3 value stocks of the undervalued property and casualty insurance industry

The Zacks Property & Casualty Insurance Industry is currently undervalued compared to the Zacks S&P 500 Composite, as well as the Zacks Financials sector. Price-to-book (P/B) ratio, the best multiple for valuing insurers due to their unpredictable financial results, is 1.4, lower than the Zacks S&P 500 Composite P/B of 6.7 and the P/B B of sector 3.3. Such positioning below the market hints at room for upside in coming quarters.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Before your valuation is extended, it is advisable to add some undervalued stocks with growth potential to the portfolio.

Driving factors

The industry is well positioned to benefit from better pricing, prudent underwriting and increased exposure despite an increase in catastrophe losses.

According to Swiss Re, the insurance and reinsurance industry incurred the world’s fourth-highest insured catastrophic losses of around $112 billion in 2021. Underwriting loss was $5.6 billion for the first nine months of 2021 and the The combined index deteriorated 70 basis points to 99.5 due to higher non-catastrophic loss, especially in personal automobiles, according to the report by Verisk and the American Association of Property Casualty Insurance. However, net income improved 19.6% to $42.1 billion in the nine months of 2021, largely driven by higher premiums (up 9.4%) and investment gains. according to the report.

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