When it comes to financial stocks to invest in, you can get as specific as you want. On the one hand you could just invest generally in the sector. Or you could narrow down and invest in the best bank stocks. Or in the case of this post, the hottest insurance stocks.
While insurance isn’t the sexiest industry, it does provide investors a solid place to invest their money. You have fairly predictable income streams and in most cases a healthy dividend. The only question is what are the best insurance stocks to invest in.
This post it going to show you the 3 hottest insurance companies to invest your money in right now.
3 Hot Insurance Stocks
#1. MetLife (NYSE: MET)
MetLife is an insurance company that covers a broad spectrum of policies. From homeowners to automobile policies and even group health and life insurance, MetLife is there. When it comes to insurance, MetLife is well diversified.
In their latest earnings release, they had earnings per share come in at $1.41 which beat estimates by $0.14 however they missed their target on revenue. It came in at $16.88 billion. Still, it was a 1.6% increase over the prior year.
The main issue for MetLife is the same one you will see for many other insurers, which is low interest rates. By not making much money on their investments, it drags down overall growth.
But with the Federal Reserve increasing rates, the pressure to earn more investment income should subside.
Plus there is the potential growth from new jobs under President Trump. Since MetLife offers group policies through employers, more jobs means more premiums.
Finally, when looking at the financials of MetLife, you will see that 1/3 of their earnings comes from overseas, specifically Central America and Asia. As these countries continue to develop, it is a fertile ground for growth. Having a strong foot hold there now will bode well for the company in the coming years.
#2. Unum (NYSE: UNM)
Unum is an insurance company that most people never heard of. But sometimes, never hearing of a stock is a great opportunity to get in at a reasonable price. This explains Unum.
They are a group and individual disability insurer and have been delivering solid results for years. But the stock hasn’t been showing how great of a company this is.
The reason is low interest rates. Because of record low interest rates, the company hasn’t been earning a good deal of investment income. But premium income has not only been steady, it has been rising each year.
For 2017, the company is forecasting strong results with mid-single digit growth. In the most recent quarter, Unum reported earnings per share of $1.02, which beat estimates by $0.04. They also reported revenue of $2.1 billion, which is up 2% compared to last year.
As the company continues to bring in more revenue through premiums, and interest rates continue to slowly rise, this stock is poised to take off.
#3. Berkshire Hathaway (NYSE: BRK_B)
When you think of Berkshire Hathaway, you think of Warren Buffett. But you may not know what this company is all about. Their basic business portfolio includes various insurance companies. These companies include:
- General Re
- Berkshire Hathaway Reinsurance
- Berkshire Hathaway Primary Group
But what makes this company interesting is what it does with the income it earns from insurance premiums. Whereas other insurance companies reinvest earnings back into the insurance business, Berkshire Hathaway invest this money into other, non-insurance brands it owns.
These include businesses like Fruit of the Loom, Duracell, and Dairy Queen to name a few.
As an investor, this is a dream come true. You invest in an insurance company but are also diversified from the start in other businesses across multiple industries.
If you are looking solely for an insurance company, the other two stocks mentioned above might be a better choice. But if you are OK with owning other companies, investing in Berkshire Hathaway is a no-brainer.
Overall, insurance stocks are a great place to invest your money. This is especially true as the Fed continues to raise interest rates. All 3 of these insurance stocks will benefit from the increase in investment income.
This area has been what was holding some of these stocks back. They have been doing a great job at growing their business and increasing premiums, but the interest they earn on this money has been virtually non-existent.
This should change going forward and as a result, they will start to show on the radar of many investors. By investing in these stocks now, you can enjoy the run up and the dividends.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.