1 Insurance Stock to Keep an Eye On and 2 We Ignore

Insurance providers use their expertise in risk assessment to help protect assets while offering consumers peace of mind through comprehensive coverage options. But concerns about claims severity and tightening regulations have tempered enthusiasm, limiting the industry’s gains to 5.6% over the past six months. This return lagged the S&P 500’s 15.6% climb.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Keeping that in mind, here is one insurance stock boasting a durable advantage and two best left ignored.

Two Insurance Stocks to Sell:

MGIC Investment (MTG)

Market Cap: $6.55 billion

Founded in 1957 when the modern mortgage insurance industry was in its infancy, MGIC Investment (NYSE:MTG) provides private mortgage insurance that protects lenders when homebuyers default on their loans, enabling borrowers to purchase homes with smaller down payments.

Why Does MTG Give Us Pause?

1. Net premiums earned contracted by 1.3% annually over the last five years, showing unfavorable market dynamics this cycle
2. Day-to-day expenses have swelled relative to revenue over the last two years as its combined ratio increased by 10.7 percentage points
3. Earnings per share lagged its peers over the last two years as they only grew by 6.1% annually

At $28.30 per share, MGIC Investment trades at 1.2x forward P/B. Check out our free in-depth research report to learn more about why MTG doesn’t pass our bar.

Reinsurance Group of America (RGA)

Market Cap: $12.77 billion

Operating behind the scenes of the insurance industry since 1973, Reinsurance Group of America (NYSE:RGA) provides life and health reinsurance services to insurance companies, helping them manage risk and meet regulatory requirements.

Why Are We Wary of RGA?

1. Flat book value per share over the last five years suggest it must find different ways to enhance shareholder value during this cycle
2. Estimated book value per share growth of 1.4% for the next 12 months implies profitability will slow from its two-year trend
3. Low return on equity reflects management’s struggle to allocate funds effectively

Reinsurance Group of America’s stock price of $193.76 implies a valuation ratio of 1x forward P/B. Read our free research report to see why you should think twice about including RGA in your portfolio.

One Insurance Stock to Watch:

Trupanion (TRUP)

Market Cap: $1.90 billion

Born from a vision to help pet owners avoid economic euthanasia when faced with expensive veterinary bills, Trupanion (NASDAQ:TRUP) provides medical insurance for cats and dogs through data-driven, vertically-integrated products priced specifically for each pet's unique characteristics.

Why Does TRUP Catch Our Eye?

1. Annual revenue growth of 16.2% over the past two years was outstanding, reflecting market share gains this cycle
2. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 143% outpaced its revenue gains
3. Impressive 15.5% annual book value per share growth over the last five years indicates it’s building equity value this cycle

Trupanion is trading at $43.33 per share, or 5.5x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.

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