1 Insurance Stock with Impressive Fundamentals and 2 We Turn Down

Insurance firms play a critical role in the financial system, offering everything from property coverage to life insurance and specialized risk solutions. Still, investors are uneasy as insurers face challenges from catastrophic events and potential regulatory changes. These doubts have certainly contributed to insurance stocks’ recent underperformance - over the past six months, the industry’s 3.7% gain has fallen behind the S&P 500’s 8.2% rise.

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. On that note, here is one resilient insurance stock at the top of our wish list and two we’re swiping left on.

Two Insurance Stocks to Sell:

Globe Life (GL)

Market Cap: $10.99 billion

With roots dating back to 1900 and a rebranding from Torchmark Corporation in 2019, Globe Life (NYSE:GL) is an insurance holding company that offers life insurance, supplemental health insurance, and annuity products through various distribution channels.

Why Are We Cautious About GL?

1. 4.5% annual revenue growth over the last two years was slower than its insurance peers
2. Growth in insurance policies was lackluster over the last two years as its 4.6% annual growth underperformed the typical financial institution
3. Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 2% annually over the last five years

At $138.10 per share, Globe Life trades at 1.9x forward P/B. To fully understand why you should be careful with GL, check out our full research report (it’s free).

MGIC Investment (MTG)

Market Cap: $5.93 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 Worry Us?

1. Insurance offerings face significant market challenges this cycle as net premiums earned contracted by 1.1% annually over the last five years
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.2%
3. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 11.7% annually

MGIC Investment is trading at $26.48 per share, or 1.1x forward P/B. Check out our free in-depth research report to learn more about why MTG doesn’t pass our bar.

One Insurance Stock to Buy:

F&G Annuities & Life (FG)

Market Cap: $3.86 billion

Founded in 1959 and serving approximately 677,000 policyholders who rely on its financial protection products, F&G Annuities & Life (NYSE:FG) provides fixed annuities, life insurance, and pension risk transfer solutions to retail and institutional clients.

Why Is FG a Top Pick?

1. Net premiums earned expanded by 28.6% annually over the last two years, demonstrating exceptional market penetration this cycle
2. Balance sheet strength has increased this cycle as its 37.7% annual book value per share growth over the last two years was exceptional
3. Exciting book value per share outlook for the upcoming 12 months calls for 41% growth, an acceleration from its two-year trend

F&G Annuities & Life’s stock price of $28.67 implies a valuation ratio of 0.8x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

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