When you're looking to build wealth through the stock market, one of the best investors you could emulate is Warren Buffett, chief executive officer of Berkshire Hathaway. Since 1965, Buffett's company has delivered investors a 20% return compounded annually -- or a total return of 3,600,000% over 57 years!

One of Buffett's early moves was buying National Indemnity Corp., a property and casualty insurer, back in 1967. Buffett has had a long love affair with insurance companies since then and owns GEICO, Berkshire Hathaway Reinsurance, and General Re.

Buffett likes the insurance industry for its strong cash flows and resilience during recessionary periods, which can make insurance stocks excellent long-term winners with much less volatility than the broader market. If you have $1,000 you're ready to put to work in the market, three insurers worth your consideration include Aflac (AFL 0.16%), Kinsale Capital Group (KNSL -0.97%), and Progressive (PGR -0.40%).

A person with a clipboard reviews damage to a car fender.

Image source: Getty Images.

1. Aflac

Aflac writes policies for businesses that offer employee benefit plans and supplemental health insurance. These policies include dental and vision, cancer, and critical illness insurance, which help people who experience life-altering events like heart attacks or strokes.

Aflac took a hit from the pandemic, which caused sky-high unemployment rates and an increase in mortality rates, leading to a jump in benefits payouts on life insurance policies. The situation has improved since then, and Aflac's benefits and claims payments were down 13% in the second quarter compared to the same period last year. 

While net earned premiums decreased 13% from last year (primarily due to lower sales in Japan), investment gains and lower claims payments resulted in net earnings increasing nearly 26% from last year. 

Aflac sits on over $121 billion in investments and cash. This strong cash position enabled the company to raise its dividend by 21% in the first quarter, which is also its 39th consecutive year of increasing its dividend payout to shareholders. With its robust balance sheet and improving economic backdrop, Aflac is one solid insurer worth considering.

2. Kinsale Capital Group

Kinsale Capital Group writes insurance policies on hard-to-gauge risks, meaning it writes policies that many other insurance companies won't. It serves the excess and surplus (E&S) insurance market and writes policies on things including small businesses, construction, product liability, and professional liability, to name a few. 

The company has done a stellar job of writing policies on unique risks. Because many insurers don't offer these policies, it leaves a gap that Kinsale Capital can fill. The company has built up knowledge of these unique risks, and the lack of competition means that these can have higher profit margins and lower loss ratios compared with the broader insurance market.

We can see this advantage when we look at the combined ratio, a key measure of how well an insurer writes policies. The combined ratio is the total expenses plus claims divided by premiums taken in, where the lower the ratio, the more profitable the policies. Over the last six years, Kinsale's combined ratio was 82%, positively crushing the industry average combined ratio of 99% during the same period. 

A chart shows Kinsale Capital's combined ratio versus the industry since 2016.

Data sources: Kinsale 10-K Filings and National Association of Insurance Commissioners. Chart by author.

Kinsale Capital is a great choice if you're looking for an insurer with growth stock potential. The insurer has done an excellent job of balancing risk and reward with its policies and should continue to perform well -- especially if inflation persists.

3. Progressive

Progressive writes auto and insurance policies for individuals and businesses and is one of the best at what it does. It was one of the first to use driving behavior to price its policies -- almost an entire decade before anyone else. This has helped the company achieve a stellar combined ratio of 91% over the last 20 years, outpacing the industry average of 100% in the same period. 

A chart shows Progressive's combined ratio versus the industry since 2002.

Data sources: Progressive 10-K filings and National Association of Insurance Commissioners. Chart by author.

The company is also in an excellent position to raise premiums in this inflationary environment, quickly adapting to rising claims costs last year and growing its earned premiums by 12%. Progressive's head start on using driver data and its precision in pricing its policies make this insurer an excellent stock to hold in your portfolio for the long haul.