Top 7 Undervalued Insurance Stocks for Value Investors in 2025

How AAII’s Valuation Lens Casts New Light on Insurance Stocks

When the American Association of Individual Investors (AAII) recently spotlighted seven supposedly undervalued U.S. insurance stocks, it provided more than a shopping list for value investors. It offered a case study in how to interpret valuation metrics in a capital-intensive, regulated, and diverse sector.

In this article, we’ll unpack the insight behind the list, dig into nuance, and suggest how insurance professionals might think about valuation signals in this space.

The Core of AAII’s Approach

AAII’s methodology hinges on six financial metrics:

• price-to-sales

• price-to-earnings

• enterprise-value-to-EBITDA (EV/EBITDA)

• shareholder yield

• price-to-book

• price-to-free-cash-flow

By converting each ratio into a percentile rank and averaging them, AAII arrives at a Value Score. That score is then slotted into a Value Grade (from deep value down to less attractive). The idea is to balance conflicting signals—one metric may look strong, another weak. The composite helps smooth out noise.

It’s worth remembering, though, that in the insurance space, capital structure, regulatory capital, reserve adequacy, reinsurance arrangements, and reserve development history all affect these ratios in ways that aren’t always captured by a mechanical screen.

The Seven Names on AAII’s Radar

Here’s a quick view of the seven insurers AAII called out (in alphabetical order), along with what to watch under the hood:

These names reflect a cross-section of the industry: specialty, reinsurance, life/annuity, commercial, and niche underwriting.

Reading Between the Lines

Let’s zoom in on a few instructive cases.

Assurant: revenue vs. capital metrics

Assurant’s relatively low price-to-sales ratio suggests investors may undervalue its revenue base. But its higher price-to-book and P/FCF multiples warn that capital returns and cash flow may already be priced in. It’s the classic tension: is the stock cheap relative to top line, or expensive relative to capital deployed?

CNA: high score, but not without blemishes

With a Value Score near 89, CNA stands out. But even here, price-to-earnings and book multiples exceed medians—meaning much of the upside hinges on execution rather than bargain multiples alone.

Skyward: scaling in niches

Skyward’s specialty focus (including areas like cannabis insurance) differentiates it. Its lower price-to-book is attractive, but elevated P/Es and its much smaller scale suggest greater volatility and higher sensitivity to underwriting cycles.

What This Means for Insurance Insiders

Here’s where a few translation tips might help if you consume screens like AAII’s:

• Understand capital intensity: Two insurers with identical P/E can have wildly different risk profiles if one holds heavy legacy reserves or is reinsurance-laden.

• Look at reserve adequacy and development: Favorable valuation metrics can be undone by surprise run-offs, reserve strengthening, or adverse loss trends.

• Consider the regulatory & rating context: An insurer with tight capital ratios or downgrades will attract higher multiple de-ratings irrespective of value signals.

• Balance scale versus optionality: Specialty or niche players may offer upside if they win in a niche; large diversified companies may be less exciting but more stable.

“A stock can look cheap by one metric yet expensive by another — the composite helps, but doesn’t replace judgment.”
— AAII analyst commentary

In short, screens such as AAII’s are valuable starting points—but they are not thesis statements. They point you toward names worthy of deeper dives, not off-the-shelf recommendations.

Final Thoughts

The seven insurance stocks AAII flagged open a window into how valuation metrics play out in a sector defined by capital, risk, and long time horizons. But the real value lies in combining those screens with business judgment: underwriting trends, capital strength, reinsurance strategy, reserve dynamics, and competitive positioning.

If you’re in the insurance industry, whether as carrier executive, investor, or analyst, treating “cheap” valuations as invitations to dig deeper, not as truth, is your edge.