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5 Stocks to Watch From the Prospering Life Insurance Industry
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Redesigning and repricing of products and services to maintain sales and profitability have been driving Zacks Life Insurance industry players. Life insurers are the direct beneficiaries of an improving rate environment as they invest a large portion of their premiums. Increased automation is expected to drive premium growth and boost the efficiency of Reinsurance Group of America, Incorporated (RGA - Free Report) , Primerica (PRI - Free Report) , Voya Financial (VOYA - Free Report) , Lincoln National Corporation (LNC - Free Report) and Brighthouse Financial (BHF - Free Report) . However, with accelerated digitalization, expenses are likely to increase. Also, prudently pricing the products and balancing customers' preferences and claim costs are a challenge.
About the Industry
The Zacks Life Insurance industry comprises companies that offer life insurance coverages and retirement benefits to individuals and groups. The products include annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements and long-term healthcare policies. Sales benefit from the increasing demand for protection products. The industry also includes companies providing wealth and asset management solutions. With a rise in the number of baby boomers, the demand for retirement benefits is increasing. Economic growth instills confidence. Per a Statista report, the life insurance market is expected to grow, with a gross written premium expected to be $3.67 trillion in 2024. The industry has also been witnessing the accelerated adoption of technology. However, rising mortality or loss cost trends may impact the profitability of insurers.
3 Trends Shaping the Future of the Life Insurance Industry
An Improved Rate Environment: An improving interest rate environment benefits life insurers as their products and investments are rate-sensitive. A favorable interest rate thus impacts life insurers' earnings, capital and reserves, liquidity and competitiveness positively. In times of persistently low interest rates, life insurers' income from investments becomes insufficient to meet the contractually guaranteed obligations of policyholders, which cannot be lowered. Thus, they direct their funds into alternative investments like private equity, hedge funds and real estate, among others, to counter the challenge. The Fed has made 11 rate hikes since March 2022. Life insurers, being the direct beneficiaries of an improving rate environment, have performed well. However, concerns over the Fed’s decision to cut rates loom. Nonetheless, these insurers stay focused on navigating the challenges faced by their commercial real estate portfolio.
Product Redesigning: Industry players are finding new solutions and ways to improve their sales and profitability. Insurers are refraining from selling long-duration term life insurance. Also, life insurers continue to roll out investment products that provide bundled covers of guaranteed retirement income, life and healthcare to cater to customers preferring policies with “living” benefits more than those with death benefits. Increased awareness about having coverages continues to support the life insurance business. A compelling product portfolio will thus aid sales of life insurers. Also, prudently pricing the products and balancing customers' preferences and claim costs will be the key to driving growth. Per a report published in ReporterLinker, global life insurance gross written premium is expected to be $2.5 trillion by 2026. Per Statista’s report, gross written premium is expected to show an annual growth rate (CAGR 2024-2028) of 1.7%.
Increased Adoption of Technology: Companies are now using electronic applications, e-signatures and electronic policy delivery. Carriers have started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data makes premium calculation easier and reduces risk. Increased automation is expected to drive premium growth and boost efficiency. Moreover, accelerated digitization, as evident from the increased adoption of generative AI, cognitive intelligence and blockchain, should help life insurers curb operational costs and aid margin expansion. Insurers are investing heavily in technological advancements to ensure efficiency and smooth functioning. At the same time, players must shield themselves from falling prey to cyber threats.
Zacks Industry Rank Indicates Rosy Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright prospects for the near term.
The Zacks Life Insurance industry, within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #105, which places it in the top 42% of the 255 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate.
Before we present a few life insurance stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Vs. Sector & S&P 500
The Life Insurance industry has underperformed the Finance sector and the Zacks S&P 500 composite in the past year. The stocks in this industry have collectively gained 19.3% compared with the Finance sector’s increase of 19.8% and the Zacks S&P 500 composite’s increase of 22.3% in the said time frame.
