The Zacks Accident and Health Insurance industry is expected to benefit from an increase in underwriting exposure. Aflac Incorporated AFL, Unum Group UNM, Trupanion TRUP, Employers Holdings, Inc. EIG and AMERISAFE, Inc. AMSF are expected to be driven by prudent underwriting standards. However, higher inflation, as well as rising medical costs, could offset the positives. 

The industry has been witnessing soft pricing over the past several quarters, and this is not expected to change any time soon. Nonetheless, a rise in claims of lower severity, with business activities returning to normal levels, is likely to favor pricing. Also, the increasing adoption of technology in operations will help the industry function smoothly.

Per a CBIZ report, the industry maintained its profitability streak, reflecting solid reserves, prudent claims management, stable loss trends and fewer claims, though Fitch Ratings predicts a softer performance in 2025.

About the Industry

The Zacks Accident and Health Insurance industry comprises companies providing workers’ compensation insurance, mainly to employers operating in hazardous industries. These companies offer group, individual or voluntary supplemental insurance products. Workers' compensation is a form of accident insurance paid by employers without affecting employees’ pay. Claims are generally met by insurers or state-run workers’ compensation fund, benefiting both employers and employees. While it boosts employees’ morale and, in turn, productivity, employers stand to benefit from lower claim costs. As awareness about the benefits of having such coverage rises, the future of these insurers seems bright. Per Precision Reports, the global worker's compensation insurance market is expected to grow considerably between 2024 and 2032.

3 Trends Shaping the Future of the Accident & Health Insurance Industry

Pricing Pressure to Continue: The worker compensation industry has been witnessing pricing pressure over the past several quarters. Inflation, coupled with rising medical costs as well as demographic change, will likely continue to put pressure on pricing. While recent Fed reports state inflation is expected to stay at 2.7% this year, per a Leavitt Group report, Centers for Medicare and Medicaid predicts healthcare spending to increase by 5.4% each year through 2028.  Per a report in Commercial Risks, AM Best expects sustained favorable loss development and beneficial loss frequency to put downward pressure on pricing. Efforts to retain market share will further increase pricing pressure, which might curb top-line growth. With commercial and industrial activities back on track, demand for insurance coverage is likely to rise. SpendEdge estimates that workers’ compensation insurance pricing will increase at a five-year (2022-2026) CAGR of 5.3%. Also, per a CBIZ report, workers’ compensation pricing is expected to rise 2%.

Claims Frequency to Improve: The adoption of safety measures and improving working conditions are lowering claims. The accident and health insurance space has witnessed growth over the years, primarily driven by an increase in benefits offered by employers. The right kind of workers’ compensation policy translates into personal care for injured workers, increased productivity, higher employee morale, lower turnover, reduced claims costs and less financial worry amid rising medical costs. Increasing underwriting exposure, sustained decrease in claims frequency rates attributable to a better working environment and conservative reserve levels have been boosting the industry’s performance.  Per the Bureau of Labor Statistics, in the next 10 years, the number of workers aged 75 and more is expected to increase by 96.5%.  Thus, claims could rise given an increase in work-life span and the degree of severity , the report states.

Increasing Adoption of Technology: The industry is witnessing accelerated adoption of technology in operations, including artificial intelligence. Electronic applications, e-signatures, electronic policy delivery, cloud computing and blockchain should help insurers gain a competitive edge. Per a CBIZ report, industry data reveals that artificial intelligence could reduce workers’ compensation claim expense by about 45%. Nonetheless, higher spending on technological advancements will result in escalated expense ratios.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates encouraging near-term prospects. The Zacks Accident and Health Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #46, which places it in the top 19% of the 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. The industry’s earnings estimate for 2025 has moved up 0.7% in a year.

Before we present a few stocks one can buy or retain, given their business advancement endeavors, it’s worth taking a look at the industry’s performance and current valuation.

Industry Outperforms Sector and S&P 500

The Accident and Health Insurance industry has outperformed its sector and the Zacks S&P 500 composite over the past year. The stocks in this industry have collectively gained 29.6% in a year compared with the Finance sector’s increase of 15.2% and the Zacks S&P 500 composite’s increase of 7.8% over the same period.

One-Year Price Performance

 

 

Current Valuation

On the basis of a trailing 12-month price-to-book (P/B), commonly used for valuing insurance stocks, the industry is currently trading at 1.88X compared with the Zacks S&P 500 composite’s 7.89X and the sector’s 4.05X.

Over the past five years, the industry has traded as high as 2.12X, as low as 1.54X and at the median of 1.83X.

