We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Zacks Industry Outlook Highlights: Athene Holding, Lincoln National Corp, Reinsurance Group of America, Voya Financial and Brighthouse Financial
Read MoreHide Full Article
For Immediate Release
Chicago, IL – September 16, 2021 – Today, Zacks Equity Research discusses Life Insurance, including Athene HoldingLtd. , Lincoln National Corporation (LNC - Free Report) , Reinsurance Group of America, Incorporated (RGA - Free Report) , Voya Financial, Inc. (VOYA - Free Report) and Brighthouse Financial, Inc. (BHF - Free Report) .
Redesigning and repricing of products and services to maintain sales and profitability drive the Zacks Life Insurance industry players. Increased automation is expected to help them weather coronavirus-induced challenges. It is also expected to drive premium growth and boost the efficiency of Athene Holding, Lincoln National Corp., Reinsurance Group of America, Voya Financial and Brighthouse Financial.
However, a sustained low rate environment weighs on investment income. Moreover, the rising incidence of COVID-19 cases poses a threat to life insurers as it raises claim payments.
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 an increasing demand for protection products.
The industry also includes companies providing wealth and asset management solutions. With the rise in the number of baby boomers, demand for retirement benefits is increasing. Per a report by IBISWorld, the $886.7 billion U.S. Life Insurance & Annuities Market is expected to grow 4.2% in 2021. Though increased vaccinations and encouraging economic growth outlook by the Fed instills confidence, coronavirus cases have been on the rise due to the Delta variant.
3 Trends Shaping the Future of the Life Insurance Industry
A Low Rate Environment: A low interest rate environment makes life insurers prone to interest rate risks, given their rate-sensitive products and investments. A low interest rate can impact life insurers' earnings, capital and reserves, liquidity, and competitiveness. 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 are directing their funds into alternative investments like private equity, hedge funds, and real estate, among others, to counter the challenge as rates are estimated to remain low until 2023. Moreover, the rising incidence of COVID-19 cases poses a threat to life insurers. A spike in mortality will induce higher claim payments by life insurers, which might drain their underwriting incomes.
Product Redesigning: In an effort to navigate the current low interest rate environment, industry players are finding new solutions and ways to maintain their sales and profitability. Insurers are refraining from selling long-duration term life insurance. The companies also made changes to their product portfolio by moving away from guaranteed savings products toward protection products of unit-linked savings products, which pass the investment risks to policyholders.
Uncertainty surrounding the increase in mortality is expected to increase demand for life insurance products. A compelling product portfolio will thus aid sales of life insurers.
Increased Adoption of Technology: The life insurance industry, which has so far been operating mostly manually, started witnessing accelerated adoption of technology in its operations due to the COVID-19 led disruption. As such, companies are using electronic applications, e-signatures, and electronic policy delivery.
This transition to technology will enable it to survive through coronavirus-induced challenges. Carriers started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data is making premium calculation easier and reducing risk.
Increased automation is expected to drive premium growth and boost efficiency. Moreover, the adoption of technologies like artificial intelligence, robotic process automation, cognitive intelligence, and blockchain should help life insurers curb operational costs and aid margin expansion.
Zacks Industry Rank Indicates Bright Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects for the near term.
The Zacks Life Insurance industry, within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #76, which places it in the top 30% 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 a result of negative earnings outlook for the constituent companies in aggregate. The industry’s earnings estimate for 2021 has gone up 16.6% in a year’s time.
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 Lags Sector and S&P 500
The Life Insurance industry has underperformed its sector as well as the Zacks S&P 500 composite in the past year. The stocks in this industry have collectively gained 8.4% compared with the Finance sector’s increase of 38.4% and the Zacks S&P 500 composite’s rise of 33.7% in the said time frame.
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 1.24X compared with the S&P 500’s 6.98X and the sector’s 3.31X.
Over the past five years, the industry has traded as high as 2.47X, as low as 0.91X, and at the median of 1.75X.
5 Life Insurers to Add to Your Portfolio for Better Returns
Lincoln National: This diversified life insurance and investment management company is poised to grow on the strong performance of the Life Insurance segment. The company has been making changes in its sales mix to emphasize sales without long-term guarantees to improve profitability.
