Time to claim overlooked insurance stock profits

Insurance stocks for sale   

Although financial stocks are up this month, there's one major exception: Insurance company stocks are down almost 1 percent. But don't let that recent dip fool you. It might be a good time to put in a claim on some future insurance stock profits, according to analysts.

Analysts are calling the coming period for insurers a more volatile one, marked by softer pricing and greater levels of regulation, but say that some big-name insurance stocks are also set to deliver some underlooked profit potential.

A rising interest-rate environment will likely buoy insurance company earnings because these companies prefer to invest in long-term assets. "Some of the biggest laggards could have some of the biggest gains," said CNBC's Morgan Brennan.

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Genworth Financial, for instance, is down about 15 percent so far this year due to lingering fallout from its recession-battered mortgage insurance field and concerns over its long-term care insurance business.

On average, analysts polled by FactSet expect that this stock could rise 34 percent over the next 12 to 18 months.

Source: Aflac

Similarly, analysts expect an 18 percent rise for Aflac, which has fallen 13 percent over the past year. Prudential Financial, which has dropped 1 percent this year, could also see a 13 percent increase in stock price.

Travelers is predicted by most to experience a more modest increase of roughly 3 percent. However, Guggenheim Securities aggressively recommends Travelers because of its 12 percent return on equity. Guggenheim suggests that investors ought to focus most on the pace at which book value grows, and Travelers' pace is one of the highest in the industry.

As rates continue to rise, investors ought to keep an eye on the yield curve for each company. A steeper yield curve will likely beget greater earnings, which in turn will help drive the stock price up, according to an analysis from Morningstar's Vincent Lui.

Nicholas Duva, special to CNBC.com