With inflation rising to a 31-year high, it is no surprise that investors are looking for opportunities in sectors that will help them dodge its ravages. Because insurance companies usually fare well during inflation, we think it could be wise to add fundamentally sound insurance stocks Hartford Financial (HIG), Fairfax Financial (FRFHF), and Alleghany (NYSE:Y) to one’s portfolio. So, let’s discuss these names.The stock market has been volatile of late owing to rising inflation. The Consumer Price Index rose 6.2% in October from a year earlier, its biggest jump in more than 30 years. While the inflationary environment may not be favorable for all sectors, it could bode well for a few, such as insurance. Since high inflation usually leads to higher interest rates, it helps insurers earn more on their investments, thereby enhancing their profitability.
According to personal finance expert Suze Orman, “Only stocks have a track record of earning more than inflation.” During times like these, insurance companies, being of a defensive nature, can help combat inflation. Furthermore, according to an Insurance Journal report, the global insurance market is expected to exceed $7 trillion in premiums for the first time by mid-2022, which is earlier than expected.
So, to help protect one’s portfolio from inflation, we think it could be wise to scoop up quality insurance stocks—The Hartford Financial Services Group, Inc. (NYSE:HIG), Fairfax Financial Holdings Limited (OTC:FRFHF), and Alleghany Corporation (Y).