Life Insurance_ Well Positioned for 2025

Summary of the Conference Call Industry Overview - The focus is on the Life Insurance sector in North America with a positive outlook for 2025 due to a favorable macro environment, including a steepening yield curve and an aging population [10][15][72]. Key Points 2025 Outlook - Expected 13% EPS growth and 15% return on equity for life insurers in 2025, supported by stable equity markets and mortality aligning with expectations [10][15]. - Capital return is projected to remain robust, with 6.1% buyback accretion, an increase from 5.4% in 2024 [10][15]. Major Themes Influencing Life Insurance Stocks 1. Steepening Yield Curve: Anticipated rate cuts are expected to steepen the yield curve, positively impacting life insurance earnings [10][15][116]. 2. Demographic Trends: An aging population is expected to drive demand for life insurance products [10][15]. 3. Variable Investment Income: This remains a wildcard for earnings, with potential improvements expected from capital markets activity and private market valuations [20][126]. Group Insurance Performance - Group insurance is expected to perform strongly in 2025, particularly in the dental and disability segments, while group life may face headwinds due to normalizing mortality rates [10][72]. - Unum is anticipated to benefit significantly from stable group life and supportive disability segments [72]. Annuity Market Dynamics - Strong demand for annuity products is expected to continue, driven by an aging population and stable macro conditions [10][45]. - Annuity sales reached historical records in 2024, with a 23% YoY growth compared to 21% in 2023 [139]. - Companies like Equitable and Corebridge are well-positioned to gain market share due to their strong capital positions and vertical integration [10][45]. Competitive Landscape - The competitive landscape for Registered Index-Linked Annuities (RILA) has intensified, with market share now concentrated among the top ten carriers [139]. - Companies with robust distribution networks and investment management capabilities are expected to perform better in the RILA space [10][45]. Variable Investment Income Challenges - Variable investment income has been underperforming due to muted realizations in private equity and lower valuations in real estate [142][147]. - While there are signs of improvement, a full recovery in variable investment income is not expected until 2026 [148]. Dental and Disability Insurance - The dental insurance market is expected to see a better underwriting environment due to annual re-pricing and reduced inflation pressure [144]. - Favorable performance in disability insurance is anticipated to continue, driven by stable pricing and claims experience [144]. Conclusion - The life insurance sector is poised for growth in 2025, driven by favorable macroeconomic conditions, demographic trends, and strong demand for annuity products. However, challenges remain in variable investment income and competitive pressures in the annuity market. Companies like Unum, Equitable, and Corebridge are expected to be key beneficiaries in this evolving landscape [10][72][139].