Buy These 5 Risky Insurance Stocks for Big Upside Potential

NEW YORK (TheStreet) -- Are you a risk-taker with your investments?

Adding stocks that are considered to have high "beta" -- a popular measure of volatility -- could be a strategy to get added performance in your portfolio. As long as the stocks are volatile in a positive direction, that is.

The financial services sector -- which includes insurance companies -- is among the most volatile sectors, including technology and energy, among others.

If you're a risk-taker looking for upside, consider these five insurance stocks. The stocks on this list are all rated buy, with a B- or better rating. The stocks are also among the most volatile stocks in their sector, each with beta measurements of greater than 1.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Research and ratings are as of June 7, 2015. Year-to-date returns are based on June 15, 2015 closing prices.

 

SYA Chart SYA data by YCharts

1. Symetra Financial Corp. (SYA)
Market Cap: $2.8 billion
Rating: Buy, A-
Beta: 1.31
Year-to-date return: 3.3%

Symetra Financial Corporation, through its subsidiaries, provides products and services that serve the retirement, employee-based benefits, and life insurance markets in the United States and the District of Columbia.

TheStreet said: "We rate SYMETRA FINANCIAL CORP (SYA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and attractive valuation levels. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • SYA's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • SYMETRA FINANCIAL CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SYMETRA FINANCIAL CORP increased its bottom line by earning $2.19 versus $1.75 in the prior year. For the next year, the market is expecting a contraction of 20.1% in earnings ($1.75 versus $2.19).

 

UNM Chart UNM data by YCharts

2. Unum Group (UNM)
Market Cap: $9.1 billion
Rating: Buy, A-
Beta: 1.45
Year-to-date return: 5%

Unum Group, together with its subsidiaries, provides group and individual disability insurance products in the United States and the United Kingdom. The company operates through three segments: Unum US, Unum UK, and Colonial Life.

TheStreet said: "We rate UNUM GROUP (UNM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 1.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $400.10 million or 15.40% when compared to the same quarter last year. Despite an increase in cash flow, UNUM GROUP's average is still marginally south of the industry average growth rate of 21.99%.
  • UNUM GROUP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, UNUM GROUP reported lower earnings of $1.56 versus $3.23 in the prior year. This year, the market expects an improvement in earnings ($3.65 versus $1.56).
  • Despite currently having a low debt-to-equity ratio of 0.32, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • After a year of stock price fluctuations, the net result is that UNM's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

 

LNC Chart LNC data by YCharts

3. Lincoln National Corp. (LNC)
Market Cap: $15.3 billion
Rating: Buy, A
Beta: 2.06
Year-to-date return: 5.1%

Lincoln National Corporation, through its subsidiaries, engages in multiple insurance and retirement businesses in the United States. It operates through Annuities, Retirement Plan Services, Life Insurance, and Group Protection segments

TheStreet said: "We rate LINCOLN NATIONAL CORP (LNC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, solid stock price performance, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 4.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • LINCOLN NATIONAL CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LINCOLN NATIONAL CORP increased its bottom line by earning $5.66 versus $4.53 in the prior year. This year, the market expects an improvement in earnings ($6.10 versus $5.66).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has increased to $296.00 million or 12.54% when compared to the same quarter last year. Despite an increase in cash flow, LINCOLN NATIONAL CORP's average is still marginally south of the industry average growth rate of 21.99%.

 

 

TMK Chart TMK data by YCharts

4. Torchmark Corp. (TMK)
Market Cap: $7.3 billion
Rating: Buy, A
Beta: 1.15
Year-to-date return: 6.9%

Torchmark Corporation, through its subsidiaries, provides various life and health insurance products, and annuities in the United States, Canada, and New Zealand. It operates through Life Insurance, Health Insurance, Medicare Part D, and Annuities segments.

TheStreet said: "We rate TORCHMARK CORP (TMK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year, good cash flow from operations and attractive valuation levels. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Although TMK's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average.
  • TORCHMARK CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TORCHMARK CORP increased its bottom line by earning $4.10 versus $3.80 in the prior year. This year, the market expects an improvement in earnings ($4.30 versus $4.10).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has slightly increased to $279.73 million or 1.77% when compared to the same quarter last year. Despite an increase in cash flow, TORCHMARK CORP's cash flow growth rate is still lower than the industry average growth rate of 21.99%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.4%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

 

PFG Chart PFG data by YCharts

5. Principal Financial Group Inc. (PFG)
Market Cap: $15.3 billion
Rating: Buy, A+
Beta: 1.8
Year-to-date return: 0.21%

Principal Financial Group, Inc. provides retirement, asset management, and insurance products and services. It operates through Retirement and Investor Services, Principal Global Investors, Principal International, and U.S. Insurance Solutions segments.

TheStreet said: "We rate PRINCIPAL FINANCIAL GRP INC (PFG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year, impressive record of earnings per share growth and compelling growth in net income. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 7.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although PFG's debt-to-equity ratio of 0.24 is very low, it is currently higher than that of the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • PRINCIPAL FINANCIAL GRP INC has improved earnings per share by 46.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PRINCIPAL FINANCIAL GRP INC increased its bottom line by earning $3.66 versus $2.96 in the prior year. This year, the market expects an improvement in earnings ($4.38 versus $3.66).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 39.9% when compared to the same quarter one year prior, rising from $301.90 million to $422.40 million.

 

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