title: "Best Insurance Stocks to Buy in 2026: 5 Float Machines Warren Buffett Would Love" description: "Our deep analysis of 458 S&P 500 stocks found 5 insurance companies with wide moats, high returns on capital, and attractive valuations. These float-powered compounders are Buffett's favorite business model." slug: best-insurance-stocks-buffett-style-2026 date: 2026-02-24 category: Stock Picks excerpt: "Insurance companies that generate underwriting profits while investing billions in float are the ultimate compounders. Our analysis found 5 insurance stocks trading at attractive valuations with Buffett-grade moats." keywords: ["best insurance stocks 2026", "insurance stocks to buy", "buffett insurance stocks", "float investing", "progressive stock", "insurance stock picks"] author: Moatifi
Best Insurance Stocks to Buy in 2026: 5 Float Machines Warren Buffett Would Love
Warren Buffett built Berkshire Hathaway into a trillion-dollar empire on one insight: insurance float is the cheapest form of capital in existence. Policyholders pay premiums upfront; claims get paid later. That gap is free money to invest, and when the underwriting itself turns a profit, the float is better than free. It pays you to hold it.
After analyzing all 458 S&P 500 companies with our Buffett-style deep analysis methodology, five insurance stocks stood out as exceptional compounders trading at reasonable prices. These are businesses with durable competitive advantages, disciplined underwriting cultures, and the kind of float-powered economics that made Berkshire what it is today.
If you want to find more companies like these, our free stock screener lets you filter by moat strength, ROE, debt levels, and valuation metrics to surface quality businesses across every sector.
Why Insurance Stocks Are the Ultimate Buffett Investment
Buffett's love for insurance is not sentimental. It is mathematical. A well-run insurance company generates three sources of return simultaneously:
- Underwriting profit: Premiums collected exceed claims paid, creating operating income before any investment returns.
- Investment income on float: Billions in premiums sit invested in stocks, bonds, and cash before claims are paid. This is capital you did not have to raise or borrow.
- Compounding at scale: As the business grows, float grows. More float means more invested capital. The flywheel accelerates.
The best insurance companies achieve combined ratios below 100% consistently, meaning they profit from underwriting alone. Then the investment income is pure gravy. This double-dip is why Buffett allocated the majority of Berkshire's capital to insurance operations over five decades.
Not all insurers are equal. The ones worth buying share specific traits: disciplined underwriting culture, scale advantages in data or distribution, low expense ratios, and management teams that resist the temptation to chase premium volume at the expense of profitability. Here are five that pass the test.
1. Progressive Corporation (PGR): The Data-Driven Float Machine
Current Price: ~$204 | Fair Value Estimate: $240-$280 | Moat Score: 9/10
View Progressive's full analysis on Moatifi
Progressive is perhaps the purest example of a Buffett-style insurance compounder operating today. The company has been collecting and analyzing driver behavior data through its Snapshot telematics program for over 15 years, building a proprietary dataset that no competitor can replicate overnight. This data advantage translates directly into better risk pricing, which means Progressive can profitably underwrite policies that competitors cannot.
The numbers tell the story: Progressive has maintained an average combined ratio around 88% over the past decade, meaning it earns roughly 12 cents of underwriting profit on every dollar of premium. In an industry where most companies consider breaking even on underwriting a victory, that is exceptional. Premium growth has averaged 16% annually, feeding a float pool that now exceeds $50 billion.
Why it qualifies: - 30+ years of telematics data creating a compounding information advantage - Combined ratio consistently below 90%, among the best in P&C insurance - Premium growth of 16% annually over recent years - Float exceeds $50 billion and growing rapidly - Down roughly 30% from all-time highs, creating a better entry point
Progressive's recent pullback from its highs offers an unusual chance to buy a company of this quality at a reasonable price. The stock trades at approximately 16x forward earnings, which is cheap for a business growing premiums in the mid-teens with industry-leading margins.
2. Arch Capital Group (ACGL): The Reinsurance Specialist
Current Price: ~$99 | Fair Value Estimate: $95-$120 | Moat Score: 8/10
View Arch Capital's full analysis on Moatifi
Arch Capital is the best reinsurer most retail investors have never heard of. The company operates across insurance, reinsurance, and mortgage insurance, giving it diversification that smooths earnings through different market cycles. What makes Arch special is its underwriting discipline: management has consistently walked away from business that does not meet their return thresholds, even when that meant slower top-line growth.
The result is a 20%+ return on equity sustained over multiple years and a book value per share that has compounded at double-digit rates for over a decade. At roughly 8.5x trailing earnings, Arch trades like a mediocre business, but its financial metrics tell a completely different story.
Why it qualifies: - 20%+ ROE sustained across market cycles - Diversified across insurance, reinsurance, and mortgage insurance - Conservative reserving practices; favorable loss reserve development - Management team with a culture of walking away from bad underwriting - Trading at approximately 8.5x P/E, a significant discount to quality
Arch's reinsurance operations benefit from the hardening pricing cycle in global reinsurance markets. After years of natural catastrophe losses, reinsurance pricing has risen substantially, and Arch is well-positioned to earn outsized returns on this favorable pricing environment.
3. Hartford Financial Services (HIG): The Commercial Lines Compounder
Current Price: ~$135 | Fair Value Estimate: $140-$170 | Moat Score: 7/10
View Hartford Financial's full analysis on Moatifi
Hartford has quietly transformed itself from a struggling conglomerate into a focused commercial lines powerhouse. After selling off its life insurance and annuity businesses, the company now concentrates on small and mid-market commercial insurance, where it has built a durable competitive position through agency relationships and proprietary data analytics.
