Back to top

Image: Shutterstock

Zacks Industry Outlook Highlights Manulife Financial, Sun Life Financial , Voya Financial, Primerica and Brighthouse Financial

Read MoreHide Full Article

For Immediate Release

Chicago, IL – March 16, 2023 – Today, Zacks Equity Research discusses Manulife Financial Corp. (MFC - Free Report) , Sun Life Financial Inc. (SLF - Free Report) , Voya Financial (VOYA - Free Report) , Primerica (PRI - Free Report) and Brighthouse Financial (BHF - Free Report) .

Industry: Life Insurance


Redesigning and repricing of products and services to maintain sales and profitability have been driving Zacks Life Insurance industry players. Life insurers, being the direct beneficiaries of an improving rate environment, are poised to benefit. Increased automation is expected to drive premium growth and boost the efficiency of Manulife Financial Corp., Sun Life Financial Inc., Voya Financial, Primerica and Brighthouse Financial. As life insurers invest a large portion of their premiums, they are poised to benefit from an improving rate environment.

However, with accelerated digitalization, expenses should continue to increase.

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. Per a report by IBISWorld, the $1.1 trillion U.S. Life Insurance & Annuities Market is expected to grow 3.2% in 2023. Increased vaccinations and economic growth instill confidence. Rising mortality may impact the profitability of these life insurers. The industry has also been witnessing accelerated adoption of technology.

3 Trends Shaping the Future of the Life Insurance Industry

A Rising 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.

Nonetheless, with the Fed already raising rates seven times in 2022 and once this year so far, life insurers, being the direct beneficiaries of an improving rate environment, are poised to perform well. At its December meeting, the Fed announced taking the interest rate to 5.1% in 2023 to combat its expected 3.1% inflation. The current federal interest rate currently stands at 4.75%. Thus, there is more room for rate hikes in 2023.

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, following the pandemic, continues to support the life insurance business. A compelling product portfolio will thus aid sales of life insurers. Per Deloitte Insights, life insurance premium is estimated to increase 1.9% in 2023.

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-led disruption. Companies are now using electronic applications, e-signatures and electronic policy delivery. Carriers started selling policies online that appealed 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, accelerated digitization, as evident from the adoption of artificial intelligence, robotic process automation, 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, the players must shield themselves from falling prey to cyber threats.

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 weak prospects for the near term.

The Zacks Life Insurance industry, within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #59, which places it in the top 24% 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. The industry's earnings estimate for 2023 has gone up 2% from November 2022 end.

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 outperformed the Finance sector but underperformed the Zacks S&P 500 composite in the past year. The stocks in this industry have collectively lost 13.4% compared with the Finance sector's decrease of 15.6% and the Zacks S&P 500 composite's decline of 13% 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 1.2X compared with the S&P 500's 5.26X and the sector's 3.24X.

Over the past five years, the industry has traded as high as 1.38X, as low as 1.06X, and at the median of 1.23X.

5 Life Insurers to Consider for Better Returns

Here we present two stocks with a Zacks Rank #1 (Strong Buy) and three with a Zacks Rank #2 (Buy).   You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Brighthouse Financial: It is one of the largest providers of annuity and life insurance products in the United States through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. A compelling suite of life and annuity products, strong market presence, exit from the transition service agreement and growing individual insurance and investment income should drive growth for this Zacks Rank #1 insurer.

Brighthouse is also revamping its life insurance business to ramp up annuity sales. Sales of Shield Level annuities and variable annuities with FlexChoice Access should drive Annuity sales. BHF remains focused on transitioning the business mix to less capital-intensive products.

The Zacks Consensus Estimate for Brighthouse's 2023 and 2024 earnings indicates a year-over-year increase of 33.5% and 11.5%, respectively. The consensus estimate for 2023 and 2024 has moved up 7% and 5.9%, respectively in the past 30 days. 

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 benefits of this Zacks Rank #1 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 2023 and 2024 earnings indicates a year-over-year increase of 28.5% and 12.2%, respectively. The consensus estimate for 2023 and 2024 has moved up 4% each in the past seven days.  

Manulife Financial: Headquartered in Toronto, Canada, this Zacks Rank #2 insurer is one of the three dominant life insurers within its domestic market and possesses rapidly growing operations in the United States and several Asian countries. A strong Asia business, expanding wealth and asset management business, investment to ramp up digital capabilities and solid capital position poised this life insurer well for growth. MFC estimates core EPS growth between 10% and 12% over the medium term.

The Zacks Consensus Estimate for Manulife's 2023 and 2024 earnings indicates a year-over-year increase of 0.8% and 9.3%, respectively.  The consensus estimate for 2023 and 2024 has moved up 1.3% and 1.5% north, respectively in the past 30 days. The expected long-term earnings growth rate is pegged at 10%.

Sun Life Financial: This Zacks Rank #2 insurer is the third largest insurer in Canada. Its focus on growth in Asia operations, expansion of its asset management businesses and strong financial position poise this life insurer well. Sun Life is improving its business mix and thus shifting its growth focus toward products that park lower capital and offer more predictable earnings.

The Zacks Consensus Estimate for SLF's 2023 earnings indicates a year-over-year increase of 29.2%.  Sun Life delivered an average earnings surprise of 49.74% in the trailing four quarters. It carries a VGM Score of B.

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. This Zacks Rank #2 insurer expects adjusted EPS growth of 12-17% through 2024.

The Zacks Consensus Estimate for Voya Financial's 2023 and 2024 earnings indicates a year-over-year increase of 7.3% and 13%, respectively.  The consensus estimate for 2023 and 2024 has moved up 3.2% and 2.1% north, respectively, in the past 30 days.  VOYA delivered an average earnings surprise of 8.68% in the trailing four quarters.  The expected long-term earnings growth rate is pegged at 14.2%, better than the industry average of 11.1%.

Why Haven't You Looked at Zacks' Top Stocks?

Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.

See Stocks Free >>

Join us on Facebook:

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

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  for information about the performance numbers displayed in this press release.

Published in