One-Year Price Performance
Life Insurance Industry's Current Valuation
On the basis of trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 1.85X compared with the S&P 500’s 8.81X and the sector’s 3.23X.
Over the past five years, the industry has traded as high as 1.9, as low as 0.65X, and at the median of 1.33X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
5 Life Insurers in Focus
Here, we present one stock with a Zacks Rank #1 (Strong Buy), one stock with a Zacks Rank #2 (Buy) and three stocks with a Zacks Rank #3 (Hold) from the industry. You can see the complete list of today’s Zacks #1 Rank stocks here.
Reinsurance Group of America: This Zacks Rank #1 insurer is a leading global provider of traditional life and health reinsurance and financial solutions with operations in the United States, Latin America, Canada, Europe, the Middle East, Africa, Asia and Australia. This insurer is set to benefit from the changing life reinsurance pricing environment, expanding business in the pension risk transfer market and disciplined capital management.
The Zacks Consensus Estimate for Reinsurance Group’s 2024 and 2025 earnings indicates a year-over-year increase of 6.2% and 4.3%, respectively. The consensus estimate for 2024 and 2025 has moved up 0.8% and 0.2%, respectively, in the past 30 days. RGA delivered a four-quarter average earnings surprise of 19.48%. It has a VGM Score of A.
Price and Consensus: RGA
Primerica: This Duluth, GA-based, second-largest issuer of term-life insurance coverage in North America aims to be a successful senior health business while continuing to enhance its shareholders’ value. Strong demand for protection products drives sales growth and policy persistency benefit of this Zacks Rank #2 insurer. A strong business model makes Primerica well-poised to cater to the middle market's increased demand for financial security.
The Zacks Consensus Estimate for PRI’s 2024 and 2025 earnings indicates a year-over-year increase of 10.3% and 11%, respectively. The consensus estimate for 2024 and 2025 has moved up 0.4% and 0.3% north, respectively, in the past 30 days. PRI delivered a four-quarter average earnings surprise of 1.60%.
Price and Consensus: PRI
Lincoln National: Headquartered in Radnor, PA, Lincoln National is a diversified life insurance and investment management company. A fast-recovering Group Protection business, strong fixed annuity business and positive flows in the Retirement Plan Services coupled with pricing discipline and new product introductions should favor this Zacks Rank #3 insurer.
The Zacks Consensus Estimate for Lincoln’s 2024 and 2025 earnings indicates a year-over-year increase of 13.8% and 27%, respectively. The expected long-term earnings growth rate is pegged at 19.9%, better than the industry average of 16.3%.
Price and Consensus: LNC
Voya Financial: Based in New York, this retirement, investment, and employee benefits company in the United States is poised to grow, given its focus on high-growth, high-return, capital-light businesses, solid market presence and cost savings. Expansion of the distribution network and achievement of efficiencies through automation are expected to drive Voya Financial’s performance. This Zacks Rank #3 insurer expects adjusted EPS growth of 12-17% through 2024.
The Zacks Consensus Estimate for Voya Financial’s 2024 and 2025 earnings indicates a year-over-year increase of 4.1% and 13.5%, respectively. The expected long-term earnings growth rate is pegged at 16.5%., better than the industry average. It delivered a four-quarter average earnings surprise of 7.49%.
Price and Consensus: VOYA
Brighthouse Financial: Charlotte, NC-based Brighthouse Financial, with an expansive and compelling suite of life and annuity products and a strong market presence, aims to become a premier player in the individual insurance market. Brighthouse is also revamping its life insurance business to boost annuity sales. Sales of Shield Level annuities and variable annuities with FlexChoice Access should drive Annuity sales. The insurer remains focused on transitioning the business mix to less capital-intensive products. BHF carries a Zacks Rank #3.
The Zacks Consensus Estimate for BHF’s 2024 and 2025 earnings indicates a year-over-year increase of 7.3% and 31.3%, respectively. The company delivered a four-quarter average earnings surprise of 0.91%.
