This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 A+ Rated Insurance Stocks

Stocks in this article: MET BRK.B RE RNR MRH AFSI PRA

NEW YORK ( TheStreet) -- Only five actively traded insurance stocks are currently assigned coveted A+ (Excellent) ratings by TheStreet Ratings, and all are property and casualty carriers.

TheStreet Ratings takes a very conservative approach to rating all stocks publicly traded on the New York Stock Exchange, AMEX and NASDAQ, that have at least five quarters of financial data available. The ratings emphasize long-term total returns, as well as revenue trends, capital strength and dividends, while also considering short-term performance, financial stability and volatility. A rating of B-minus (Good) or higher is considered a "Buy" recommendation.

It's been a difficult two years for many insurance companies in the prolonged low rate environment. Property and casualty carriers are "particularly sensitive to low interest rates," according to Gavin Magor, a senior analyst with Weiss Ratings, since the group "typically seeks to break even on underwriting premiums, while making profits on cash invested in securities." The P&C carriers are "still under significant pressure and are struggling to implement a normal pricing that you would see in a hard market, due to oversupply."

Magor does see opportunities among certain P&C carriers that may be undervalued, saying that "speculators may start to look at the surviving bond and mortgage guaranty insurers, but they are not for Granny's pension."

Life insurance companies are also under pressure, as "profitability for the largest ones dropped by 84% during 2011," according to Magor, because "the life insurers have had a lot of guarantees on their annuities that they have to live up to, while they haven't got the yields to back them up."

Insurers have underperformed banks so far this year. The KBW Bank Index (I:BKX) was up 10% year-to-date, through Wednesday's close at 43.42, while the KBW Insurance Index (I:KIX) was down 1% to 109.50.

A quick look at two of the largest U.S. insurance companies -- by market capitalization -- paints a stark contrast for share valuations, and a possible opportunity for investors.

The shares closed at $81.72 Thursday, returning 7% year-to-date, following a 5% return during 2011. The shares trade for 1.8 times tangible book value, according to Worldscope data provided by Thomson Reuters, and 15 times the consensus 2013 earnings estimate of $5.40 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $4.93.

Of course, being led by the legendary Warren Buffett supports quite a premium for the shares. TheStreet Ratings rates Berkshire's class B shares A-minus.

MetLife (MET) is rated C+ by TheStreet Ratings. The company's shares closed at $29.17 Thursday, down 6% year to date, after declining 28% during 2011.

The shares trade for 1.1 times tangible book value and just five times the consensus 2013 EPS estimate of $5.63. The consensus 2012 EPS estimate is $5.22.

MetLife is in the midst of a transition from being considered a bank holding company, and hopefully escaping regulatory supervision by the Federal Reserve. The company agreed in November to sell "most of the depository business" of its MetLife Bank subsidiary to General Electric (GE) (GE) unit GE Capital. In January, MetLife announced it was exiting the forward residential mortgage business.

The company continues to originate reverse mortgages and to service existing mortgage loans.

During March, MetLife's plan to increase its return of capital to investors during 2012 was rejected by the Federal Reserve.

The sale of the MetLife Bank depository business is expected to be completed before the end of the second quarter, after which the company plans to deregister as a bank holding company.

Out of 21 sell-side analysts covering MetLife, 18 rate the shares a buy. With such a low multiple to forward earnings, patient investors willing to wait for the company's transition and for the eventual return of capital, may be looking at quite a bargain. Meanwhile, the shares have a yield of 2.54%, based on 74-cent annual dividend, paid in November.

The insurers rated A+ by TheStreet Ratings trade at valuations to forward earnings between those of Berkshire Hathaway and MetLife. Here they are, in order of descending valuation to consensus 2013 earnings estimates.

1 of 6

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs