3 High-PE Insurance Stocks Worth the Premium Rising healthcare costs, cutting-edge technology, and escalating geopolitical tensions are supercharging growth in the insurance industry. This landscape presents prime opportunities for The Progressive Corporation (PGR), Primerica (PRI), and The...
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Rising healthcare costs, cutting-edge technology, and escalating geopolitical tensions are supercharging growth in the insurance industry. This landscape presents prime opportunities for The Progressive Corporation (PGR), Primerica (PRI), and The Hanover Insurance Group (THG) to thrive and deliver substantial value for investors, even with their premium valuations. Read on….
Rising healthcare expenses, technological advancements, and increasing geopolitical threats are driving significant growth in the insurance industry. As these dynamics evolve, the sector presents promising opportunities for expansion.
With that in mind, investors could consider investing in shares of fundamentally sound insurance stocks, The Progressive Corporation (PGR), Primerica, Inc. (PRI), and The Hanover Insurance Group, Inc. (THG), that stand out as potentially rewarding investments despite their premium valuations.
The rise in healthcare expenses is fueling demand in the health insurance sector. In fact, a report by Mordor Intelligence projects that the U.S. health and medical insurance market could reach $2.01 trillion by 2029, growing at a CAGR exceeding 6%. This indicates a steady, expanding market.
Moreover, advancements in artificial intelligence (AI) continue to transform risk assessment and claims management for insurers. By enabling enhanced data analysis and faster decision-making, AI can improve both customer service and operational efficiency, making it a critical tool for the industry's growth and adaptation to challenges.
Global geopolitical tensions are another factor boosting the insurance industry. As risks rise, insurers are capitalizing on this environment, seeing substantial opportunities for expansion. Polaris Market Research forecasts the property and casualty insurance market to reach $3.79 trillion by 2032, with a projected CAGR of 8.3%.
Furthermore, Deloitte's 2025 global insurance outlook estimates that insurance premiums will grow by 3.3% in 2024, with advanced markets expected to account for 75% of this increase. This growth reflects strong demand and underscores the value of the insurance sector as an attractive option for investors.
Against this backdrop, investors could consider buying insurance stocks with high P/E ratios. Even though they come at a premium cost, these stocks offer excellent growth opportunities. Now, let us discuss the fundamentals of three high P/E insurance stocks, starting with #3.
Stock #3: The Progressive Corporation (PGR)
PGR works as an insurance holding company, providing personal and commercial auto, business related general liability, personal residential and commercial property, and other insurance products and services. Its three operational segments are: Personal Lines; Commercial Lines; and Property.
PGR's forward non-GAAP P/E of 18.61x is 53.6% higher than the industry average of 12.12x. Its forward EV/EBIT multiple of 14.21 is 16.3% higher than the sector average of 12.22x. Likewise, the stock's forward Price/Book of 5.11x is 324.2% higher than the industry average of 1.20x.
Despite its premium valuation, PGR demonstrates strong profitability, backed by impressive financial metrics. PGR's trailing-12-month levered FCF margin of 19.09% is 4.7% higher than the industry average of 18.24%. Its trailing-12-month asset turnover ratio of 0.75x is 247.6% higher than the sector average of 0.22x.
Likewise, the stock's ROTC of 22.56% is 230.3% higher than the industry average of 6.83%.
For the fiscal 2024 second quarter that ended on June 30, PGR's total revenues increased 18.1% year-over-year to $18.13 billion. Its net income and EPS grew 322.3% and 335.1% from the prior year's quarter, respectively, to $1.46 billion and $2.48. As of June 30, 2024, PGR's total assets amounted to $97.89 billion, compared to $88.69 billion on December 31, 2023.
Analysts expect PGR's revenue for the fiscal fourth quarter (ending December 2024) to increase 22.8% year-over-year to $18.57 billion. Its EPS is expected to grow 2.6% from the prior year's period to $3.05. Moreover, the company surpassed the consensus revenue and EPS estimates in three of the four trailing quarters.
Shares of PGR have surged 35.8% over the past nine months and 52.1% over the past year to close the last trading session at $242.72.
PGR's POWR Ratings reflect its positive fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PGR has an A grade for Momentum. It is ranked #25 out of 55 stocks in the A-rated Insurance - Property & Casualty industry.
