The insurance space is poised for growth in the coming year despite worries about the 2020 election cycle. With the Federal Reserve looking unlikely to lower interest rates any further, the industry will be able to profit from investing the cash they’ve collected from premiums but haven’t paid out in claims.
Insurance stocks are also likely to profit from improving jobs data as employer-sponsored plans will rise.
Of course, health insurers could be in for a bumpy ride as the healthcare debate rages on in the U.S. However, a lot of the risk surrounding a healthcare overhaul has been alleviated as even the most progressive candidates agree it will take years to implement widespread reforms.
United Health (UNH)
The healthcare industry in the U.S. is a great place to make some money in the coming year. As the population ages, more focus will be on the healthcare industry. Insurers like United Healthcare (NYSE:UNH) are likely to benefit from that.
While concerns about a Democratic candidate like Elizabeth Warren winning the 2020 election have weighed on the sector, it looks likely that the proposed healthcare overhauls would have gradual rollouts.
United Healthcare is a great pick in the healthcare space because the firm stands to benefit from the ageing population. UNH is the largest Medicare Advantage healthcare plan provider in the country — and as baby boomers start to retire they’re choosing those plans. The number of people choosing a Medicare Advantage plan is supposed to increase by more than 40% by 2027.
Cigna (NYSE:CI) provides healthcare as well as life and accident insurance to people around the U.S. Cigna shareholders have been on a bit of a roller coaster ride over the past year, and 2020 could offer more of the same as lawmakers continued to debate the future of healthcare in the country.
CI stock had a strong rally in October after posting stronger than expected Q3 results. Every division of Cigna’s business appeared to be firing on all cylinders and that strength is continuing through the end of the year. Management raised its full-year guidance, saying income is expected to rise by between 18 and 20% on an annual basis.
This year Cigna’s results included the benefits from its purchase of Express Scripts last December. The strong performance suggests the acquisition was a wise strategic move for CI.
Investors comfortable with a degree of risk may want to consider British insurer Aviva (OTC:AVVIY), whose turnaround looks likely to materialize in the coming year. The firm saw its share price fall meaningfully after it released a new, simpler strategy that fell short of expectations.
The firm’s strategy — which included selling off its Hong Kong business and reorganizing into five leaner divisions — makes for a more streamlined organisation. While its plans aren’t overly exciting, they appear doable and should move the firm in a positive direction.
Importantly, the firm has been able to nearly double its profits over the past three years and has hiked its dividend payment by 44%.
What’s most likable about AVVIY stock is its 6.45% dividend yield that’s more than sustainable, which makes waiting out a bit of turbulence much easier.
Travelers Companies (TRV)
Speaking of dividends, Travelers Companies (NYSE:TRV) is another dividend stock that has a history of giving back to its shareholders. The firm is America’s second-largest commercial property casualty insurance seller and the third-largest personal insurance writer.
Admittedly, TRV stock has been struggling to eek out growth over the past few months, but that’s not why people buy Travelers. Not only does the firm offer a dividend yield of 2.4%, but management buys back between 5% and 10% of TRV shares every year. That adds up to a return of 7%-12% excluding any growth.
Boston Omaha (BOMN)
Boston Omaha (NASDAQ:BOMN) isn’t an insurance pure-play. In fact, the majority of its revenue comes from billboard companies. However, the tiny conglomerate also invests in surety insurance, which is one of the safest insurance businesses out there.
That’s because the nature of surety insurance encourages people not to claim on it — the average loss ratio is just 30%. To put that into perspective, homeowners insurance and commercial insurance have loss ratios of 71% and 61% respectively.
It’s worth noting that BOMN is still working to grow its business and insurance only makes up a small portion of the firm’s overall revenue. With that said, it makes for a good long-term bet for growth investors.
As of this writing Laura Hoy did not hold a position in any of the aforementioned securities.