While ModernGraham supports the bottom-up approach to investing, many investors do utilize the top-down method, whereby an industry is selected before the company itself. With that in mind, this article will take a brief look at the best companies of the Insurance industry, selecting the most promising investment opportunities within the industry, and giving a broad look into the industry as a whole.

Out of the more than 560 companies reviewed by ModernGraham, 28 were identified as being closely related to the insurance industry. Of those, eight are suitable for the Defensive Investor, eleven are suitable for the Enterprising Investor, and the remaining nine are considered speculative at this time. Excluding any extreme outliers, the average company was rated as being priced at 82.34% to its MG Value (estimated intrinsic value), with an average PEmg ratio of 16.52.  The industry as a whole, therefore would appear to be fairly valued (within a margin of safety relative to the current price), particularly in comparison to the market (see Mr. Market’s Mental State).

The Elite

The following companies have been rated as the most undervalued and suitable for either the Defensive Investor or the Enterprising Investor:

ACE Limited (ACE)

Ace Limited qualifies for both the Defensive Investor and the Enterprising Investor. The company passes all of the requirements of both investor types, an accomplishment indicative of the company’s strong financial position. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $6.42 in 2011 to an estimated $8.84 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.96% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

 

AFLAC Incorporated (AFL)

Aflac Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong fundamentals.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.92 in 2011 to an estimated $6.07 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

 

Allstate Corp (ALL)

Allstate passes the initial requirements of the Enterprising Investor but not the Defensive Investor. In fact, the company passes every requirement of the Enterprising Investor types, but the Defensive Investor is concerned by the lack of earnings stability and insufficient earnings growth over the last ten years. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $1.38 in 2011 to an estimated $4.97 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of only 2.69% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 52% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that Allstate is significantly undervalued at the present time. (See the full valuation)

 

American Financial Group Inc (AFG)

American Financial Group Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  The company passes all of the initial requirements of both investor types, an indication that the company has  a very strong financial position.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.58 in 2011 to an estimated $5.01 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.82% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

 

American International Group Inc (AIG)

American International Group Inc. qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor is concerned by the insufficient earnings growth or stability over the last ten years, and the inconsistent dividend record, while the company passes all of the Enterprising Investor’s requirements. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.

As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from a loss of $109.06 in 2011 to an estimated gain of $5.36 for 2015. This level of demonstrated growth is greater than the market’s implied estimate of 1.66% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price. (See the full valuation)

 

CIGNA Corporation (CI)

Cigna Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.11 in 2011 to an estimated $6.94 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 6.79% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

 

Marsh & McLennan Companies, Inc. (MMC)

Marsh & McLennan Companies qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.38 in 2011 to an estimated $2.56 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.34% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

 

Metlife Inc (MET)

MetLife passes the initial requirements of the Enterprising Investor but not the Defensive Investor. In fact, the company passes every requirement of the Enterprising Investor types, but the Defensive Investor is concerned by the lack of earnings stability and insufficient earnings growth over the last ten years. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $3.02 in 2011 to an estimated $4.48 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of only 2.15% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 9.6% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that MetLife is significantly undervalued at the present time. (See the full valuation)

 

Principal Financial Group Inc (PFG)

Principal Financial Group qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.99 in 2011 to an estimated $3.48 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.79% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

 

Torchmark Corporation (TMK)

Torchmark Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The company passes all of the initial requirements of both investor types, an indication that the company has  a very strong financial position. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.63 in 2011 to an estimated $3.95 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.42% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

 

Travelers Companies Inc (TRV)

Travelers Companies qualifies for both the Defensive Investor and the Enterprising Investor.  The company passes all of the requirements of both investor types, an accomplishment indicative of the company’s strong financial position.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $5.25 in 2011 to an estimated $8.88 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.81% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

 

Unum Group (UNM)

Unum Group qualifies for both the Defensive Investor and the Enterprising Investor, as the company passes all of the requirements of both investor types.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2011 to an estimated $2.73 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

 

The Good

The following companies have been rated as fairly valued and suitable for either the Defensive Investor or the Enterprising Investor:

