Insurance can be an excellent business to invest in: Customers pay their insurers in exchange for the promise of future payments if certain things occur. In the meantime, the insurer can invest its customers' paid-in premiums and pocket 100% of the investment profits.

However, it's important to invest in insurers with a solid history of profitable underwriting and responsible investing practices. With that in mind, here's why three of our contributors think Metlife (NYSE: MET), UnitedHealth (NYSE: UNH), and Markel (NYSE: MKL) are worth a closer look right now.

A Rock-Solid Insurer At A Dirt Cheap Valuation

Matt Frankel, CFP (Metlife): Metlife is one of the largest stock holdings in my own portfolio, and I could end up adding even more shares. The largest U.S. life insurer, Metlife generated over $67 billion in revenue during 2018 on strong sales growth, especially in its key group benefits business (up 11% year over year in the fourth quarter) and is on track to grow significantly in 2019.

One big reason I like Metlife as a business is the growing need for solutions to the retirement savings shortfall in the U.S. Roughly half of Metlife's income comes from its retirement and income solutions (RIS) for businesses, and there's a clear trend toward more retirement savings options and easier access to retirement plans for businesses. Plus, Metlife's RIS investment spreads have been quite low recently thanks to the flattening yield curve, but this should be a much greater source of revenue as rates normalize over time.

Finally, don't be tricked into thinking Metlife is an expensive stock just because it's trading for just below its 52-week high. The stock is still valued extremely cheaply at just 8.5 times 2019 earnings estimates -- well below its peer group average. So, this insurance stock not only has an attractive 3.7% dividend yield but could grow with a lot of upside potential in the years ahead.

A Healthy Investment

Matthew Cochrane (UnitedHealth Group): UnitedHealth provides health insurance to 27 million members across all 50 states, making it the largest health insurer in the U.S. In 2018, it processed more than $750 billion in gross billing charges and spent more than $250 billion on healthcare for its customers.  

One of UnitedHealth's biggest growth drivers is Optum, an "information and technology-enabled health services business dedicated to modernizing the system and improving the health of people and communities" that provides pharmacy, healthcare delivery, and consulting services.  

In the company's 2019 first quarter, revenue grew to $60.3 billion, a 9% increase year over year, and its adjusted earnings per share (EPS) rose to $3.73, a 23% increase year over year. With political rhetoric keeping the share price down, shares now trade at a forward P/E ratio of just about 16.5 -- based on the midpoint of 2019 full-year earnings guidance -- which is a bargain for a stock growing earnings at a 20%-plus rate. 

The company's management is also shareholder-friendly. UnitedHealth has hiked its dividend every year since 2010, giving it a 20% raise in 2018, which puts the dividend yield at about 1.5%. The company also repurchased $3 billion of shares in 2019's first quarter.

With a compelling valuation, shareholder-friendly management, and strong growth, investors could do a lot worse than taking a closer look at UnitedHealth for their own portfolios.

Following in Buffett's Footsteps

Dan Caplinger (Markel): The success of Warren Buffett has led many promising people in business to seek to follow his strategy of taking insurance premium payments and investing them profitably before having to pay claims. Markel co-CEOs Tom Gayner and Richie Whitt do a lot of things similarly to what you'd expect from Buffett, working hard to find lucrative investment opportunities while taking care of Markel's core business.

Markel has multiple insurance operations under its corporate umbrella, including several categories of traditional insurance, a global reinsurance business, an insurance services specialist, and managers of insurance-linked securities. Also, the company holds its non-insurance operations under the Markel Ventures business, which includes everything from transportation-related businesses to the handbag manufacturer Brahmin.

Markel has seen its stock lose ground since 2018, with regulatory concerns having weighed on confidence about the company. Yet the fundamental strength of Markel's underlying business remains solid, and although the insurance company did suffer a setback when the stock market's decline in late 2018 led to a temporary hit to its financials, the strong rebound in the financial markets early in 2019 helped Markel recover from the worst of it. Markel has a good long-term track record of performance, and despite recent setbacks, the insurer still looks like a smart long-term bet.

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