USAA (United Services Automobile Association) has provided its members with insurance and other financial services for more than 100 years. A group of U.S. Army officers formed the company in 1922 because they couldn't get auto insurance due to the belief that military members were a higher-risk group. It has been serving military members and their families ever since.
The company has expanded beyond auto insurance to provide other financial services to its members, including banking services and investments, such as mutual funds, retirement plans, and savings plans, like 529 plans. However, its commitment to providing quality financial products and services to members of the military (retired and active duty) and their families hasn't changed over the years. Its membership focus stems from USAA being a member-owned company.
Today, USAA serves more than 13 million members. You might be one of them and wonder how to invest in the company. Here's a look at everything you need to know about investing in USAA.
529 Plan
Publicly traded?
Is USAA publicly traded?
USAA is not a publicly traded company. It's a private company owned by its members. USAA has been a private company since its founding in 1922.
Will it IPO?
When will USAA IPO?
USAA didn't have an IPO on the calendar in mid-2024. The private financial services company might never go public. It has been a private company since its founding in 1922. By remaining private, it can focus on serving its members instead of maximizing its profitability for outside shareholders.
How to buy
How to buy USAA stock
USAA isn't a publicly traded company, so you can't buy shares in your brokerage account. However, USAA members don't need to buy stock in the company to become an owner. They're already part owners because it's a member-owned company.
Brokerage Account
Although it doesn't issue shares to each member, they benefit from being part owners. One benefit of being a member-owner is that it entitles auto policyholders to receive yearly dividends. Members can have their auto dividends paid in cash or receive a credit on their auto insurance premiums. In 2023, USAA returned $1.9 billion to its members through distributions, dividends, bank rebates, and rewards.
Not everyone is eligible to become a USAA member (it's only open to U.S. military members and veterans and their spouses and children) and part-owner of the member-owned financial services company. However, you can invest in many other insurance stocks whether you're a policyholder or not. Here are three top insurance stocks to consider buying if you're ineligible to become a member-owner of USAA:
Progressive
Progressive (PGR 0.44%) is the second-largest auto insurer in the country. It also offers home, motorcycle, boat, and other insurance products. In 2023, the company wrote $61.5 billion in net insurance premiums and made more than $5 billion in income. Progressive returns some of its profits to shareholders via a quarterly dividend.
Lemonade
Lemonade (NASDAQ:LMND) is a technology-focused insurance company that uses artificial intelligence (AI) to help lower costs and speed up the insurance process. The company offers renters, homeowners, car, pet, and life insurance to customers in the U.S., Germany, the Netherlands, France, and the U.K.
The company ended 2023 with more than 2 million members. Lemonade doesn't return money to shareholders via dividends. However, it enables policyholders to select a charity to receive some of the company's profits each year.
MetLife
MetLife (MET 3.3%) is one of the world's leading financial services companies. It provides insurance, annuities, employee benefits, and asset management services to clients in more than 40 global markets. In 2023, MetLife made more than $5 billion in profit. The company returns some of that money to shareholders through quarterly dividend payments.
People who want to invest in one of these publicly traded insurance companies can purchase shares in any brokerage account. Here's a step-by-step guide on how to invest in stocks.
Step 1: Open a brokerage account
You'll have to open and fund a brokerage account before buying shares of any company. If you still need to open one, here are some of the best-rated brokers and trading platforms. Take your time to research the brokers to find the best one for you.
Step 2: Figure out your budget
Before making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to decide how to allocate that money. The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years.
That might seem like a daunting task for those starting out. However, you don't have to get there on the first day. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across around 10 stocks and then grow your portfolio from there.
Step 3: Research related companies
It's essential to thoroughly research a company before buying its shares. You should learn how it makes money and study its balance sheet and other factors to ensure you have a solid grasp on whether the company can grow value for its shareholders over the long term. Specific to investing in USAA, you must make sure you understand how the insurance industry works.
Shareholder
You should also research related companies. Progressive, Lemonade, and MetLife are notable competitors to USAA. Those considering USAA should research these rivals before becoming a member or buying shares of a publicly traded insurance company.
Step 4: Place an order
Once you've opened and funded a brokerage account, set your investing budget, and researched the stock and its competitors, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill in all the relevant information, including:
- The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
- The stock ticker (PGR for Progressive, LMND for Lemonade, and MET for MetLife).
- Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order because it guarantees you buy shares immediately at the current market price.
Once you complete the order page, click to submit your trade and become a shareholder in one of USAA's competitors. If it ever goes public, investors will follow a similar process when buying an IPO stock like USAA. If shares become available, fill in your brokerage account's order page with the insurance company's selected stock ticker and submit your trade.
Profitability
Is USAA profitable?
The member-owned USAA reports its financial results to its members each year. It makes that information publicly available on its website.
USAA returned to profitability in 2023. Since the COVID-19 pandemic, several external factors have affected the company's profitability, including historic catastrophes, elevated interest rates, surging inflation, and banking sector turmoil. However, actions by the company's management restored its profitability in 2023.
The company reported $1.2 billion in net income for 2023 and total comprehensive income of $3.3 billion. Both represented significant improvements from 2022, when the company posted an almost $1.3 billion net loss and a total comprehensive loss approaching $12 billion. USAA's strong year enabled it to return $1.9 billion to members, including paying policyholders $149 million in dividends.
USAA's improving profitability and strong balance sheet ($11.8 billion in cash at the end of 2023) will enable it to remain a member-owned company. Its sound financial foundation will also allow the company to continue growing its business to provide members with more services in the future.
Should I invest?
Should I invest in USAA?
While you can't buy stock in USAA directly, people eligible for membership can become part owners. Here's a look at reasons you might want to become a member-owner if you're eligible:
- You like that USAA takes care of the military by providing financial services geared toward military members and their families.
- USAA offers the financial services you need to meet your family's needs.
- You want an auto policy with a company that pays policyholders an annual auto dividend.
- You want to be part of a member-owned insurance company.
On the other hand, here are some reasons why becoming a member-owner of USAA might not be right for you:
- You can get better rates from other insurance companies.
- USAA doesn't provide all the products and services to meet your needs.
- You'd rather invest in another insurance stock to earn a fixed and growing dividend than potentially earn a variable dividend from USAA.
ETF options
ETFs with exposure to USAA
Since USAA isn't a publicly traded company, you can't passively invest in the insurance company through an exchange-traded fund (ETF). However, you can invest in the insurance industry through ETFs. Here are two funds to consider if you're seeking to gain broad exposure to the insurance industry:
- iShares U.S. Insurance ETF (IAK 0.74%): This fund aims to track an index composed of U.S. insurance companies. The ETF held 54 insurance stocks in mid-2024, including Progressive (largest holding, at 15.3%) and MetLife (fifth-largest holding, at 5.3%), and had a 0.4% ETF expense ratio.
- SPDR S&P Insurance ETF (KIE 0.6%): This fund seeks to track the total return of the S&P Insurance Select Sector Industry Index, which has a modified equal-weighted strategy. In mid-2024, it had 48 holdings, including Progressive (seventh-largest, at 2.3%), and a 0.35% expense ratio.
Related investing topics
The bottom line on USAA
USAA has provided its members with insurance and other financial products and services for more than 100 years. The member-owned company has a member focus. While not everyone is eligible to become a USAA member, anyone can invest in the insurance industry through a publicly traded insurance company or insurance-focused ETF.
Even though the sector has faced some stiff headwinds since the COVID-19 pandemic, which has affected its profitability, like USAA, many insurance companies are returning to profitability. The sector could make investors more money in the future through growing dividends and stock price appreciation.
Investing in USAA FAQs
Can you buy stock in USAA?
You can't buy stock in USAA. It has been a private company since its founding in 1922.
Is USAA an investment bank?
USAA is not an investment bank. It's a diversified financial service company that provides its members property, casualty, life insurance, banking, and investing services.
Is USAA publicly traded?
USAA is not a publicly traded company. It has been a private company since its founding in 1922.
Is USAA profitable?
USAA returned to profitability in 2023. The member-owned insurance company posted a significant loss in 2022 due to historic claims and other headwinds. However, it was solidly profitable in 2023, posting $1.2 billion in net income and nearly $3.3 billion in comprehensive income. USAA's strong profitability in 2023 enabled it to return $1.9 billion to members, including paying policyholders $149 million in dividends.