The small commercial segment is where Hartford shines. Small businesses often buy insurance once and forget about it, creating sticky customer relationships with low churn. Hartford's digital tools for agents make it easier to quote and bind policies quickly, creating a distribution advantage that reinforces retention. The company's expense ratio consistently runs below industry averages, indicating operational discipline.
Why it qualifies: - Focused on high-retention small and mid-market commercial lines - Strong agency relationships creating distribution moat - Expense ratio consistently below industry averages - ROE in the mid-to-high teens - Reasonable valuation at approximately 11x forward earnings
For investors who want exposure to the insurance compounding thesis without concentration risk, Hartford offers a more diversified bet than a pure-play like Progressive. The commercial lines market is also less competitive than personal auto, giving Hartford more pricing power.
4. Brown & Brown (BRO): The Insurance Brokerage Rollup
Current Price: ~$69 | Fair Value Estimate: $85-$110 | Moat Score: 8/10
View Brown & Brown's full analysis on Moatifi
Brown & Brown is not technically an insurance company. It is an insurance brokerage, meaning it earns commissions and fees for placing insurance on behalf of clients rather than taking underwriting risk itself. This distinction matters enormously: brokerages earn recurring revenue from policy renewals without bearing the risk of catastrophic losses. It is one of the most attractive business models in financial services.
The company has grown through a disciplined acquisition strategy, buying small and mid-sized brokerages at reasonable prices and integrating them into its platform. This rollup strategy works because insurance brokerage is intensely local, and consolidating fragmented agencies creates economies of scale in back-office operations while preserving the local relationships that drive business.
Why it qualifies: - Asset-light model: earns fees without underwriting risk - 90%+ client retention rates creating annuity-like revenue - Decades of successful acquisition-driven growth - Operating margins expanding through scale - Trading at approximately 17x forward earnings, below its historical average of ~25x
Brown & Brown is particularly interesting because it captures the economics of insurance growth without the tail risk. When premiums rise industry-wide (as they have in the current hard market), brokerages earn higher commissions automatically. When catastrophes cause losses, the brokerages are unaffected because they did not underwrite the risk.
5. Marsh & McLennan (MMC): The Global Insurance Broker
Current Price: ~$177 | Fair Value Estimate: $195-$230 | Moat Score: 9/10
View Marsh & McLennan's full analysis on Moatifi
If Brown & Brown is the mid-market brokerage compounder, Marsh & McLennan is the enterprise giant. As the world's largest insurance broker with approximately 22% global market share, Marsh operates in a tier of its own. The company's scale allows it to negotiate terms with insurers that smaller brokers cannot match, creating a self-reinforcing competitive advantage.
Marsh's consulting divisions (Mercer and Oliver Wyman) add diversification beyond pure brokerage, though the Risk and Insurance Services segment remains the crown jewel. The company generates approximately $5 billion in free cash flow annually, supports a growing dividend, and has delivered total returns that have compounded at double-digit rates over extended periods.
Why it qualifies: - 22% global market share, largest in the industry - Toll-booth business model: earns fees on trillions of dollars in insured risk - Operating margins of 25.6% and expanding - $5 billion annual free cash flow - Down approximately 29% from all-time highs, creating an attractive entry point
The pullback in Marsh shares over recent months has been driven by broader market rotation rather than any fundamental deterioration. For patient investors, buying the world's dominant insurance broker at a 29% discount to its highs is exactly the kind of opportunity Buffett describes as a "wonderful company at a fair price."
How Float Creates Compounding Magic
The common thread connecting these five companies is the economic power of insurance float, whether they hold it directly (Progressive, Arch Capital, Hartford) or benefit from it indirectly through the brokerage fees it generates (Brown & Brown, Marsh).
To illustrate: an insurer collecting $10 billion in annual premiums with an average claims payout lag of two years has roughly $20 billion in float to invest. At a 5% return on that float, the company earns $1 billion in investment income before considering any underwriting profit. This is capital that required zero equity issuance and zero debt. It simply appeared because people pay for insurance before they need it.
When the underwriting itself is profitable (combined ratio below 100%), the company is literally being paid to hold other people's money. This is why Buffett called float his "secret weapon" and why he repeatedly said he would rather own a great insurance company than almost any other type of business.
Building an Insurance-Focused Portfolio
These five stocks can serve as the foundation of an insurance-focused sleeve within a broader portfolio. For investors looking to replicate the Buffett playbook at a smaller scale:
- Core holdings: Progressive and Marsh & McLennan for their unmatched competitive positions
- Value plays: Arch Capital and Hartford for lower valuations and higher near-term upside potential
- Asset-light exposure: Brown & Brown for brokerage economics without underwriting risk
Use the Moatifi screener to compare these companies side-by-side on moat strength, returns on capital, and valuation metrics. You can also read our complete guide to how Warren Buffett picks stocks to understand the full framework behind these selections.
For more Buffett-style investment ideas, check out our analysis of undervalued wide moat stocks in 2026 and our breakdown of Berkshire Hathaway's $344 billion cash position under new CEO Greg Abel.
The Bottom Line
Insurance is not a glamorous sector. It does not generate headlines about AI breakthroughs or viral consumer products. But it generates something better: predictable, compounding cash flows powered by float economics that reward patient owners over decades.
The five companies profiled here combine Buffett-grade competitive advantages with reasonable current valuations. In a market where most quality businesses trade at premium multiples, insurance stocks remain one of the last pockets of value for fundamental investors willing to look past the surface-level complexity of the business model.
The best time to buy insurance stocks is when nobody is talking about them. That time is now.