Price and Consensus: BHF
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5 Stocks to Watch From the Prospering Life Insurance Industry
Redesigning and repricing of products and services to maintain sales and profitability have been driving Zacks Life Insurance industry players. Life insurers are the direct beneficiaries of an improving rate environment as they invest a large portion of their premiums. Increased automation is expected to drive premium growth and boost the efficiency of Reinsurance Group of America, Incorporated (RGA - Free Report) , Primerica (PRI - Free Report) , Voya Financial (VOYA - Free Report) , Lincoln National Corporation (LNC - Free Report) and Brighthouse Financial (BHF - Free Report) . However, with accelerated digitalization, expenses are likely to increase. Also, prudently pricing the products and balancing customers' preferences and claim costs are a challenge.
About the Industry
The Zacks Life Insurance industry comprises companies that offer life insurance coverages and retirement benefits to individuals and groups. The products include annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements and long-term healthcare policies. Sales benefit from the increasing demand for protection products. The industry also includes companies providing wealth and asset management solutions. With a rise in the number of baby boomers, the demand for retirement benefits is increasing. Economic growth instills confidence. Per a Statista report, the life insurance market is expected to grow, with a gross written premium expected to be $3.67 trillion in 2024. The industry has also been witnessing the accelerated adoption of technology. However, rising mortality or loss cost trends may impact the profitability of insurers.
3 Trends Shaping the Future of the Life Insurance Industry
An Improved Rate Environment: An improving interest rate environment benefits life insurers as their products and investments are rate-sensitive. A favorable interest rate thus impacts life insurers' earnings, capital and reserves, liquidity and competitiveness positively. In times of persistently low interest rates, life insurers' income from investments becomes insufficient to meet the contractually guaranteed obligations of policyholders, which cannot be lowered. Thus, they direct their funds into alternative investments like private equity, hedge funds and real estate, among others, to counter the challenge. The Fed has made 11 rate hikes since March 2022. Life insurers, being the direct beneficiaries of an improving rate environment, have performed well. However, concerns over the Fed’s decision to cut rates loom. Nonetheless, these insurers stay focused on navigating the challenges faced by their commercial real estate portfolio.
Product Redesigning: Industry players are finding new solutions and ways to improve their sales and profitability. Insurers are refraining from selling long-duration term life insurance. Also, life insurers continue to roll out investment products that provide bundled covers of guaranteed retirement income, life and healthcare to cater to customers preferring policies with “living” benefits more than those with death benefits. Increased awareness about having coverages continues to support the life insurance business. A compelling product portfolio will thus aid sales of life insurers. Also, prudently pricing the products and balancing customers' preferences and claim costs will be the key to driving growth. Per a report published in ReporterLinker, global life insurance gross written premium is expected to be $2.5 trillion by 2026. Per Statista’s report, gross written premium is expected to show an annual growth rate (CAGR 2024-2028) of 1.7%.
Increased Adoption of Technology: Companies are now using electronic applications, e-signatures and electronic policy delivery. Carriers have started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data makes premium calculation easier and reduces risk. Increased automation is expected to drive premium growth and boost efficiency. Moreover, accelerated digitization, as evident from the increased adoption of generative AI, cognitive intelligence and blockchain, should help life insurers curb operational costs and aid margin expansion. Insurers are investing heavily in technological advancements to ensure efficiency and smooth functioning. At the same time, players must shield themselves from falling prey to cyber threats.
Zacks Industry Rank Indicates Rosy Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright prospects for the near term.
The Zacks Life Insurance industry, within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #105, which places it in the top 42% of the 255 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate.
Before we present a few life insurance stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Vs. Sector & S&P 500
The Life Insurance industry has underperformed the Finance sector and the Zacks S&P 500 composite in the past year. The stocks in this industry have collectively gained 19.3% compared with the Finance sector’s increase of 19.8% and the Zacks S&P 500 composite’s increase of 22.3% in the said time frame.