To check the stock's ratings for Growth, Value, Sentiment, Quality, and Stability click here.
Stock #2: Primerica, Inc. (PRI)
PRI engages in providing financial products and services to middle-income households in the United States and Canada. The company's operational segments include Term Life Insurance; Investment and Savings Products; Senior Health; and Corporate and Other Distributed Products.
PRI's forward non-GAAP P/E of 15.09x is 24.5% higher than the industry average of 12.12x. The stock's forward EV/Sales of 3.60x is 11.2% higher than the sector average of 3.24x. Additionally, its forward Price/Book multiple of 4.17 is 246.3% higher than the 1.20x industry average.
Even with a higher valuation, PGR stands out for its profitability, boasting solid performance across core financial metrics. PRI's trailing-12-month gross profit margin of 66.52% is 9.8% higher than the industry average of 60.60%. The stock's trailing-12-month levered FCF margin of 32.83% is 80% higher than the sector average of 18.24%.
Furthermore, its trailing-12-month EBITDA margin of 31.35% is 44.7% higher than the 21.66% industry average.
For the fiscal 2024 second quarter that ended June 30, PRI's total revenues increased 16.7% year-over-year to $803.38 million. Its adjusted net operating income and adjusted operating EPS grew 11.9% and 18% from the prior year's quarter to $162.75 million and $4.71, respectively.
As of June 30, 2024, PRI's cash and cash equivalents amounted to $627.29 million, compared to $613.15 million on December 31, 2023.
Street expects PRI's revenue and EPS for the fiscal third quarter (ended September 2024) to grow 4.9% and 12.3% year-over-year to $745.70 million and $4.81, respectively. Moreover, the company topped the consensus revenue estimates in all four trailing quarters, which is impressive.
PRI's shares have surged 27.3% over the past six months and 41.2% over the past year to close the last trading session at $274.44.
PRI's solid prospects are projected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
PRI has an A grade for Momentum and a B for Stability and Sentiment. It is ranked #8 out of 26 stocks in the B-rated Insurance – Life industry.
Click here to see PRI's ratings for Quality, Value, and Growth.
Stock #1: The Hanover Insurance Group, Inc. (THG)
THG provides property and casualty insurance solutions. It operates through four segments: Core Commercial; Specialty; Personal Lines; and Other. The company markets its products and services through independent agents and brokers, offering customized coverage options to meet diverse client needs.
THG's forward non-GAAP P/E of 13.15x is 8.5% higher than the industry average of 12.12x. Its forward Price/Book of 1.79x is 48.8% higher than the sector average of 1.20x. Furthermore, the stock's Price/Cash flow of 10.34x is 8.9% higher than the 9.49x industry average.
THG's elevated valuation doesn't diminish its profitability, as it continues to excel in essential financial indicators. THG's trailing-12-month asset turnover ratio of 0.42x is 92% higher than the industry average of 0.22x. Its trailing-12-month ROTC of 9.73% is 42.5% higher than the sector average of 6.83%.
Furthermore, the stock's trailing-12-month ROCE of 14.63% is 42.5% higher than the 10.34% industry average.
For the fiscal 2024 third quarter that ended September 30, THG's total revenues increased 3.2% year-over-year to $1.57 billion. Its net income grew significantly from the prior year's quarter to $102.10 million, while its EPS rose significantly from its year-ago value to $2.80.
As of September 30, 2024, THG's cash and cash equivalents amounted to $427.10 million, compared to $316.10 on December 31, 2023.
The consensus revenue estimate of $1.40 billion for the fiscal fourth quarter (ending December 2024) reflects a year-over-year rise of 4.2%. Its EPS for the same period is expected to increase 3.3% from the prior year's period to $3.23. The company also surpassed the consensus EPS estimates in all four trailing quarters.
THG's stock has surged 12.8% over the past six months and 23.7% over the past year to close the last trading session at $147.90.
THG's POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
THG has an A grade for Momentum and a B for Growth, Sentiment, and Stability. It is ranked #6 out of 55 stocks in the Insurance – Property & Casualty industry.
Click here to check out additional THG ratings for Value and Quality.
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PGR shares were unchanged in premarket trading Monday. Year-to-date, PGR has gained 53.36%, versus a 21.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program.She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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