Insurance stocks are a bit complicated to understand. For this reason, a lot of investors avoid the sector. However, it can be a very lucrative place if you get it right.
Insurance is all about managing risk. Everybody needs insurance whether it be for their car, home, or business. Some insurance is mandated by the government. Other insurance is just mandated by necessity.
Wherever there is risk, there is an insurance solution. Investments in smartly managed insurance companies can be very successful. Great investors like Warren Buffett have made fortunes by smart investments in insurance stocks.
If you are looking for insurance stocks to add on pullbacks, here are three to consider right now.
Source: Getty Images
Canada’s top insurance company
With a market cap of $50 billion, Intact Financial (TSX: IFC) is one of the largest insurers in Canada. It has also been one of the best performers. Its stock is up over 100% in the past five years and 237% in the past 10 years.
Intact operates several dominant property and casualty insurance brands in Canada. It is well known for being one of the most affordable providers across the country. It can do this because of its national scale, operating expertise, smart claims management, and focus on high returning business.
Not only does Intact plan to keep growing in Canada, but it is becoming a rising player in the U.K. Likewise, it is expanding its speciality insurance business with a growing global presence.
This insurance stock yields 1.9% right now. It has grown its dividend per share by a 12% compounded annual growth rate (CAGR) over the past 20 years. For a safe, solid company with a great dividend and growth ahead, Intact is an attractive buy on any major pullback.
An insurance stock in the early growth innings
If you want a higher risk/higher reward stock, Trisura Group (TSX: TSU) is another insurance company to look at adding. It has a market cap of $1.5 billion. While its stock has been volatile in the past couple of years, it is up 188% in the past five years and over 500% since it listed in 2017.
Trisura provides speciality insurance and insurance fronting solutions in Canada and the United States. The company has delivered very strong returns on equity and a low combined ratio.
The insurer has had a few growing pains in the past couple of years. However, it now has the infrastructure to really scale its enterprise. Analysts predict Trisura could enjoy mid-teens growth for the next several few years.
This insurance stock trades at a substantial discount to other speciality peers. If you have a long, patient time horizon, this could be a great stock to hold in the years ahead.
A leading insurance broker
With a market cap of US$32 billion, Brown and Brown (NYSE: BRO) has become a substantial global insurance broker in the past decade. Its stock is up 207% in the past five years and nearly 600% in the past 10 years.
Insurance brokerages are great businesses because they earn high profit margins and tend to have high recurring income. Brown and Brown has executed a market consolidation strategy in the U.S. and around the world. It has done a very good job of using its scale and expertise to become a broker of choice.
This company is run by the founder’s family, and they own a large stake in the company. Brown and Brown is not the cheapest insurance stock. However, it is a worthy addition on any significant pullbacks.
