Industry Overview - The Zacks Life Insurance industry includes companies providing life insurance coverage and retirement benefits, with products such as annuities, whole and term life insurance, and health insurance [2] - The life insurance market is projected to grow, with gross written premiums expected to reach $1.34 trillion by 2025, driven by increasing demand for protection products and retirement benefits due to a rising number of baby boomers [2] - The industry is experiencing accelerated technology adoption, although rising mortality or loss cost trends may impact profitability [2] Trends Shaping the Industry - Steady Interest Rate: The Federal Reserve has maintained interest rates at 4.25%-4.5%, with two rate cuts expected in 2025, which may challenge life insurers as they invest premiums to meet obligations [3][4] - Product Redesigning: Insurers are focusing on new solutions to improve sales and profitability, moving away from long-duration term life insurance and offering products with "living" benefits [4] - Increased Adoption of Technology: The shift towards digital platforms and online sales is enhancing efficiency and premium growth, with significant investments in technology to reduce operational costs [5] Industry Performance - The Zacks Life Insurance industry ranks 64, placing it in the top 26% of 255 Zacks industries, indicating strong near-term prospects [7][8] - Over the past year, the industry has gained 13.7%, outperforming the Zacks S&P 500 composite's increase of 8.8% but underperforming the Finance sector's 18.1% increase [9] Valuation Metrics - The industry is currently trading at a trailing 12-month price-to-book (P/B) ratio of 1.95X, compared to the S&P 500's 8.01X and the Finance sector's 4.12X [12] - Historical P/B ratios for the industry have ranged from a high of 2.11X to a low of 0.91X over the past five years, with a median of 1.43X [13] Notable Companies - AIA Group Limited: A leading pan-Asian life insurer with strong earnings growth projections of 8.1% and 11.9% for 2025 and 2026, respectively [18][19] - NN Group: A financial services company with a focus on life and non-life insurance, expected to see earnings growth of 31.1% and 2.3% for 2025 and 2026 [22][23] - Aviva: A UK-based insurer with solid results across business lines, projected earnings growth of 12.2% and 10.9% for 2025 and 2026 [26][27] - Manulife Corporation: A dominant life insurer in Canada with a strong growth outlook, expecting core EPS growth of 10% to 12% over the medium term [30][31] - Sun Life Corporation: The third-largest insurer in Canada, focusing on growth through diversification and strategic buyouts, with earnings growth estimates of 8.4% and 7.8% for 2025 and 2026 [35][36]
5 Life Insurance Stocks to Watch in a Steady Interest Rate Environment