The insurance market shows promise due to rising prices, increased capacity, and innovative strategies in auto, homeowners’, and renters’ insurance. Key trends include increased demand, climate change impacts, and AI technology, making it a good investment now. In addition, regulatory demands are spurring innovation and keeping the market stable.

Hence, investors might consider buying fundamentally strong insurance stocks such as Hagerty, Inc. (HGTY) and HCI Group, Inc. (HCI) with promising Q2 earnings expectations.

Despite GDP growth slowing to around 1.4 percent quarterly annualized in Q1 2024, the U.S. economy is expected to pick up later in the year as inflation subsides and the Fed signals rate cuts. This boost in economic activity and consumer confidence will benefit businesses. Concurrently, the insurance market is expanding, driven by rising demand from emerging economies.

Furthermore, the property and casualty insurance market is thriving due to strong premium growth, easing claims cost inflation, and higher investment returns. The U.S. economy shows promise with strong business investment and recovery from temporary issues. Hence, the property and casualty insurance market is expected to grow from $2 trillion in 2024 to $3.79 trillion by 2032, with an 8.3% CAGR.

Considering this favorable backdrop, let’s assess the fundamentals of the two Insurance - Property & Casualty picks, starting with the second choice.

Stock #2: Hagerty, Inc. (HGTY)

HGTY provides insurance agency services worldwide, offering motor vehicle and boat insurance products, as well as reinsurance products. The company also operates Hagerty Media, which publishes content through the Hagerty Drivers Club Magazine (HDC), video content, and social media channels. HDC offers subscription-based products and services.

In terms of the trailing-12-month Return on Total Assets, HGTY’s 1.10% is 2.5% higher than the 1.07% industry average. Likewise, its 0.73x trailing-12-month asset turnover ratio is 243.2% higher than the 0.21x industry average. In addition, its 19.01% trailing-12-month Return on Common Equity is 79.1% higher than the 10.61% industry average.

HGTY’s total revenue for the first quarter that ended March 31, 2024, increased 24.4% year-over-year to $271.71 million. Similarly, the company’s adjusted EBITDA rose 307.6% year-over-year to $27.33 million.

For the same quarter, its adjusted consolidated net income and adjusted EPS came in at $14.34 million and $0.04 per share, respectively, compared to an adjusted consolidated net loss and adjusted loss per share of $14.51 million and $0.04.

For the full year 2024, HGTY expects total revenue between $1.15 billion and $1.17 billion, reflecting growth of 15% to 17%. Its net income is projected to range from $61 million to $70 million, with growth of 116% to 148%. Moreover, the company’s adjusted EBITDA is expected to be between $124 million and $135 million, showing growth of 41% to 53%.

Analysts expect HGTY’s revenue for the quarter ended June 30, 2024, to increase 17.6% year-over-year to $307.19 million. Its EPS for the same quarter is expected to increase 60% year-over-year to $0.08. It surpassed the consensus EPS estimates in each of the trailing four quarters. HGTY’s stock has gained 40.6% year-to-date to close the last trading session at $10.97.

HGTY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked #25 out of 56 stocks in the A-rated Insurance - Property & Casualty industry. It has an A grade for Growth and Momentum. To see HGTY’s Value, Stability, Sentiment, and Quality ratings, click here.

Stock #1: HCI Group, Inc. (HCI)

HCI and its subsidiaries engage in property and casualty insurance, insurance management, reinsurance, real estate, and information technology businesses in Florida. The company provides residential insurance products including homeowners, fire, flood, and wind-only insurance to homeowners, condominium owners, and tenants, and offers reinsurance programs.

In terms of the trailing-12-month Return on Total Capital, HCI’s 20.76% is 200.2% higher than the 6.92% industry average. Similarly, its 6.04% trailing-12-month Return on Total Assets is 462.3% higher than the industry average of 1.07%. Also, its 29.19% trailing-12-month EBIT margin is 23.6% higher than the industry average of 23.63%.

HCI’s total revenues for the fiscal first quarter ended March 31, 2024, amounted to $206.62 million, up 60.1% year-over-year. Its non-GAAP adjusted net income rose 216% over the previous year’s quarter to $54.98 million. In addition, its adjusted net income per share increased 143.3% year-over-year to $3.65. Additionally, HCI’s total gross premiums earned rose 42.5% year-over-year to $256.64 million.

Street expects HCI’s EPS for the quarter ended June 30, 2024, to increase 194.3% year-over-year to $3.59. Its revenue for the same quarter is expected to increase 56.4% year-over-year to $199.12 million. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 53.9% to close the last trading session at $89.01.

HCI’s POWR Ratings reflect its positive outlook. Within the Insurance - Property & Casualty industry, it is ranked #21 out of 56 stocks. It has an A grade for Momentum and a B for Growth and Quality. Click here to see HCI’s Value, Stability, and Sentiment ratings.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

HGTY shares were trading at $11.02 per share on Monday afternoon, up $0.05 (+0.46%). Year-to-date, HGTY has gained 41.28%, versus a 18.78% rise in the benchmark S&P 500 index during the same period.

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.

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