What are the best insurance stocks to watch?
Exploring insurance stocks can bring significant opportunity to traders. Known to be quite stable, and famous thanks to Warren Buffett, here, our top picks for the best insurance stocks to watch.
What's on this page?
Investing in insurance companies: what you need to know
Insurers are businesses first, meaning the same indicators that would apply to any company, apply here – like margins and revenues. Successful traders often follow an insurer’s results and news releases closely, and tread carefully if concerns arise around regulatory breaches or negative publicity.
Some other factors to note:
- Assets under management (AUM): more AUM means a larger client base and an increased potential for good returns. In some cases, it also means less uncertainty for the trader, as insurers with higher AUM tend to be older, well established institutions. These are often preferable for beginner traders as they are likely very stable
- Earnings per share (EPS): increasing EPS means that the insurer’s profits are higher relative to the price of its shares. The higher the EPS, the more the insurer tends to return to shareholders or use for projects – such as growing their global footprint, which creates a positive cycle for EPS
- Percentage of valid claims paid: choosing to trade the stocks of an insurer with most if not all of its valid claims paid out can be a prudent move , as these insurers are stable and far less susceptible to stock price-tumbling bad publicity
- Combined ratio: two ratios are important to understanding insurers’ operations – loss ratio and expense ratio. Despite its name, the loss ratio isn’t bad – it’s just the number of payouts (valid claims paid out) each year. The expense ratio is how much it takes to run the company, collected from premiums charged. Put together, this gives the ‘combined ratio’, which shows an insurance company’s income versus expenditure
How to buy or invest in insurance companies
With us, you can trade on insurance stocks that are rising or falling in value. You’d go long (‘buy’) if you think the shares will increase in value, or you’d go short (‘sell’) if you think they will decrease.
To take a position, follow these simple steps:
- Create a trading account or log in to your existing account and go to our platform
- Type the name of a stock in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm and monitor your trade
You can also buy and hold shares with share dealing. This means you own the shares outright in the hope of benefiting from long-term share price appreciation. You’ll be entitled to any dividends paid (if the company offers them) and you could get voting rights.
You can benefit from our best share dealing commission rates – starting at zero commission when you buy US stocks, or at £3 commission when you buy UK stocks. Our best commission rates apply to clients who opened three or more positions on their share dealing account in the previous month.
Top life insurance stocks
With an interesting year ahead for insurance stocks and plenty of potential opportunity, here are our picks for what could be good insurance stocks to trade, in no particular order:
*Please note: these stocks are ranked in no particular order and the above list represents no numeric ranking value.
With more than £90 billion AUM in its UK book alone, Aviva is by far the largest insurers in the United Kingdom and deals in life insurance, pensions and short-term insurance. Aviva also has a solid reputation for paying out valid claims, with more than £30.6 billion going back to policyholders during the claim-addled year that was 2020.
Although it’s operating profits dipped slightly by approximately £20 million as compared to 2019, Aviva’s profits were up significantly according to International Financial Reporting Standards (IFRS profits), from £2.6 billion in 2019 to £2.9 billion in 2020. Aviva also managed to reduce core debt and pay dividends of 14p per share, more than double the 6p paid in the third quarter (Q3) of 2020.
In February, Aviva launched its new cash savings platform business, Aviva Save, set to be a significant UK fintech. To increase liquidity, Aviva is also selling off non-core businesses in France and Italy. These will ’strengthen excess capital by £3 billion and centre cash by £3.9 billion’, according to Aviva’s 2020 results report.
Germany’s Allianz needs no introduction, as AM Best’s top insurer globally in 2020 in terms of non-banking assets.1
In 2020, total revenues dropped 1.3% to €140 billion in 2020, while operating profit was €10.8 billion, including a negative Covid-19 impact of €1.3 billion. The year’s net income attributable to shareholders decreased 14% to €6.8 billion. Dividends for shareholders also didn’t increase, remaining at €9.60 a share.
However, the insurer’s holding company announced that a rise in gross written premiums has caused it to almost double its book to £3.92 billion in 2020 - meaning that, even in the midst of a pandemic, the insurer is seeing a significant increase in new business. Allianz also paid out 75% of all business interruption and 78% of SME claims, highly contentious thanks to Covid-19 and not paid out by many insurers.
For 2021, Allianz is targeting an operating profit of €12 billion. This is partly due to the company receiving permission to establish Allianz Insurance Asset Management in China, the first foreign-owned insurance asset management company ever to operate there.
The Ping An group is one of the world’s biggest insurers and China’s largest in terms of market capitalisation. Its Ping An Asset Management arm alone has predicted it will reach $100 billion AUM within the next two to four years.
Ping An’s 2020 results showed its first annual fall in profit since 2008’s financial crisis.2 However, the company’s total investment income from its core businesses (life and health insurance) climbed 4.5% to ¥182.5 billion. Shareholders were also given an annual cash dividend of ¥2.20 per share for 2020, a 7.3% increase from ¥2.05 per share in 2019.
It also delivered a year of innovations, developing all-new China ESG benchmarks and increasing its revenues through new offerings, with its Good Doctor online medical services, OneConnect banking platform and InsurTech Autohome generating revenue increases of 82.4%, 42.3% and 34.4% respectively.
MetLife is one of the world’s biggest insurers in terms of active policyholders, with an estimated 90 million policyholders on its books.
MetLife’s 2020 results were affected by Covid-19 volatility, reporting a net income of $5.2 billion for 2020 and $5.68 per share, down significantly from $5.7 billion and $6.06 per share in 2019.
However, the insurer’s overall book value rose 15% from $68.62 per share in 2019 to $78.67 per share in 2020. Adjusted earnings were up marginally, from $6.11 to $6.16 per share. On a per share basis, adjusted earnings, excluding total notable items, grew 5% from $6.06 in 2019 to $6.38 in 2020.
