We recently The 10 Best Health Insurance Stocks to BuyIn this article, we’ll look at how Chubb Limited (NYSE:CB) stands relative to other health insurance stocks.
Healthcare market: what does the future hold?
2023 posed significant challenges for the healthcare sector as investors adjusted their portfolios to adapt to the high interest rate environment. This caused the sector to underperform compared to other segments of the stock market, especially technology and communication services. The turbulent environment has understandably created anxiety and pessimism about the future. According to Deloitte’s annual Healthcare Outlook survey, only 3% of health system executives and 7% of health plan executives said their outlook for 2024 was “positive,” down from 15% and 40%, respectively, marking a significant decrease from the previous year.
On the bright side, the aging baby boomer generation, which accounts for 20% of the U.S. population, is driving the growing demand for healthcare services and products, such as insurance, medicines, medical equipment, and hospital care. Forecasts indicate that healthcare costs will increase significantly over the next decade. In the U.S., the Centers for Medicare and Medicaid Services projects that national healthcare spending will increase 5.6% annually between 2023 and 2032. Similarly, in OECD countries, healthcare spending as a percentage of GDP is expected to increase from 8.8% to 10.2% by 2030. In addition to the aging population, a growing middle class in emerging markets will also contribute to the growing demand for healthcare services.
One of the biggest stories this year has been the rise of GLP-1 drugs as weight loss treatments, which has helped major developers Eli Lilly and Company and Novo Nordisk (NVO) significantly outperform their peers. Meanwhile, after vaccine and therapeutics sales approached $100 billion in 2022, many companies experienced a deep downturn due to declining post-COVID revenues, making year-over-year comparisons difficult. On the other hand, BlackRock predicts that the Healthcare sector will have the highest 12-month forward profit growth of all sectors year-over-year, with sales growth coming in behind only Consumer Goods and Information Technology.
Current state of health insurance
Health insurance remains a major issue, especially in the United States. In 2022, more than 300 million Americans, about 92% of the population, had health insurance. The U.S. healthcare system is a mix of public and private insurers, with private insurance being the predominant form of insurance. In the same year, more than half of the insured had private insurance through their employers, and about 36% were enrolled in public insurance programs such as Medicare or Medicaid.
As of 2023, the U.S. health insurance exchanges, established under the Affordable Care Act in 2014, are celebrating their 10th year of operation. Over the past decade, the individual market has experienced annual fluctuations in insurer participation, pricing, and plan options, making it interesting to say the least. According to McKinsey, consumer engagement is expected to increase significantly by 25% from 2020 to 2022, reaching approximately 16 million participants, coinciding with enhanced subsidies introduced in the American Rescue Plan Act of 2021.
The global health insurance industry is expected to experience significant growth in the coming years. According to one report, the global health insurance market is projected to achieve a compound annual growth rate (CAGR) of 9.9% from 2022 to 2030, reaching a market value of $5.28 trillion by 2030.
Insurance company, car and family healthy life concept. Insurance agent presents a toy that symbolizes the coverage.
Our Methodology
To create a list of the best health insurance stocks to buy, we sifted through multiple ETFs and internet rankings. We then analyzed Insider Monkey’s Q1 2024 database to select the stocks that are most widely held by hedge funds. The following companies, ranked by the number of hedge funds that own their stocks, provide health insurance services in the United States and/or internationally. Why care about what hedge funds do? The reason is simple: our research shows that you can outperform the market by mimicking the top holdings of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks every quarter, which have returned 275% since May 2014 and outperformed the benchmark by 150 percentage points (more here).
Close-up of an insurance agent’s hand pointing to a marine insurance policy, highlighting the company’s expertise in marine insurance.
Chubb Limited (NYSE:CB)
Number of hedge fund holders: 53
Chubb Limited (NYSE:CB) is a global insurance company that provides a wide range of insurance and reinsurance products to individuals, businesses and other entities around the world. For the first quarter, the company reported strong financial results, beating analyst expectations with earnings per share of $5.41, $0.10 above the consensus estimate of $5.31. Chubb’s revenue reached $12.22 billion, beating analyst expectations of $11.75 billion. Despite the strong results, the stock was flat in after-hours trading.
The company also reported that net income increased 13.3% to $2.14 billion and core operating profit increased 20.3% to $2.22 billion. These improvements were partially impacted by two one-time items: a $55 million deferred tax benefit related to Bermuda tax law and a $30 million donation to the Chubb Charitable Foundation.
Additionally, Warren Buffett’s Berkshire Hathaway revealed a large investment in Chubb Limited (NYSE:CB). The conglomerate bought about 26 million shares of the Zurich-based insurance company, valuing it at $6.7 billion, making it Berkshire’s ninth-largest holding as of the end of March. On news of Berkshire’s investment, Chubb Limited (NYSE:CB) shares rose about 7% in after-hours trading. The stock has risen about 16.5% year-to-date.
Of the 919 hedge funds tracked by Insider Monkey, 53 reported holdings in Chubb Limited (NYSE:CB) as of the first quarter of 2024. Millennium Management is one of the leading hedge fund investors in the company, with over $54.9 million in shares.
General CB No.9 Check out our list of the best health insurance stocks to buy. The 10 Best Health Insurance Stocks to Buy Let’s take a look at other health insurance stocks that hedge funds are watching. While we acknowledge CB’s potential as an investment, we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you are looking for AI stocks that have better prospects than CB but trade for less than 5x their earnings, check out our report. Cheapest AI Stocks.
Read next: Analyst sees $25 billion in new ‘opportunity’ for NVIDIA and Jim Cramer’s 10 stock recommendations for June.
Disclosures: None. This article was originally published on Insider Monkey.