1 Insurance Stock on Our Watchlist and 2 Facing Challenges

Insurance companies serve as the backbone of risk management, providing essential protection and financial security for individuals and businesses. But concerns about claims severity and tightening regulations have tempered enthusiasm, and over the past six months, the industry has pulled back by 4.9%. This performance is a stark contrast from the S&P 500’s 11% gain.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one resilient insurance stock at the top of our wish list and two we’re passing on.

Two Insurance Stocks to Sell:

Trupanion (TRUP)

Market Cap: $971 million

Born from a vision to help pet owners avoid economic euthanasia when faced with expensive veterinary bills, Trupanion (NASDAQ:TRUP) provides medical insurance for cats and dogs through data-driven, vertically-integrated products priced specifically for each pet's unique characteristics.

Why Are We Cautious About TRUP?

1. Annual book value per share growth of 1.5% over the last five years was below our standards for the insurance sector
2. Estimated book value per share growth of 3.4% for the next 12 months implies profitability will slow from its two-year trend
3. Negative return on equity shows that some of its growth strategies have backfired

Trupanion’s stock price of $22.12 implies a valuation ratio of 2.3x forward P/B. Read our free research report to see why you should think twice about including TRUP in your portfolio.

RLI (RLI)

Market Cap: $4.65 billion

Founded in 1965 and named after its original focus on "replacement lens insurance" for contact lens wearers, RLI (NYSE:RLI) is a specialty insurance company that underwrites property, casualty, and surety products through wholesale brokers, independent agents, and carrier partnerships.

Why Do We Think Twice About RLI?

1. Costs have risen faster than its revenue over the last five years, causing its pre-tax profit margin to decline by 10.4 percentage points
2. Earnings per share lagged its peers over the last two years as they only grew by 15% annually
3. Muted 8.4% annual book value per share growth over the last two years shows its capital generation lagged behind its insurance peers

At $50.65 per share, RLI trades at 2.6x forward P/B. Dive into our free research report to see why there are better opportunities than RLI.

One Insurance Stock to Watch:

W. R. Berkley (WRB)

Market Cap: $25.07 billion

Founded in 1967 and operating through more than 50 specialized insurance units across the globe, W. R. Berkley (NYSE:WRB) underwrites commercial insurance and reinsurance through specialized subsidiaries serving industries from healthcare to construction to transportation.

Why Should WRB Be on Your Watchlist?

1. Strong 12.1% annualized net premiums earned expansion over the last five years shows it’s capturing market share this cycle
2. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 30.6% exceeded its revenue gains over the last five years
3. Capital generation for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust book value per share growth of 24.3%

W. R. Berkley is trading at $65.25 per share, or 2.3x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free.

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