June 30, 2022
Health insurance stocks are an overlooked investment sector. CEO and equity research analyst interviews reveal some interesting potential investment upside in this segment of the market.
Meyer Shields is Managing Director at Keepe, Bruyette & Woods, Inc., a subsidiary of Stifel Financial Corp. He covers insurance brokers and small- and mid-cap property and casualty insurers. Earlier, he worked at Legg Mason, JP Morgan Securities, Inc., and Zurich North America. He ranked fifth among stock pickers in the insurance/nonlife industry in The Wall Street Journal “Best on the Street” analysts survey for 2009.
He has a BS degree in actuarial science from the University of Toronto and is a Fellow of the Casualty Actuarial Society. In his interview in the Wall Street Transcript, Mr. Shield states:
“2021 was a fascinating year that started off with really strong earnings because in the first quarter of the year, there was still less driving than normal, and therefore car insurance companies were making an awful lot of money.
And then very quickly, in the aftermath of COVID-related supply chain disruptions, the rate of claim cost inflation, what we call loss trend, for personal auto really accelerated and most companies were actually doing worse or significantly worse than they expected earlier on.
So, over the course of the end of 2021, let’s say the second half of the year, that segment of the insurance industry did fairly poorly because there were consistent indications of rising claim costs, and not much in the way of rate increases.
And the insurance brokers also did pretty well. The economic rebound that we saw last year combined with the tendency of insurance companies to raise rates — and this is predominantly