This Day On The Street
Continue to site right-arrow
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!

Insurance Stocks Are a 'Glacial' Theme

Stocks in this article: RGA CB IAK PC

The business of "reinsurance" involves insurance that is purchased by insurance companies to limit the total loss an insurer would experience in case of an oversized disaster like Super-Storm Sandy. In past years reinsurance was not hard to obtain.

In recent years that has changed. Massive earthquakes like the one in Japan, increasingly severe outbreaks of violent weather and floods, and other recent natural disasters have made it difficult for insurers to secure reinsurance.

The result has been that insurers have abandoned certain markets and states, or, the premiums for specific kinds of insurance have risen to all-time highs. Let's look at a chart to see how reinsurance companies like RGA have fared the past five years. The potential upside is plain to see.

RGA Chart RGA data by YCharts

With rising quarterly revenue growth and earnings improvements, it's not surprising that analysts' consensus one-year price target for RGA is above $65. With a forward PE of only 7 and a price-to-earnings-to growth ratio (PEG ratio) of only 1.10 RGA looks like a bargain among insurers and reinsurers.

A more famous name in the insurance business is Chubb (CB) which provides property and casualty insurance to businesses and individuals. For the immediate future that should be a profitable business as long as they collect their premiums and invest them wisely.

Chubb has a trailing-12-month ROA of 3.37% and a positive ROE of nearly 12%. Along with a 79% year-over-year quarterly earnings growth and $2.08 billion in levered free cash flow, an investor can appreciate how CB can sustain a 2.2% dividend with a low 24% payout ratio.

As the five-year chart below illustrates, the price-per-share of CB and its rising diluted quarterly EPS have done very well for shareholders and investors.

CB Chart CB data by YCharts

Chubb took a hit from Sandy to the tune of about $880 million, which is part of the reason the stock has dropped below its 52-week high of $81.80. Like most of the other companies impacted by the October Super-Storm it had the reserves and reinsurance in place to cover the financial blow.

2 of 3

Select the service that is right for you!

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!


DOW 17,685.80 +328.93 1.90%
S&P 500 2,049.14 +36.25 1.80%
NASDAQ 4,729.6280 +85.3160 1.84%

Brokerage Partners

Rates from

  • 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