The insurance sector is currently experiencing significant turbulence, with losses squeezing gains. The ongoing wildfires in Los Angeles have destroyed or damaged more than 17,000 structures, highlighting the sector’s massive work ahead in recovery efforts.
The financial toll is staggering. Estimates from catastrophe risk modelers place the average insured loss per structure at $1.9 million. CoreLogic predicts total insured losses in the $35-$45 billion band, while Moody’s RMS estimates range within $20-$30 billion, including losses tied to the California FAIR Plan.
Most insurance and utility companies with operations in California have seen share prices drop due to the fires. This financial burden will be distributed across insurers and their reinsurers, with most losses stemming from home insurance claims. Auto and commercial property insurance are expected to see smaller impacts in comparison. These substantial losses have even affected reinsurers. The share price drop has created an opening for investors looking to expand their footprint in the insurance space.
The Los Angeles wildfires are a tragedy for individuals and businesses alike, and rebuilding will undoubtedly come at a significant cost. However, historical trends indicate that insurance stocks often recover quickly. In fact, following the last four major U.S. natural disasters with losses exceeding $100 billion, insurance shares typically experienced notable gains in the months afterward.
The demand for various types of insurance products often surges after such events. Insurers typically respond by innovating and offering more efficient solutions to meet evolving customer requirements and stand by them in their time of need. History suggests that insurers can become a guiding force for recovery and rebuilding, which is important because, often, a rising tide will lift all boats in an industry.
As such, we have identified three Zacks Rank #2 (Buy) stocks with strong ties to Los Angeles and significant growth potential in the insurance sector: Arthur J. Gallagher & Co. AJG, Brown & Brown, Inc. BRO and Primerica, Inc. PRI. Their resilience, innovation and ability to contribute to the overall recovery efforts make them standout choices for investors looking to capitalize on the sector’s rebound.
These selections were made using the Zacks Stock Screener. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Investment Research
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Arthur J. Gallagher: Headquartered in Rolling Meadows, IL, Arthur J. Gallagher offers insurance brokerage and consulting services and third-party claims settlement and administration services in the United States and internationally. It offers Risk Management services in Los Angeles. The company has a strong merger pipeline, which will boost its inorganic growth efforts.
The Risk Management business continues to benefit from new business wins and excellent retention. Renewal premium continues to improve, increasing across all major geographies and most product lines. Strong operational performance will continue driving Arthur J. Gallagher’s cash flows.
The Zacks Consensus Estimate for AJG’s 2024 earnings is pegged at $10.05 per share, indicating a 14.7% year-over-year jump. Arthur J. Gallagher beat the Zacks Consensus Estimate for earnings in three of the last four quarters and met once, with an average surprise of 1.2%. The consensus mark for its 2024 revenues suggests 14.3% year-over-year growth.
Arthur J. Gallagher & Co. Price and EPS Surprise
Arthur J. Gallagher & Co. price-eps-surprise | Arthur J. Gallagher & Co. Quote
Brown & Brown: Daytona Beach, FL-based Brown & Brown markets and sells insurance products and services. It has a significant presence in Los Angeles, offering insurance products for individuals, families, businesses and more. Higher core commissions and fees, profit-sharing contingent commissions, guaranteed supplemental commissions, and investment income are boosting its results. It makes consistent investments in boosting organic growth and margin expansion.
Backed by a sustained operational performance, its debt levels have been decreasing in the past few years, strengthening its balance sheet. The strong capital and liquidity position enables Brown & Brown to distribute wealth to shareholders via dividend increases and share buybacks.
The Zacks Consensus Estimate for BRO’s 2024 earnings is pegged at $3.74 per share, indicating 33.1% year-over-year growth. Brown & Brown beat the Zacks Consensus Estimate for earnings in each of the last four quarters, with an average surprise of 6.9%. The consensus mark for its 2024 revenues suggests 11.2% year-over-year growth.
Brown & Brown, Inc. Price and EPS Surprise
Brown & Brown, Inc. price-eps-surprise | Brown & Brown, Inc. Quote
Primerica: Headquartered in Duluth, GA, Primerica offers financial products and services in the United States and Canada. In Los Angeles, it offers various term life insurance, investments and securities and other financial solutions. Growth in policies issued and equity market appreciation are aiding its results. The company doesn’t shy away from divesting non-core assets to improve profitability.
Growing average client asset values are benefiting its Investment and Savings Products business. PRI should gain from the strong demand for protection products. Its business model makes it well-poised to cater to the middle-income market’s increased demand for financial security in the current economic environment.
The Zacks Consensus Estimate for PRI’s 2024 earnings is pegged at $19.75 per share, indicating a 22.9% year-over-year rise. Primerica beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed twice, with an average surprise of 4.9%. The consensus mark for its 2024 revenues suggests 7.2% year-over-year growth.
Primerica, Inc. price-eps-surprise | Primerica, Inc. Quote
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