The financial industry is experiencing significant growth, driven by various factors contributing to its upgradation to cater to the evolving customer needs. Also, cutting-edge technologies, higher and diverse demand, and evolving customer expectations widen its horizons.
Given the industry’s tailwinds, it could be wise to invest in fundamentally sound financial stocks Reinsurance Group of America, Incorporated (RGA), AXIS Capital Holdings Limited (AXS), and Hagerty, Inc. (HGTY) poised for strong Q2 earnings.
The financial industry plays a vital role in upholding and maintaining economy by facilitating the flow of capital and resources. Financial services, including investment banks, insurance, reinsurance, insurance brokerage, investments, and foreign exchange services make funding accessible to individuals and businesses of all sizes and also provide stability.
The financial services market is expected to grow to $44.92 trillion by 2028, expanding at a CAGR of 7.6%. Factors like expanding wealth of HNIs, various alternative investments, adoption of blockchain, growing individual investors' investments, rapid urbanization, and application of AI contribute to the market growth.
Further, as the aftereffects of COVID-19, rising demand from emerging economies, rising cybersecurity concerns, and technological advancements, the insurance market is growing vastly. The USA life & non-life insurance market is projected to reach $2.83 trillion by 2029, growing at a CAGR of 6.9%.
Moreover, investors’ interest in financial stocks is evident from the Financial Select Sector SPDR ETF’s (XLF) 24.2% returns over the past year.
Given the industry’s robust outlook, investing in quality financial stocks such as RGA, AXS, and HGTY could be wise for future gains.
Reinsurance Group of America, Incorporated (RGA)
RGA engages in reinsurance business. The company provides individual and group life and health insurance products, like term life, credit life, universal life, whole life, group life and health, joint and last survivor insurance, critical illness, disability, and longevity products.
On July 2, RGA announced it reached an agreement with Tongyang Life Insurance Company, Ltd. for an RGA subsidiary to reinsure a 200 billion KRW in-force block of life policies through coinsurance. This marks the the first cross-jurisdictional coinsurance transaction in South Korea.
On May 25, RGA entered into an agreement with Tokio Marine & Nichido Life Insurance Co., Ltd. to reinsure an approximately 100 billion JPY paid-up block of whole life policies through coinsurance.
The ongoing partnership of RGA with Anshin Life reflects RGA’s strategic commitment to the Japanese market and its understanding of the distinctive requirements.
For the first quarter that ended March 31, 2024, RGA’s net premiums increased 58.8% year-over-year to $5.38 billion. Net income available to RGA shareholders came in at $210 million for the quarter. The company’s adjusted operating income of $401 million and $6.02 per share indicates growth of 14.9% and 16.7% from the prior year’s quarter, respectively.
Analysts expect RGA’s revenue for the second quarter (ended June 2024) to increase 23.9% year-over-year to $5.15 billion and its EPS for the same quarter is expected to grow 12.8% year-over-year to $4.96. Moreover, the company has surpassed the consensus EPS estimates in all of the trailing four quarters.
Shares of RGA have surged 26.2% over the past six months and 45.6% over the past year to close the last trading session at $207.34.
RGA’s POWR Ratings reflect its robust outlook. It has an overall rating of B, which translates to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
RGA has an A grade for Sentiment and a B grade for Growth and Momentum. It is ranked #3 out of 9 stocks in the A-rated Insurance - Reinsurance industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of RGA for Quality, Stability, and Value. Get all RGA ratings here.
AXIS Capital Holdings Limited (AXS)
Headquartered in Pembroke, Bermuda, provides various specialty insurance and reinsurance products in Bermuda, the United States, and internationally. The company operates through two segments, Insurance; and Reinsurance.
On June 27, AXS expanded its partnership with Elpha Secure, which initially commenced in 2021. Under the extended partnership with Elpha Secure, AXS will focus on ensuring cyber customers in the US get high-quality coverage, with embedded cyber security solutions to improve their risk profiles and mitigate their exposure to cyber risk.
The cyber coverage through Elpha’s established, secure digital distribution platform will benefit customers and AXS.
On June 20, AXS launched a new service for US-based, direct primary cyber insurance customers – AXIS Cyber Incident Commander. Incident Commander offers policyholders who are hit with a cyber incident with a single point of contact to access immediate guidance from experienced cyber experts.
During the first quarter that ended March 31, 2024, AXS’ total revenues rose 6% year-over-year to $1.42 billion. Its operating income increased 10.1% year-over-year to $220 million. Also, net income available to common shareholders and EPS came in at $387.90 billion and $4.53, indicating growth of 124.8% and 125.4% from the year-ago value, respectively.
Street expects AXS’ revenue and EPS for the second quarter (ended June 2024) to increase 6.9% and 18% year-over-year to $1.55 billion and $2.63, respectively. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Over the past six months, AXS’ stock has gained 25.3% and 30.2% over the past year to close the last trading session at $69.98.
AXS’ sound fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Momentum and Growth. Within the A-rated Insurance – Property & Casualty industry, AXS is ranked #10 of 56 stocks.
Click here to access additional ratings of AXS for Stability, Sentiment, Quality, and Value.
Hagerty, Inc. (HGTY)
HGTY offers insurance agency services globally. The company offers motor vehicle and boat insurance products, and reinsurance products. It offers Hagerty Media, which publishes contents through the Hagerty Drivers Club Magazine (HDC).
HGTY’s trailing-12-month ROCE of 19.01% is 79.3% higher than the industry average of 10.60%. Likewise, the stock’s trailing-12-month ROTA of 1.10% is 3.6% higher than the industry average of 1.06%. And its trailing-12-month CAPEX/Sales of 2.16% is 11.7% higher than the 1.94% industry average.
In terms of forward Price/Sales, HGTY is trading at 0.81x, 68.3% lower than the industry average of 2.56x. Likewise, the stock’s forward EV/Sales multiple of 1.17 is 61.8% lower than the industry average of 3.07.
HGTY’s total revenue for the first quarter that ended March 31, 2024, increased 24.4% year-over-year to $271.71 million and its operating income was $12.22 million. The company’s net income and adjusted EPS came in at $8.20 million and $0.04 for the quarter, respectively.
Furthermore, the company’s adjusted EBITDA increased 307.6% year-over-year to $27.33 million.
According to the company’s outlook for the full year 2024, HGTY expects total revenue between $1.00 billion and $1.15 billion reflecting growth between 15% and 17%. Its net income is expected to range from $61 million to $70 million having growth of 116% - 148%. And the company’s adjusted EBITDA is expected to be $88.16 million - $124 million.
Analysts expect HGTY’s EPS for the second quarter (ended June 2024) to increase 60% year-over-year to $0.08 and its revenue for the same quarter is expected to grow 17.6% year-over-year to $307.19 million. Moreover, the company topped the consensus EPS estimates in each of the trailing four quarters.
HGTY’s stock has surged 39.2% over the past six months and 23% over the past year to close the last trading session at $11.07.
HGTY’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
HGTY has an A grade for Growth. It also has a B grade for Momentum and Sentiment. The stock is ranked #14 among 56 stocks in the A-rated Insurance – Property & Casualty industry.
To access HGTY’s other ratings for Quality, Value, and Stability, click here.
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.
RGA shares were trading at $210.54 per share on Wednesday afternoon, up $3.20 (+1.54%). Year-to-date, RGA has gained 31.34%, versus a 18.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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