(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — Insurance might be the best business in the world. Not at all times because catastrophes happen and underwriting can sometimes get so crowded that the pricing becomes unattractive. But over long stretches of time, the potential negatives are far outweighed by the inherent profitability of being paid to assume the risks that your customers want to lay off on you. And when premiums are reinvested at high rates of return, the flywheel effect can turn these businesses into cash machines for their investors. It’s not an accident that Warren Buffett and Charlie Munger built the world’s greatest investment platform at Berkshire Hathaway on a foundation of insurance companies. Today we’re going to update you on Travelers (TRV) now that the company has reported earnings. This was a homerun for regular readers of The Best Stocks in the Market column here at CNBC Pro. We’re also going to tell you about two other plays in the space that have been working this summer — Chubb (CB) and Aflac (AFL) — both of which are Dividend Aristocrats, with payouts growing consecutively for 33 years and 43 years respectively. Travelers is on the verge of becoming an Aristocrat, with a 23 year track record of increasing its dividend. This is notable given that, during the Great Financial Crisis, many insurance companies had to cut or even suspend their dividends to conserve capital and survive. These three did not, which speaks to the quality of the companies and the relative safety of these business models. Here’s Sean with our usual high-level look at the Best Stocks list and the stories behind today’s tickers… As of July 20, there are 208 names on The Best Stocks in the Market list. Top sector ranking: Top industries: Top 5 best stocks by relative strength: Sector spotlight: Insurance The Travelers Cos., Inc. (TRV): Sean — The State Street Insurance ETF (KIE) ripped to all-time highs in July. Not a single stock in the ETF is below its 50-day moving average, and 85% of the holdings are above their 200-day. The median insurance name sits just 5% below its 52-week high. Compare that to the S & P 500 where the median stock is 14% below its high. Insurance is ripping. Luckily for us, Travelers is leading the way. We wrote about TRV on June 11 , calling it a case study on how implementing AI can expand the bottom line. Since then, the stock has returned 21.4%, roughly double KIE at 10.9% and nearly triple the financial sector (XLF) at 7.3%. On Friday, Travelers reported Q2 core EPS of $10.04 against a consensus estimate of roughly $5.39 — nearly double what the Street was looking for. Income came in at $2.2 billion with a return on equity of 24.9%. Catastrophe losses of $518 million were nearly half of last year’s $927 million and reserve development was favorable across all three segments while investment income grew 14% year over year. The stock jumped almost 8% to a new all-time high in response. Management attributed about half a point of the Business Insurance underlying loss ratio improvement to AI-driven claims processing. Their digital underwriting platform, “Travis,” now extracts data and generates quotes in seconds. CEO Alan Schnitzer described the earnings engine as a “virtuous cycle” — profits fund innovation, innovation funds better returns. Travelers bought back $1.31 billion of stock in Q2 and paid $266 million in dividends, with $3.9 billion left on the buyback authorization. Since the buyback program began in 2006, the company has retired 70% of its originally outstanding shares. It’s a pretty good time to be a Travelers shareholder. Josh — No new entries here. The stock made a massive move since we wrote it up with a 10% gain on Friday after the earnings report. Let it cool off or, in a best case scenario, trade flat for a few weeks while it consolidates the run and cleans up the profit-takers. I still like it. Raise stops to $325 and stay long if you’ve been with us. Chubb Ltd. (CB): Sean — Chubb is the largest commercial insurer in the U.S. and one of the only carriers with a footprint big enough to service multinational corporations with operations in 54 countries, $275.5 billion in total assets, and nearly half the business written outside the U.S. Overseas CB grew net premiums 14.4% last quarter, with consumer lines up 20.5%, and the life insurance business grew premiums 33.1% to $2.29 billion, mostly out of Asia. The Q1 numbers were excellent across the board. Operating EPS of $6.82 grew 85% year over year (13.5% growth excluding catastrophe losses normalizing for last year’s California wildfires) while net premiums written rose 10.7% to $14 billion. Net income has climbed from $5.3 billion in FY2022 to $10.3 billion in FY2025 — roughly a double in three years. The investment portfolio is a big lever for the company — a record $173 billion in invested assets, with new money going to work at elevated rates. This is why scale is a massive advantage in this business. Every quarter that rates stay elevated, that investment income compounds at a higher rate and is paid out to shareholders. Net investment income grew 9.5% in Q1, and management guided Q2 to $1.825–$1.85 billion. The board raised the dividend 5.2% in May to $4.08 annually, the 33rd consecutive annual increase, for a yield of about 1.2%. On Tuesday we get the Q2 report, with the Street looking for $6.60 in EPS on $15.89 billion in revenue, up 7.5% and 7.3%, respectively. Josh — We’re writing about Chubb the day before earnings so a lot could change when the company reports. I think a breakout is coming so long as the company continues to execute the way Sean has described above. CB broke below its 50-day moving average in the spring and spent several weeks trading underneath it before buyers stepped back in and reclaimed that level. From there the stock didn’t look back, running to new highs in July. The rally then produced a sharp pullback, with price gapping down into a brief consolidation before buyers gapped it right back out of that range, leaving gaps on both sides of the dip. If this formation had gone on for more than a few sessions I would call it an island reversal, but it’s even more bullish that it happened so quickly. Gap down immediately followed by gap up. The buyers are getting loud. A sustained move back above the July peak is the next level to clear. RSI is 57, sitting in the middle of the range with plenty of room to run in either direction. Nothing about the current momentum reading argues against the stock continuing higher from here. Both traders and investors can use the $320s as their stop, a zone where the stock found footing on multiple occasions before resuming higher. Aflac, Inc. (AFL): Sean — Aflac sells supplemental life and health insurance in two markets, the U.S. and Japan, and Japan is by far the bigger one. Within Japan, sales grew 25.5% in Q1 on the strength of three new products last quarter and margins expanded to 35.0% from 31.8% year over year. Stable to slightly growing premium growth is the goal for AFL and the business generates roughly $2.5 to $3 billion in free cash flow a year doing it. That cash finds its way back to shareholders, too. Aflac returned $1.3 billion in Q1 between buybacks and dividends and the yield of about 2.0% is the highest of the three names here, backed by 43 consecutive years of dividend increases. The stock trades near $124, all-time high territory, ahead of the Q2 report on Aug. 6. Josh — This is a clean breakout and a running follow-through. When I get to heaven, it’ll be a room full of charts like this one and a bucket of ice-cold Pilsner Urquells while I trade ’em. AFL has been in a strong uptrend, recently pushing to new highs above $124 with the 50-day rising underneath it at $117. The sharp market selloff in March drove the stock down to $110, where it found its footing and reversed cleanly. That recovery and the subsequent breakout to new highs tells you everything you need to know about who is in control of this chart. RSI is 65 reflecting genuine momentum as the stock breaks out to new highs. It’s a bit elevated but not at an extreme, leaving room for continuation without an immediate need to cool off. Traders can stay long as long as AFL continues to honor its rising 50-day on a weekly closing basis, with any breach of that level a signal to step aside. For investors, $110 is the line that defines the uptrend. That level absorbed the selling in March and held cleanly. A close below it would signal the trend has broken and it would be time to look elsewhere. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. 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There’s an insurance name on Josh Brown’s Best Stocks list that’s been a homerun