Price-to-Book (P/B) Ratio (TTM)

Price-to-Book (P/B) Ratio (TTM)

 

5 Accident & Health Insurance Stocks in Focus

We are presenting one Zacks Rank #2 (Buy) stock and four Zacks Rank #3 (Hold) stocks from the Zacks Accident and Health Insurance industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amerisafe: Headquartered in DeRidder, LA, AMERISAFE, Inc. is a specialty provider of workers’ compensation insurance. It has been offering coverage for over four decades to small to mid-sized employers engaged in hazardous industries. This Zacks Rank #2 insurer stands to benefit from niche focus, high-hazard underwriting expertise and intensive claims management. A balance sheet with no debt provides Amerisafe plenty of financial flexibility to fund operations, meet financial obligations and weather shocks or unexpected expenses. Also, the latest 5.4% hike in dividends this February marks a consistent record of dividend payments since 2013.

AMSF delivered a trailing four-quarter earnings surprise of 3.75% on average. The Zacks Consensus Estimate for 2025 and 2026 earnings has moved 3.2% and 5% in the past 30 days. The stock has gained 0.3% year to date.

Price and Consensus: AMSF

Employers Holdings: Based in Henderson, NV, Employers Holdings is the 19th largest provider of workers' compensation insurance to small businesses in the low-to-medium hazard industries and carries a Zacks Rank #3. EIG should continue to benefit from a solid presence in attractive markets and prudent underwriting. Its multiple distribution channels provide competitive advantages. 
EIG delivered a trailing four-quarter earnings surprise of 2.32%, on average. The consensus estimate for 2026 earnings has moved 5.2% north in the past 60 days. The stock has lost 1.8% year to date.

Price and Consensus: EIG

Unum Group: Chattanooga, TN-based Unum Group provides long-term care insurance, life insurance, employer- and employee-paid group benefits and related services. This Zacks Rank #3 insurer is poised to grow on the operational excellence of Unum U.S. and Colonial Life. Encouraging sales trends, strong persistency in group lines and growth of new product lines like dental and vision, coupled with favorable risk results, should benefit Unum U.S. and Colonial Life, the two largest operating segments. It has an impressive dividend track record, having increased dividends 15 times in the last 14 years and yielding better than the industry average. It estimates a 10-15% increase in dividends going forward.

 In 2025, Unum Group expects sales growth in the range of 5-10%, premium growth in the band of 4-7% and adjusted operating return on equity (ROE) between 21% and 23% from the core business. Unum estimates 8-12% growth in adjusted operating EPS in 2025. For the long term, Unum Group expects sales growth in the range of 8-12%, premium growth in the range of 4-7% and adjusted operating earnings per share growth between 8% and 12%.  

The expected long-term earnings growth rate for Unum Group is 6.5%, better than the industry average of 5.7%. Though the Zacks Consensus Estimate for 2025 earnings indicates a year-over-year decrease of 5.3%, the same for 2026 implies an increase of 8.7%. UNM delivered a trailing four-quarter earnings surprise of 2.94%, on average. The stock has gained 11.6% year to date.

Price and Consensus: UNM

Aflac: This Columbus, GA-based company offers voluntary supplemental health and life insurance products and operates through Aflac Japan and Aflac U.S. The top-line benefits from strategic growth investments, robust persistency rates and enhanced productivity. Aflac introduces new products and upgrades existing ones to address the changing needs of its customers as well as integrates digital solutions into its offerings to align with the ongoing trend of digitization. This, in turn, should support strong profit margins. The Argus buyout will provide it with a platform to build the company’s network of dental and vision products and further strengthen its U.S. segment. It carries a Zacks Rank #3 currently.

AFL delivered a trailing four-quarter earnings surprise of 8.06% on average. Though the Zacks Consensus Estimate for 2025 earnings indicates a year-over-year decrease of 4.7%, the same for 2026 implies an increase of 5.1%. The expected long-term earnings growth rate is pegged at 4.9%. The stock has gained 5.4% year to date.

Price and Consensus: AFL

Trupanion: Headquartered in Seattle, WA, Trupanion is a provider of insurance for cats and dogs in the United States, Canada, Continental Europe and Australia. It operates in a total addressable market worth $34.1 billion, which is a large but underpenetrated market. This Zacks Rank #3 pet insurer is well-poised to grow, courtesy of its heightened focus on pets’ health and well-being in an underpenetrated pet insurance market, product launches, extended operating boundaries and a solid capital position. This pet insurer continues to invest in areas where it believes it can achieve high internal rates of return. Improving pricing should add to the upside.

The Zacks Consensus Estimate for 2025 and 2026 earnings indicates a 126.1% and 340% year-over-year increase, respectively. TRUP delivered a trailing four-quarter earnings surprise of 37.50%, on average. It has a Growth Score of A. The stock has lost 22.2% year to date. 

Price and Consensus: TRUP

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This article originally published on Zacks Investment Research (zacks.com).

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