The Zacks Accident and Health Insurance industry is expected to benefit from increased underwriting exposure, driven by companies like Aflac Incorporated (AFL), Unum Group (UNM), Trupanion (TRUP), Globe Life (GL), and AMERISAFE, Inc. (AMSF). These companies are anticipated to perform well due to their prudent underwriting standards. However, the industry faces challenges from higher inflation and rising medical costs, which could offset some of the positives.
Industry Overview
The Accident and Health Insurance industry comprises companies that provide workers’ compensation insurance, mainly to employers in hazardous industries. They offer group, individual, or voluntary supplemental insurance products. Workers’ compensation is a form of accident insurance paid by employers without affecting employees’ pay. As awareness of the benefits of such coverage grows, the future of these insurers appears promising. According to Precision Reports, the global workers’ compensation insurance market is expected to grow significantly between 2024 and 2032.
Trends Shaping the Industry
- Pricing Pressure to Continue: The industry has faced pricing pressure over several quarters, and this trend is expected to persist due to inflation, rising medical costs, and demographic changes. Despite this, a rise in claims of lower severity, as business activities return to normal, is likely to favor pricing.
- Claims Frequency to Improve: The adoption of safety measures and improved working conditions are lowering claims frequency. The industry has seen growth driven by increased benefits offered by employers. A better working environment and conservative reserve levels have boosted the industry’s performance.
- Increasing Adoption of Technology: The industry is witnessing accelerated technology adoption, including AI, data analytics, automation, cloud computing, and blockchain. These technologies are expected to give insurers a competitive edge. For instance, AI could reduce workers’ compensation claim expenses by about 45%, according to a CBIZ report.
Industry Performance and Valuation
The Accident and Health Insurance industry has outperformed its sector and the Zacks S&P 500 composite year-to-date, with a collective gain of 29.6%. The industry is currently trading at a trailing 12-month price-to-book (P/B) ratio of 1.84X, compared to the Zacks S&P 500 composite’s 7.89X and the sector’s 4.17X.
Stocks in Focus
- Trupanion (TRUP): A Zacks Rank #2 (Buy) stock, Trupanion is a pet insurer with a heightened focus on pets’ health and well-being in an underpenetrated market. The Zacks Consensus Estimate for 2025 and 2026 earnings indicates significant year-over-year growth.
- Aflac (AFL): With a Zacks Rank #3 (Hold), Aflac benefits from strategic growth investments, robust persistency rates, and enhanced productivity. It introduces new products and integrates digital solutions to address changing customer needs.
- Unum Group (UNM): Also a Zacks Rank #3, Unum Group is poised to grow due to operational excellence in its U.S. and Colonial Life segments. It has a strong dividend track record and expects sales and premium growth.
- Globe Life (GL): This Zacks Rank #3 insurer has seen positive revenue trends driven by premium growth and net investment income. Expansion initiatives are expected to drive future growth.
- AMERISAFE (AMSF): With a Zacks Rank #3, AMERISAFE benefits from its niche focus on workers’ compensation insurance for hazardous industries. It has a strong balance sheet and a consistent dividend payment record.
The Zacks Industry Rank indicates bright prospects for the Accident and Health Insurance industry, with the top 50% of Zacks-ranked industries outperforming the bottom 50% by more than 2 to 1. The industry’s positive earnings outlook and growth potential make it an attractive sector for investors.
