3 Value Picks From the Undervalued P&C Insurance Industry

Core Insights - The property and casualty insurance industry is expected to perform well in 2024 due to profitable commercial lines, improving personal lines, and higher investment returns [3][8] - Companies like NMI Holdings, HCI Group, and Skyward Specialty Insurance Group are highlighted for their solid growth potential and operational efficiency [5][11][12] Industry Overview - The Zacks Property and Casualty Insurance industry ranks in the top 14% of 248 Zacks industries, currently holding a Zacks Industry Rank of 35 [8] - The industry has outperformed the Zacks S&P 500 composite and the Finance sector year to date, with a gain of 15.1% compared to 12.6% and 4.4% respectively [9] Pricing and Premiums - The industry is witnessing improving pricing, with Swiss Re estimating a 7% growth in premiums for 2024 and 4.5% for 2025 [6] - Personal auto insurance is expected to perform better than other lines, contributing to improved premiums [6] Company Highlights - NMI Holdings is positioned for growth with an expected long-term earnings growth rate of 6.9%, driven by a strong mortgage insurance portfolio and effective capital deployment [11] - HCI Group is experiencing growth through its homeowners business and proactive risk management strategies [12] - Skyward Specialty Insurance Group benefits from strong new business pricing and higher retention rates [2] Valuation Metrics - The Zacks Property and Casualty Insurance industry is currently undervalued, with a price-to-book (P/B) ratio of 1.52, compared to the Zacks S&P 500 composite's P/B of 6.46 [14] - Specific companies within the industry have shown positive earnings revisions, indicating analysts' confidence in their operational efficiency [4] Growth Drivers - The industry is expected to benefit from an active hurricane season, with Colorado State University estimating it to be about 170% of the average season [16] - Accelerated digitalization and heavy investment in technology, particularly generative AI, are anticipated to improve operational efficiencies [16]