One-Year Price Performance
Life Insurance Industry's Current Valuation
On the basis of trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 1.85X compared with the S&P 500’s 8.81X and the sector’s 3.23X.
Over the past five years, the industry has traded as high as 1.9, as low as 0.65X, and at the median of 1.33X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
5 Life Insurers in Focus
Here, we present one stock with a Zacks Rank #1 (Strong Buy), one stock with a Zacks Rank #2 (Buy) and three stocks with a Zacks Rank #3 (Hold) from the industry. You can see the complete list of today’s Zacks #1 Rank stocks here.
Reinsurance Group of America: This Zacks Rank #1 insurer is a leading global provider of traditional life and health reinsurance and financial solutions with operations in the United States, Latin America, Canada, Europe, the Middle East, Africa, Asia and Australia. This insurer is set to benefit from the changing life reinsurance pricing environment, expanding business in the pension risk transfer market and disciplined capital management.
The Zacks Consensus Estimate for Reinsurance Group’s 2024 and 2025 earnings indicates a year-over-year increase of 6.2% and 4.3%, respectively. The consensus estimate for 2024 and 2025 has moved up 0.8% and 0.2%, respectively, in the past 30 days. RGA delivered a four-quarter average earnings surprise of 19.48%. It has a VGM Score of A.
Price and Consensus: RGA
Primerica: This Duluth, GA-based, second-largest issuer of term-life insurance coverage in North America aims to be a successful senior health business while continuing to enhance its shareholders’ value. Strong demand for protection products drives sales growth and policy persistency benefit of this Zacks Rank #2 insurer. A strong business model makes Primerica well-poised to cater to the middle market's increased demand for financial security.
The Zacks Consensus Estimate for PRI’s 2024 and 2025 earnings indicates a year-over-year increase of 10.3% and 11%, respectively. The consensus estimate for 2024 and 2025 has moved up 0.4% and 0.3% north, respectively, in the past 30 days. PRI delivered a four-quarter average earnings surprise of 1.60%.
Price and Consensus: PRI
Lincoln National: Headquartered in Radnor, PA, Lincoln National is a diversified life insurance and investment management company. A fast-recovering Group Protection business, strong fixed annuity business and positive flows in the Retirement Plan Services coupled with pricing discipline and new product introductions should favor this Zacks Rank #3 insurer.
The Zacks Consensus Estimate for Lincoln’s 2024 and 2025 earnings indicates a year-over-year increase of 13.8% and 27%, respectively. The expected long-term earnings growth rate is pegged at 19.9%, better than the industry average of 16.3%.
Price and Consensus: LNC
Voya Financial: Based in New York, this retirement, investment, and employee benefits company in the United States is poised to grow, given its focus on high-growth, high-return, capital-light businesses, solid market presence and cost savings. Expansion of the distribution network and achievement of efficiencies through automation are expected to drive Voya Financial’s performance. This Zacks Rank #3 insurer expects adjusted EPS growth of 12-17% through 2024.
The Zacks Consensus Estimate for Voya Financial’s 2024 and 2025 earnings indicates a year-over-year increase of 4.1% and 13.5%, respectively. The expected long-term earnings growth rate is pegged at 16.5%., better than the industry average. It delivered a four-quarter average earnings surprise of 7.49%.
Price and Consensus: VOYA
Brighthouse Financial: Charlotte, NC-based Brighthouse Financial, with an expansive and compelling suite of life and annuity products and a strong market presence, aims to become a premier player in the individual insurance market. Brighthouse is also revamping its life insurance business to boost annuity sales. Sales of Shield Level annuities and variable annuities with FlexChoice Access should drive Annuity sales. The insurer remains focused on transitioning the business mix to less capital-intensive products. BHF carries a Zacks Rank #3.
The Zacks Consensus Estimate for BHF’s 2024 and 2025 earnings indicates a year-over-year increase of 7.3% and 31.3%, respectively. The company delivered a four-quarter average earnings surprise of 0.91%.
Price and Consensus: BHF
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