The Accident and Health Insurance industry is poised for growth as underwriting exposure increases. Aflac Incorporated AFL, Unum Group UNM, Employers Holdings EIG, and AMERISAFE AMSF are expected to benefit from prudent underwriting standards, despite facing pricing pressure. However, a rise in claims frequency could pose challenges. Let’s explore the industry trends and the top stocks to watch.
Trends Shaping the Future of the Accident & Health Insurance Industry
Pricing Pressure to Continue
The Accident and Health Insurance industry has been facing pricing pressure, which is expected to continue. Efforts to retain market share may increase pricing pressure, potentially affecting top-line growth. However, with business activities returning to normal levels, the demand for insurance coverage is expected to rise, leading to increased pricing for the industry.
Claims Frequency to Rise
The accident and health insurance space has witnessed consistent growth due to an increase in benefits offered by employers. Adequate workers’ compensation policies translate into better care for injured workers, increased productivity, and higher employee morale. However, the aging workforce and potential severity of claims could lead to a rise in claims frequency rates.
Increasing Adoption of Technology
The adoption of technology in operations has gained momentum in the accident and health insurance industry. Insurers are offering online policies and streamlining processes through cloud computing and advanced software applications. While this improves sales and customer experience, increased investments in technology may impact expense ratios.
Accident & Health Insurance Industry Outlook
The Accident and Health Insurance industry is currently ranked #4 out of 250+ industries tracked by Zacks. The industry’s positive earnings outlook and favorable prospects have contributed to its strong position. Analysts have revised the industry’s earnings estimate for the current year, showing increased confidence in its growth potential.
Despite facing pricing pressure, the industry has outperformed the Finance sector but underperformed the overall market. The stocks in this industry have collectively gained 13.1% in the past year, outperforming the sector’s increase of 4.8% but falling short of the S&P 500’s increase of 15.3% over the same period.
In terms of valuation, the industry is currently trading at a price-to-book ratio of 1.9X compared to the S&P 500’s ratio of 5.69X and the sector’s ratio of 3.03X.
4 Accident & Health Insurance Stocks for Better Returns
Employers Holdings (EIG)
Employers Holdings is a Reno, NV-based provider of workers’ compensation insurance to small businesses in hazardous industries. With a strong presence in attractive markets and prudent underwriting, EIG is well-positioned for growth. The company has delivered positive earnings surprises and has seen upward revisions in its earnings estimates for 2023 and 2024.
Amerisafe (AMSF)
Amerisafe, based in DeRidder, LA, specializes in workers’ compensation insurance. The company’s focus on high-hazard niches and intensive claims management has contributed to its success. AMSF is expected to benefit from the growing demand for insurance coverage in its target market.
Aflac Incorporated (AFL)
Aflac Incorporated, headquartered in Columbus, GA, offers voluntary supplemental health and life insurance products. The company’s recent acquisition provides a platform to expand its network of dental and vision products. With positive earnings surprises and upward revisions in earnings estimates, AFL is well-positioned for future growth.
Unum Group (UNM)
Unum Group, based in Chattanooga, TN, provides various insurance products, including long-term care insurance and life insurance. The company’s continued expansion and geographic growth have been paying off. With a promising earnings outlook and positive earnings surprises, UNM is poised for future success.
As the Accident and Health Insurance industry continues to evolve, these stocks offer promising investment opportunities. Investors should closely monitor industry trends and stay informed to make educated investment decisions.
(Note: This article has been revised to correct a mistake. The original version, issued on November 6, 2023, should no longer be relied upon.)
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