The Zacks Consensus Estimate for 2021 and 2022 earnings has been revised 10.5% and 3.2% upward over the past 60 days, indicating a respective year-over-year increase of 131.9% and 7.8%. The expected long-term earnings growth rate is pegged at 40.1%, better than its industry average of 18.7%.
Voya Financial: 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.
The company delivered an average earnings surprise of 9.13% in the trailing four quarters. The Zacks Consensus Estimate for 2021 earnings indicates 47.4% year-over-year increase. The consensus estimate for 2021 and 2022 earnings has moved up 13.8% and 0.4%, respectively in the past 60 days.
Brighthouse Financial: Boasting one of the largest providers of annuity and life insurance products in the United States, it is poised to grow on a compelling suite of life and annuity products, growing individual insurance, and focus on transitioning the business mix to less capital-intensive products.
The Zacks Consensus Estimate for 2021 earnings indicates a year-over-year increase of 238.9%. The consensus estimate for 2021 and 2022 has moved up 15.1% and 1.3%, respectively in the past 60 days. The company delivered an average earnings surprise of 52.23% in the trailing four quarters.
Athene: This Bermuda-based provider of insurance and reinsurance retirement products across the United States and Bermuda is poised for long-term growth driven by its continued focus on organic channels and strong relationship with Apollo. Strategic buyouts and block reinsurance transactions with several companies should fuel inorganic growth.
The Zacks Consensus Estimate for 2021 earnings indicates year-over-year increase of 101.4%. The consensus estimate for 2021 and 2022 has moved up 20.4% and 3.1%, respectively in the past 60 days. The company delivered an average earnings surprise of 47.78% in the trailing four quarters.
Reinsurance Group of America: This leading global provider of traditional life and health reinsurance and financial solutions is poised to benefit from the changing life reinsurance pricing environment, expanding business in the pension risk transfer market, and disciplined capital management. Significant value embedded in the in-force business is estimated to generate predictable long-term earnings. Reinsurance Group expects longevity insurance to see long-term growth in the Canadian market as it is projected to see steady demand.
The Zacks Consensus Estimate for 2021 and 2022 earnings has been revised 21.5% and 0.9% upward over the past 60 days, indicating a respective 7.3% and 3.4% year-over-year increase.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
Zacks Industry Outlook Highlights: Athene Holding, Lincoln National Corp, Reinsurance Group of America, Voya Financial and Brighthouse Financial
For Immediate Release
Chicago, IL – September 16, 2021 – Today, Zacks Equity Research discusses Life Insurance, including Athene HoldingLtd. , Lincoln National Corporation (LNC - Free Report) , Reinsurance Group of America, Incorporated (RGA - Free Report) , Voya Financial, Inc. (VOYA - Free Report) and Brighthouse Financial, Inc. (BHF - Free Report) .
Link: https://www.zacks.com/commentary/1796742/5-life-insurers-to-benefit-from-rising-protection-products-demand
Redesigning and repricing of products and services to maintain sales and profitability drive the Zacks Life Insurance industry players. Increased automation is expected to help them weather coronavirus-induced challenges. It is also expected to drive premium growth and boost the efficiency of Athene Holding, Lincoln National Corp., Reinsurance Group of America, Voya Financial and Brighthouse Financial.
However, a sustained low rate environment weighs on investment income. Moreover, the rising incidence of COVID-19 cases poses a threat to life insurers as it raises claim payments.
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 an increasing demand for protection products.
The industry also includes companies providing wealth and asset management solutions. With the rise in the number of baby boomers, demand for retirement benefits is increasing. Per a report by IBISWorld, the $886.7 billion U.S. Life Insurance & Annuities Market is expected to grow 4.2% in 2021. Though increased vaccinations and encouraging economic growth outlook by the Fed instills confidence, coronavirus cases have been on the rise due to the Delta variant.
3 Trends Shaping the Future of the Life Insurance Industry
A Low Rate Environment: A low interest rate environment makes life insurers prone to interest rate risks, given their rate-sensitive products and investments. A low interest rate can impact life insurers' earnings, capital and reserves, liquidity, and competitiveness. 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 are directing their funds into alternative investments like private equity, hedge funds, and real estate, among others, to counter the challenge as rates are estimated to remain low until 2023. Moreover, the rising incidence of COVID-19 cases poses a threat to life insurers. A spike in mortality will induce higher claim payments by life insurers, which might drain their underwriting incomes.
