What happened
Shares of several insurance stocks rose this week, some making big moves, and all for slightly different reasons. Shares of life insurance company National Western Life Group (NWLI +0.00%) traded more than 52% higher for the week as of 1:30 p.m. ET Thursday, according to data from S&P Global Market Intelligence.
Meanwhile, shares of insurance marketplace SelectQuote (SLQT +1.86%) traded roughly 40% higher, while shares of the property and casualty insurer United Insurance (UIHC 0.59%) were up nearly 24%.
So what
National Western Life Group has had an eventful week. First, the company reported earnings results for the first quarter of 2023, delivering diluted earnings per share of $3.48 on total revenue of roughly $152.6 million.
Image source: Getty Images.
But the real news driving the stock came in another release where the company announced that it is exploring strategic options in order to maximize shareholder value, which usually means the company is considering selling itself. National Western also said it has hired Goldman Sachs as a financial advisor to help assess the company's strategic options.
National Western's book value per share at the end of the first quarter was roughly $634 per share. If you don't include the company's unrealized securities losses, book value per share would be nearly $735. Currently, the stock trades around $400, so any kind of sale is likely to result in material upside, which explains the big move.
SelectQuote is benefiting this week from heavy insider buying. CEO Tim Danker recently acquired 100,000 shares; President Robert Clay Grant recently purchased 200,000 shares, and a bunch of directors bought shares as well. The directors and members of senior management collectively purchased $1.2 million worth of stock, as they try to send a strong signal to the market, which so far appears to be working.
United Insurance also reported its first-quarter earnings results earlier this week. The company delivered $5.99 diluted earnings per share on total revenue of more than $104 million. Earnings were way up on a year-over-year basis, while revenue fell roughly 11%. The company wrote gross premiums of more than $187 million, up roughly $44.7 million year over year. United Insurance's combined ratio, which looks at expenses and losses incurred divided by earned premiums, came in at just 70.6%, which is quite good.
NASDAQ: NWLI
Key Data Points
United Insurance CEO Dan Peed said in an earnings statement that the company's "commercial lines portfolio written in our subsidiary American Coastal Insurance Company continued to perform very well," and that he believes "these results are sustainable in the near and intermediate terms given the hard market conditions in Florida," which demonstrate the company's transformation into a commercial specialty insurer.
Now what
Given that National Western Life Group looks to be exploring a buyer and that shares are trading significantly below book value, there definitely could be further upside from here, especially if the company can recoup some of the unrealized losses.
United Insurance also looks like a good stock given the improvement in the combined ratio and the fact that the hard market condition reflects an upswing in the insurance cycle in Florida where United Insurance has leading market share.
Despite the increase in SelectQuote's stock, this wouldn't be my choice right now. The company is going through a strategic shift and while progress is being made, I think more progress needs to be seen.
