Insurance Stocks

About Insurance Stocks

Nobody buys insurance stocks for excitement, and that's the pitch. Carriers trade around book value, return cash, and mostly just sit there.

Two things are worth knowing. Higher rates are good here, which is backwards from how rates hit REITs and utilities: insurers hold premiums for years before the claims come due, so they earn on the float. And the brokers are a different animal from the carriers entirely. Marsh, Aon and Gallagher take a cut and carry zero claims risk, and they've been some of the best compounders in the market with almost none of the attention.

What actually goes wrong is soft pricing. After a run of good years capital floods in, premium rates fall, and earnings growth just stops. Health insurers are their own mess, exposed to medical cost inflation and Washington rather than weather.

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