Benchmark US Treasury yields have been rising since the start of the year. The yield on the benchmark 10-year Treasury note has been hovering around 1.8% lately. The rise in interest rates will allow financial institutions, including insurance companies, to generate better revenues.
At its December FOMC meeting, the Federal Reserve announced that it accelerate the reduction of its monthly bond purchases and signaled three interest rate hikes later this year. A reduction in bond purchases by the Fed should reduce bond prices, pushing up their interest rates. Since higher bond yields increase risk-free returns, high investment in bonds by financial institutions should benefit them. Insurance companies typically hold long-term, high-quality bonds to meet the returns promised to policyholders. Therefore, higher bond yields should benefit them.
In this context, we think it could be wise to add quality insurance companies Allianz SE (ALIZY), The Hartford Financial Services Group, Inc. (RAISED), Loews Corporation (L), and Alleghany Corporation (Yes) to your wallet.
Allianz SE (ALIZY)
Based in Munich, Germany, ALIZY provides property and casualty insurance, life/health insurance and asset management products and services worldwide. The company offers a range of reinsurance covers, primarily to Allianz insurance entities and third-party customers. It operates in Property, Life/Health, Asset Management, Corporate and Others segments.
On November 8, 2021, Allianz Global Investors and the European Investment Bank announced the creation of the Emerging Markets Climate Action Fund (EMCAF), which plans to raise €500 million ($577.55 million ). The fund of funds aims to strengthen climate change mitigation and adaptation in developing countries. The announcement was made during the COP26 climate summit. ALIZY’s revenue increased 9.5% year-on-year to €34.40 billion ($39 billion) for the third quarter ended September 30, 2021. The company’s net profit increased by 4 .6% year-on-year to 2.22 billion euros ($2.51 billion). . His EPS amounted to €5.01, an increase of 2.6% year-on-year.
Over the past month, the stock price has gained 11.3% to close the last trading session at $25.31.
ALIZY’s solid fundamentals are reflected in its POWR Rankings. It has an overall rating of B, which equates to a buy in our proprietary rating system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
It has an A rating for stability and a B rating for momentum and feeling. It is ranked #4 out of 55 stocks in the Insurance – P&C industry. Click here to see ALIZY’s additional ratings for growth, value and quality.
The Hartford Financial Services Group, Inc. (RAISED)
HIGH in Hartford, Connecticut, is a holding company and its segments include Commercial Lines; personal lines; damage to other operations; group benefits; and the Hartford Funds. The company is a leader in property and casualty insurance, group benefits and mutual funds.
On November 9, 2021, HIG announced its commitment to invest $2.5 billion over the next five years in technologies, companies and funds that address climate change concerns and drive the energy transition. HIG Chairman and CEO Christopher Swift said, “We demonstrate our environmental commitment through our actions across the business, from insurance solutions that encourage sustainable construction to corporate investments. in renewable energies.
For its third fiscal quarter, ended September 30, 2021, HIG’s total revenue increased 10% year-over-year to $5.68 billion. The company’s net income available to common shareholders rose 5% year-over-year to $476 million. Additionally, its Adjusted EPS was $1.36, representing an increase of 8%.
Analysts expect HIG’s EPS for the quarter ending March 31, 2022 to rise 187.5% year-over-year to $1.61. Its revenue for its fiscal year 2021 is expected to increase 6.4% year-over-year to $21.84 billion. It has exceeded Street’s EPS estimates in three of the past four quarters. The stock has gained 33.8% in price over the past year to close last trading session at $70.46.
HIG’s POWR ratings reflect this promising outlook. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. HIG has a B rating for Momentum, Stability and Sentiment. It is ranked #7 in the Insurance – P&C industry. To check HIG’s additional ratings for growth, value and quality, Click here.
Loews Company (L)
L, based in New York, offers commercial property and casualty insurance in the United States and internationally. The Company offers specialty insurance products that include executive and professional liability, other coverage products, bonds and fidelity bonds, property insurance and damage insurance.
L’s revenue increased 24% year-over-year to $10.99 billion for the nine months ended Sept. 30, 2021. The company’s net income for its fiscal third quarter, ended Sept. September 2021, increased 58.2% year-over-year to $220 million. Additionally, its EPS was up 70% year over year to $0.85.
Analysts expect L’s EPS to grow 14% over the next five years. Over the past year, the stock price has gained 25.2% to close the last trading session at $59.59.
L’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. L has a B rating for momentum and stability. It is ranked #6 in the Insurance – P&C industry. Click here to see other L ratings for Growth, Value, Sentiment and Quality.
Alleghany Society (Yes)
Y provides reinsurance and property and casualty insurance products internationally. The New York-based company operates in three segments: reinsurance; Assurance; and Alleghany Capital. In addition, it owns and manages commercial land and improved and unimproved residential lots.
On October 18, 2021, Alleghany Capital (a subsidiary of Y) announced that its subsidiary, Integrated Project Services, had acquired Anchorbuoy Limited. Alleghany Capital President and CEO David Van Geyzel said, “We look forward to supporting IPS and Linesight as they continue to grow their businesses globally and capitalize on the opportunities of this transaction.
Y’s total revenue for the quarter ended September 30, 2021 increased 13.6% year-over-year to $2.87 billion. The company’s net premiums written increased 21.1% year-over-year to $1.98 billion. And its net investment income was $133 million, up 2.9% year-over-year.
For its 2021 fiscal year, analysts expect Y’s EPS to rise 175.6% year-over-year to $43.80. It has exceeded street EPS estimates in each of the past four quarters. And the stock has gained 9.8% in price over the past year to close the last trading session at $660.50.
Y’s POWR ratings reflect this promising outlook. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. There is a B rating for Momentum, Stability and Sentiment. Again, it is ranked #9 in the Insurance – P&C industry. To see Y’s additional ratings for growth, value, and quality, Click here.
ALIZY shares were trading Thursday morning at $25.37 per share, up $0.06 (+0.24%). Year-to-date, ALIZY has gained 7.45%, versus a -3.44% rise in the benchmark S&P 500 over the same period.
About the Author: Dipanjan Banchur
Ever since he was in elementary school, Dipanjan had been interested in the stock market. This enabled him to obtain a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan is particularly interested in reading and analyzing emerging trends in financial markets. Following…