3 P&C Insurers to Add for Better Returns in Sluggish September

The Dow Jones Industrial Average and the Nasdaq Composite have declined since Aug. 31, 2026. September has historically been a sluggish month for the stock market. While there are several theories for this uncanny phenomenon, the most common notion is that investors take time off during the summer months, leading to an overall decline in trading volumes. Stock Trader’s Almanac shows that September has been the weakest month for the S&P 500 since 1950 and for the Nasdaq since 1971.

The property and casualty insurance industry continues to face rising losses from severe weather, wildfires, social inflation and expensive litigation. Higher repair and replacement costs add pressure, while moderating premium and reinsurance rates could constrain margins. Regulatory oversight and affordability challenges in catastrophe-prone states are additional concerns. Still, the industry has gained 8.8% in the last three months, outperforming the Finance sector’s increase of 5.8% and the Zacks S&P 500 composite’s rise of 0.2%.

Insurance vs Finance, S&P 500 in 3 Months 

Image Source: Zacks Investment Research

Expanded exposure, healthy renewals, strong retention, new business gains, portfolio repositioning, disciplined segmentation and adequate reinsurance should support The Allstate Corporation ALL, Heritage Insurance Holdings HRTG and American Integrity Insurance Group AII in delivering operational excellence and, in turn, better returns for investors.

Factors Dominating the Insurance Industry

The insurance industry remains sensitive to interest-rate movements. Following three rate cuts in 2025, the federal funds rate stands at 3.50-3.75%. Persistent inflation has prevented further easing in 2026, while the Fed’s June projection of 3.8% for year-end suggests rates could remain steady or edge higher. Potential easing in 2027 may follow as inflation moderates. Higher rates generally support insurers’ investment income because they invest premiums before claims are paid.

Pricing is equally important for premium growth and claims management. Marsh’s Global Insurance Market Index showed a 6% decline in global commercial insurance rates during the second quarter of 2026, extending pricing moderation to seven consecutive quarters. Increased competition, favorable claims experience and improved reinsurance conditions drove the decline. Even so, disciplined underwriting, greater insured exposure and new business generation should support premium growth. Swiss Re expects global insurance premiums to increase 4% in 2026.

Colorado State University (CSU) expects the 2026 hurricane season to be milder than normal, forecasting nine named storms, including four hurricanes and one major hurricane. The hurricane season typically starts in June and lasts through November, gathering strength in August and September. Thus, property and casualty insurers’ third-quarter results are affected the most.  

Per Verisk and The American Property Casualty Insurance Association (APCIA), premiums written increased 2.1% and earned premiums grew 3% in the first half of 2026. Aon estimates first-half 2026 total economic losses to be $111 billion, of which 43% is covered by insurance. Verisk and APCIA stated a net underwriting gain of $31.7 billion in the first half of 2026, up nearly three times year over year. Policyholders’ surplus improved to $1.3 trillion as of June 30, 2026 from $1.13 trillion as of June 30, 2025. Swiss Re projects the combined ratio to deteriorate by 50 basis points to 99% in 2026.

Also, the insurance industry continues to witness accelerated digitalization. Players are investing heavily in technology to improve scale and efficiencies. 

A sturdy capital position supports effective capital deployments like mergers and acquisitions, dividend hikes, special dividends and share buyback programs. 

Notably, the insurance industry is currently undervalued. The price-to-book multiple, commonly used for valuing insurance stocks, is currently pegged at 1.48, compared with the S&P 500’s 7.19 and the sector’s 4.46. 

Insurers like ALL, HRTG and AII, banking on operational excellence, are poised to deliver better returns for investors.

Value Picks

Picking the right stocks for greater investment rewards might be an uphill task. With the help of our Zacks Stock Screener, we have identified the best bets.

We have shortlisted three stocks with a Zacks Rank #1 (Strong Buy) and an impressive Value Score of A or B. Each stock has witnessed positive estimate revisions, reflecting analysts’ optimism about their prospects. Shares have gained more than 10% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

Value Score identifies stocks that are undervalued. These value stocks have a long history of delivering superior returns.

Allstate Corporation: Northbrook, IL-based Allstate is the fourth-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the United States.  Growing premiums, Protection Services, business streamlining efforts and solid cash flows are expected to drive long-term growth. Strength in the P&C market supports premium growth, improved rate adequacy, and product innovation, particularly in homeowners and auto lines exposed to weather-related risks. Allstate’s Transformative Growth strategy is also driving market-share gains.

The Zacks Consensus Estimate for ALL’s 2026 and 2027 earnings has moved up 13.8% and 4.5%, respectively, in the past 30 days. 

The stock currently has a P/B ratio of 2.1. It has a Value Score of A. Its shares have gained 24.6% in the past three months.

Heritage Insurance: Tampa, FL-based HRTG provides personal and commercial residential insurance products. Its focus on rate adequacy, selective underwriting and profit-oriented underwriting criteria, while restricting new business in over-concentrated markets or products, positions it well for growth. This Zacks Rank #1 insurer has strategically diversified its portfolio to achieve better risk distribution, claims trends and lower reinsurance costs.

The Zacks Consensus Estimate for HRTG’s 2026 and 2027 earnings has moved up 27.7% and 14.5%, respectively, in the past 30 days. 

The stock currently has a P/B ratio of 1.84. It has a Value Score of A. Its shares have gained 17.4% in the past three months.

American Integrity Insurance Group: Headquartered in Tampa, FL, American Integrity operates as an insurance company in the United States. American Integrity’s performance is being driven by rapid voluntary-policy growth, particularly in Florida’s Tri-County region, middle-aged homes and expansion markets. The company appears well-positioned for profitable long-term growth, supported by geographic expansion, disciplined risk selection, Florida’s insurance reforms and lower catastrophe-reinsurance pricing. However, its heavy Florida exposure and vulnerability to hurricanes could make earnings volatile and temper the consistency of that growth. 

The Zacks Consensus Estimate for 2026 and 2027 earnings has moved 39.8% and 5.4% north, respectively, in the past 30 days. Its expected long-term earnings growth rate is pegged at 8%. 

The stock currently has a P/B ratio of 1.38. It has a Value Score of A. Its shares have gained 25.3% in the past three months.

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

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