Aetna Inc (AET)

Aetna Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned with the low current ratio.  The Enterprising Investor is willing to overlook concerns with the level of debt relative to the current assets because the company passes the more conservative Defensive Investor requirements. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.03 in 2011 to an estimated $6.02 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 4.96% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price. (See the full valuation)

 

Anthem Inc (ANTM)

Anthem Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history while the Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $7.25 in 2011 to an estimated $8.88 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 4.01% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

 

Assurant, Inc. (AIZ)

Assurant Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the inconsistent dividend record and the insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.09 in 2011 to an estimated $5.41 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 3.07% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

 

Chubb Corp (CB)

Chubb Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong fundamentals. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $6.08 in 2011 to an estimated $7.68 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.63% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

 

Cincinnati Financial Corporation (CINF)

Cincinnati Financial Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.16 in 2011 to an estimated $2.92 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 5.22% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

 

Progressive Corp (PGR)

Progressive Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years as well as the inconsistent dividend record. The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.37 in 2011 to an estimated $1.91 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 3.96% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

 

The Full List

 Clicking on the company name will take you to the company’s latest valuation.

Ticker	Name with Link	Investor Type	Latest Valuation Date	MG Value	Recent Price	Price as a percent of Value	PEmg Ratio	Div. Yield
ACE	ACE Limited	D	8/18/2015	—	$104.33	—	—	2.57%
AET	Aetna Inc	D	7/21/2015	—	$113.04	—	—	0.88%
AFG	American Financial Group Inc	D	8/7/2015	—	$70.26	—	—	1.42%
AFL	AFLAC Incorporated	D	9/11/2015	—	$59.32	—	—	2.63%
AHL	Aspen Insurance Holdings Limited	S	8/9/2015	—	$47.39	—	—	1.77%
AIG	American International Group Inc	E	8/9/2015	—	$58.28	—	—	1.92%
AIZ	Assurant, Inc.	E	8/11/2015	—	$79.68	—	—	2.51%
AJG	Arthur J Gallagher & Co	S	8/11/2015	—	$42.11	—	—	3.51%
ALL	Allstate Corp	E	7/30/2015	—	$59.90	—	—	2.00%
ANTM	Anthem Inc	E	9/14/2015	—	$142.85	—	—	1.75%
AON	Aon Plc	S	11/30/2014	—	$91.52	—	—	1.31%
BRK.B	Berkshire Hathaway Inc.	S	8/19/2015	—	$132.38	—	—	#N/A
CB	Chubb Corp	D	9/21/2015	—	$123.40	—	—	1.85%
CI	CIGNA Corporation	E	7/17/2015	—	$139.69	—	—	0.03%
CINF	Cincinnati Financial Corporation	E	8/8/2015	—	$55.05	—	—	3.34%
GNW	Genworth Financial Inc	S	6/2/2015	—	$4.88	—	—	N/A
HIG	Hartford Financial Services Group Inc	S	6/3/2015	—	$46.67	—	—	1.80%
HUM	Humana Inc	E	7/24/2015	—	$183.71	—	—	0.63%
L	Loews Corporation	S	11/5/2014	—	$36.65	—	—	0.68%
MET	Metlife Inc	E	7/22/2015	—	$47.79	—	—	3.14%
MMC	Marsh & McLennan Companies, Inc.	E	9/8/2015	—	$53.77	—	—	2.31%
PFG	Principal Financial Group Inc	E	8/11/2015	—	$49.09	—	—	3.10%
PGR	Progressive Corp	E	8/19/2015	—	$31.39	—	—	2.20%
PRU	Prudential Financial Inc	S	12/16/2014	—	$77.28	—	—	3.00%
TMK	Torchmark Corporation	D	7/22/2015	—	$57.28	—	—	0.94%
TRV	Travelers Companies Inc	D	8/15/2015	—	$101.86	—	—	2.40%
UNM	Unum Group	D	8/11/2015	—	$32.73	—	—	2.26%
XL	XL Group plc	S	3/30/2015	—	$36.33	—	—	2.20%