Product Redesigning: In an effort to navigate the current low interest rate environment, industry players are finding new solutions and ways to maintain their sales and profitability. Insurers are refraining from selling long-duration term life insurance. The companies also made changes to their product portfolio by moving away from guaranteed savings products toward protection products of unit-linked savings products, which pass the investment risks to policyholders.
Uncertainty surrounding the increase in mortality is expected to increase demand for life insurance products. A compelling product portfolio will thus aid sales of life insurers.
Increased Adoption of Technology: The life insurance industry, which has so far been operating mostly manually, started witnessing accelerated adoption of technology in its operations due to the COVID-19 led disruption. As such, companies are using electronic applications, e-signatures, and electronic policy delivery.
This transition to technology will enable it to survive through coronavirus-induced challenges. Carriers started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data is making premium calculation easier and reducing risk.
Increased automation is expected to drive premium growth and boost efficiency. Moreover, the adoption of technologies like artificial intelligence, robotic process automation, cognitive intelligence, and blockchain should help life insurers curb operational costs and aid margin expansion.
Zacks Industry Rank Indicates Bright Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects for the near term.
The Zacks Life Insurance industry, within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #76, which places it in the top 30% 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 a result of negative earnings outlook for the constituent companies in aggregate. The industry’s earnings estimate for 2021 has gone up 16.6% in a year’s time.
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 Lags Sector and S&P 500
The Life Insurance industry has underperformed its sector as well as the Zacks S&P 500 composite in the past year. The stocks in this industry have collectively gained 8.4% compared with the Finance sector’s increase of 38.4% and the Zacks S&P 500 composite’s rise of 33.7% in the said time frame.
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 1.24X compared with the S&P 500’s 6.98X and the sector’s 3.31X.
Over the past five years, the industry has traded as high as 2.47X, as low as 0.91X, and at the median of 1.75X.
5 Life Insurers to Add to Your Portfolio for Better Returns
Following are the five stocks in the space that currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lincoln National: This diversified life insurance and investment management company is poised to grow on the strong performance of the Life Insurance segment. The company has been making changes in its sales mix to emphasize sales without long-term guarantees to improve profitability.
The Zacks Consensus Estimate for 2021 and 2022 earnings has been revised 10.5% and 3.2% upward over the past 60 days, indicating a respective year-over-year increase of 131.9% and 7.8%. The expected long-term earnings growth rate is pegged at 40.1%, better than its industry average of 18.7%.
Voya Financial: 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.
The company delivered an average earnings surprise of 9.13% in the trailing four quarters. The Zacks Consensus Estimate for 2021 earnings indicates 47.4% year-over-year increase. The consensus estimate for 2021 and 2022 earnings has moved up 13.8% and 0.4%, respectively in the past 60 days.
Brighthouse Financial: Boasting one of the largest providers of annuity and life insurance products in the United States, it is poised to grow on a compelling suite of life and annuity products, growing individual insurance, and focus on transitioning the business mix to less capital-intensive products.
The Zacks Consensus Estimate for 2021 earnings indicates a year-over-year increase of 238.9%. The consensus estimate for 2021 and 2022 has moved up 15.1% and 1.3%, respectively in the past 60 days. The company delivered an average earnings surprise of 52.23% in the trailing four quarters.
Athene: This Bermuda-based provider of insurance and reinsurance retirement products across the United States and Bermuda is poised for long-term growth driven by its continued focus on organic channels and strong relationship with Apollo. Strategic buyouts and block reinsurance transactions with several companies should fuel inorganic growth.
The Zacks Consensus Estimate for 2021 earnings indicates year-over-year increase of 101.4%. The consensus estimate for 2021 and 2022 has moved up 20.4% and 3.1%, respectively in the past 60 days. The company delivered an average earnings surprise of 47.78% in the trailing four quarters.
Reinsurance Group of America: This leading global provider of traditional life and health reinsurance and financial solutions is poised to benefit from the changing life reinsurance pricing environment, expanding business in the pension risk transfer market, and disciplined capital management. Significant value embedded in the in-force business is estimated to generate predictable long-term earnings. Reinsurance Group expects longevity insurance to see long-term growth in the Canadian market as it is projected to see steady demand.
The Zacks Consensus Estimate for 2021 and 2022 earnings has been revised 21.5% and 0.9% upward over the past 60 days, indicating a respective 7.3% and 3.4% year-over-year increase.
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.