%.
The stock is a favourite among fund managers who believe the company could outperform the market as we move into a strong secular growth period for the healthcare industry in 2022.
#3. Allianz (ALV)
Allianz is a European financial services company headquartered in Munich, Germany. The company’s core business is insurance and asset management, making it the fourth-largest insurer in the world. In 2020, total revenue exceed €140 billion.
The company serves more than 100 million customers in more than 70 countries, providing property and casualty insurance, health and life insurance and business insurance. They also have an asset management division.
In early 2021, the German insurance company announced that it expected higher operating profit for the year, even though it reported a weak earnings report for 2020. The company is also a contender for one of the best insurance dividend stocks as it currently pays €9.60 per share.
The stock price made a new record high at the beginning of 2022 but ended the year lower in line with the broader stock market sell-off during 2022.
#4. Prudential PLC (PRU)
Prudential is a British-based multinational insurance company that is headquartered in London, England. The company was founded in 1848 and recorded total revenue of more than $55 billion in 2020. Prudential has multiple listings of its shares which trade on the London Stock Exchange, Hong Kong Stock Exchange and New York Stock Exchange.
Many European insurers are currently going through a re-rating as dividend payments normalise after the coronavirus pandemic. Many investment banks such as Deutsche Bank believe there is much further to go in the recovery of the sector.
Prudential provides an interesting focus for investors as the company’s primary market is now in Asia but also serves UK customers and retirees in the United States. Bullish forecasts for the Asia economy could attract more investors to Prudential.
The stock price has been falling since 2018 and recorded multi-year lows in 2020. While the stock price is up from these lows it ended 2022 lower.
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FAQs on Insurance Stocks
What is an insurance stock?
Insurance stocks are companies that provide insurance for businesses and individuals. This could be home insurance, car insurance, etc. Insurance companies make revenues from the premium they charge for their insurance products.
What insurance share is best?
As stock prices rise and fall there is no best insurance stock. However, the largest insurance companies are a good place to start. This includes Berkshire Hathaway, Prudential, UnitedHealth, Allianz and others.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or recommendation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.