Towards the beginning of 2021, MetLife’s shares have risen 13% in little over a month.3 The company also continues with its ‘New Horizon strategy’, including increasing liquidity by selling its Metropolitan Property and Casualty Insurance unit for $3.94 billion.
Top health insurance stocks
Health insurance stocks have seen a lot of sympathy trade market movement, with the spotlight firmly of Covid-19 vaccines. This could pose real opportunity for savvy traders. Here are our picks for what we think may be good insurance stocks to trade, in no particular order:
AXA Global Healthcare
Although AXA was negatively affected by the Covid-19 pandemic, with its net income dropping 18% to €3.164 billion, overall revenues decreased by only 1%, to just over €96.7 billion in 2020. Its overall underlying earnings dropped 34% to €4.2 billion as compared with 2019’s €6.45 billion. However, this was largely due to the high volumes the insurer paid out to Covid-19 related claims.
AXA’s core businesses grew 3% in 2020. Still, the insurer has represented great value for shareholders, with their equity increasing by €1.7 billion to a total of €71.6 billion.
In a year of near universal mental health issues, AXA Global Healthcare received positive press for its pilot launch of the insurer’s new Mind Health service, which gives policyholders access to psychologists. But it’s AXA’s core health business that stole the spotlight and grew its revenues by 6% in 2020 globally and has been estimated to increase by at least 5% year on year between this year and 2023.
UnitedHealthcare represents approximately 80% of the UnitedHealth Group’s business, making it one of America’s biggest health insurers.
UnitedHealth increased overall revenue from $242.2 billion in 2019 to $257.1 billion in 2020 – a jump of $15 billion. Earnings from operations increased by $2.7 billion (13.8%) in 2020 to $22.4 billion, compared to 2019’s $19.7 billion. The company’s net margin also grew to 6%, up from 5.7% in 2019.
Most importantly for traders and investors, UnitedHealth has a reputation of treating shareholders well. With the announcement ofits 2020 results, UnitedHealthcare stated that it will continue to repurchase shares of its common stock,seeing net earnings attributable to common shareholders increase from $13,839 in 2019 to $15,403 in 2020.
South African healthcare insurance giant Discovery Ltd is in partnership with Asia’s Ping An insurance, Europe’s Generali and John Hancock in the USA. As the company’s share prices are in South African rand, it can represent good value for those looking for the best value insurance stocks to trade in 2021. However, this also means Discovery’s share price is effected by any volatility the rand may experience as an emerging market currency.
Discovery reports its annual results from June to June each year. According to its 2020 results, Discovery’s reported core new business increased 5% to R19.17 billion. However, normalised headline earnings per share plummeted by 27% to R56.67 cents and headline earnings per share dropped by 94% to just 44.7 cents.
Discovery’s half year results, ended December 2020, are more optimistic. Although profits decreased 10% to R1.8 billion, normalised profit from operations increased 19% to R4.5 billion. Net asset value increased by R582 million, gross income of the Group rose 9% to R34.9 billion and the company’s total new business API increased 8% to R10.92 billion. However, during the six months ended December 2020, earnings per share decreased 10% to R28.02.
Of the US insurers, Humana is often overlooked compared with the slightly more well-known Anthem. Yet Humana had one of the least brutal 2020 years of all US healthcare insurers, announcing a Q4 revenue $200 million dollars higher than consensus estimates had anticipated, rising 16% to $18.96 billion in revenues for Q4 alone. They also announced a comfortable dividend increase of 12% to 70c per share, payable at the end of April 2021, and an FY 2021 EPS guidance in a range of $20.82 to $21.32.
With its new senior citizens healthcare offering CenterWell (potentially very poised to profit from the ageing US population trend) receiving a favourable initial reception too, the rest of 2021 may well be rosy for Humana.
Where next for insurance stocks?
Hit by near historic levels of claims due to Covid-19, 2020 and the first months of 2021 have been difficult for insurance stocks. However, as of 2021, many larger insurers have already rallied to their pre-Covid-19 share prices and are projecting substantial growth for the year.
Also, when news of successful vaccine development emerged toward the end of 2020, many insurance stocks – in particular that of healthcare and life insurance companies – saw rapid rises. Now, as vaccine rollout picks up pace across the globe, insurance stocks may well be poised for further gains in 2021.
Best insurance stocks summed up
- The year 2021, with its significant market movements caused by both Covid-19 and vaccination proceedings, led to significant potential opportunities for traders, including in the insurance sector. Some stocks traders may wish to explore include life insurance and health insurance
- Despite Covid-19 causing a difficult year thus far for insurance, several insurance companies present potential opportunities to traders
- When trading insurance stocks, factors to consider include earnings per share, profits, size of the insurer’s book and dividends paid to shareholders. Other factors, such as a high percentage of valid claims paid out and a good combined ratio can be indications of a sustainable (and therefore reliable) insurance stock to trade
1 According to AM Best
2 According to https://www.reuters.com/article/ping-an-ins-results-idUSL1N2K90LW
3 According to https://www.nasdaq.com/articles/why-is-metlife-met-up-13-since-last-earnings-report-2021-03-05
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Explore the markets with our free course
Learn how shares work – and discover the wide range of markets you can spread bet on – with IG Academy's free ’introducing the financial markets’ course.
Put learning into action
Try out what you’ve learned in this shares strategy article risk-free in your demo account.
Ready to trade shares?
Put the lessons in this article to use in a live account – upgrading is quick and easy.
- Trade on over 13,000+ popular global stocks
- Protect your capital with risk management tools
- React to breaking news with out-of-hours trading on 70 key US stocks
Inspired to trade?
Put your new knowledge into practice. Log in to your account now.