A favorable rate environment, product redesigning and increased digitalization should help life insurers to grow. The industry has risen 16.21% year to date compared with the Finance sector’s increase of 10.6%. The Zacks S&P 500 composite has witnessed an increase of 20.5% in the said time frame. The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong prospects for the near term. The Zacks Life Insurance industry carries a Zacks Industry Rank #86, which places it in the top 34% of the 255 Zacks industries

Industry players are redesigning products to improve their sales and profitability. 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. 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. Per a report published in ReporterLinker, global life insurance gross written premium is expected to be $2.5 trillion by 2026.

An improving rate environment is a boon for life insurers. These insurers invest a large portion of the premiums to ensure smooth claims payout. The Fed has already made two hikes in 2023, taking the tally to nine since March 2022. However, at its recently concluded FOMC meeting, the committee for the time being paused further rate hikes despite high inflation. The Fed hinted at another increase by 2023 end. Companies that have locked in high interest rates are bound to generate higher yields at this point.

The insurance industry continues to witness accelerated digitalization. Players are investing heavily in technology to improve scale and efficiencies. Increased automation is expected to drive premium growth.

Here we focus on two life insurers, namely American Equity Investment and Brighthouse Financial (BHF Quick QuoteBHF - Free Report) .  

American Equity Investment, with a market capitalization of $3.3 billion, is a leader in the development and sale of fixed index and fixed rate annuity products.

Brighthouse Financial is one of the largest providers of annuity and life insurance products in the United States. It has multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. It has a market capitalization of $3 billion. Both companies carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let’s now see how these life insurers have fared in terms of some of the key metrics.

Price Performancee

AEL has gained 20.6% year to date versus BHF’s rise of 15.4%.  

Return on Equity

AEL has a return on equity (ROE) of 12.8%, which exceeds BHF’s ROE of 11.3% and the industry average of 12.4%.

Dividend Yield

AEL’s dividend yield is 0.1% versus the industry average of 3.7%. BHF does not pay dividends.

Debt to Equity

AEL’s debt-to-equity ratio of 33.1 is higher than the industry average of 17.5 but lower than BHF’s reading of 54.3.  

Growth Projection

The Zacks Consensus Estimate for AEL and BHF’s 2023 earnings indicates a 64.6% and 28.6% year-over-year increase, respectively.

The consensus estimate for 2024 earnings indicates a 7% increase from the year-ago reported figure for AEL and 18.7% for BHF.

To Conclude

Our comparative analysis shows that American Equity Investment has the edge over Brighthouse Financial with respect to price performance, dividend yield, growth projection and leverage. BHF outpaces AEL in terms of return on equity.