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Voya or Lincoln National: Which Life Insurer is Better Placed?
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Life insurers invest a big chunk of the premiums so that they have enough funds at the time of claims payment or upon maturity. A low interest rate environment thus impacts life insurers' earnings, capital and reserves, liquidity and competitiveness. The outbreak of COVID-19 forced the Federal Reserve to slash interest rates to 0-0.25%. Spike in mortality due to increasing cases of COVID-19 positive will induce higher claim payments, which might drain life insurers’ underwriting incomes.
The industry has lost 31.3% year to date, wider than the Zacks S&P 500 composite’s decrease of 7.1% and the Finance sector’s decrease of 23.5%.
Nonetheless, life insurers are working hard to find new ways of maintaining sales and profitability. To that end, they are refraining from selling long duration term life insurance. They are also moving away from guaranteed savings products toward protection products of unit-linked savings products, which pass the investment risks to policyholders.
Here we focus on two life insurers, namely Voya Financial Inc. (VOYA - Free Report) and Lincoln National Corporation (LNC - Free Report)
While Voya operates as a retirement, investment, and employee benefits company in the United States, Lincoln National operates multiple insurance and retirement businesses. Both these stocks 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 Performance
Voya has outperformed both Lincoln National and the industry year to date. While shares of Lincoln National have lost 30.9%, Voya has lost 23.3%.
Return on Equity (ROE)
Lincoln National with a return on equity of 10% exceeded Voya’s ROE of 7.4%. However, both lagged the industry average of 11.9%. Lincoln National thus has an edge.
Valuation
Price to book value is the best multiple used for valuing insurers. Compared with the life insurance industry’s P/B ratio of 1.16, both Voya with a reading of 0.71 and Lincoln National with a reading of 0.5 are undervalued. Lincoln National with a lower valuation multiple is cheaper.
Dividend Yield
Lincoln National with dividend yield of 3.9% betters Voya’s 1.3% as well as the industry’s average of 2.7%. Lincoln National thus has an edge over Voya.
Debt-to-Equity
Both Lincoln National and Voya’s debt-to-equity ratio is higher than the industry average of 13. Lincoln National with a lower reading of 40.7 is cheaper than Voya’s ratio of 61.8.
Earnings Surprise History
Voya outpaced expectations in two of the last four trailing quarters, delivering positive average surprise of 8.55%. Though Lincoln National also surpassed estimates in two of the last four reported quarters, it delivered average negative surprise of 0.46%.
Voya has an edge in this respect.
Growth Projections
For Lincoln National, the Zacks Consensus Estimate for earnings per share is $8.59 for 2020, indicating a year-over-year increase of 96.1%. Revenues are expected to increase 1.2%
For Voya, the Zacks Consensus Estimate for earnings per share is $4.29 for 2020, implying year-over-year increase of 22.6%. Revenues are expected to decrease 6.6%
Lincoln National scores better than Voya.
To Conclude
Our comparative analysis shows that Lincoln National has an edge over Voya with respect to return on equity, valuation, leverage, dividend yield and growth projections. Meanwhile, Voya scores higher in terms of price and earnings surprise history.
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Voya or Lincoln National: Which Life Insurer is Better Placed?
Life insurers invest a big chunk of the premiums so that they have enough funds at the time of claims payment or upon maturity. A low interest rate environment thus impacts life insurers' earnings, capital and reserves, liquidity and competitiveness. The outbreak of COVID-19 forced the Federal Reserve to slash interest rates to 0-0.25%. Spike in mortality due to increasing cases of COVID-19 positive will induce higher claim payments, which might drain life insurers’ underwriting incomes.
The industry has lost 31.3% year to date, wider than the Zacks S&P 500 composite’s decrease of 7.1% and the Finance sector’s decrease of 23.5%.
Nonetheless, life insurers are working hard to find new ways of maintaining sales and profitability. To that end, they are refraining from selling long duration term life insurance. They are also moving away from guaranteed savings products toward protection products of unit-linked savings products, which pass the investment risks to policyholders.
Here we focus on two life insurers, namely Voya Financial Inc. (VOYA - Free Report) and Lincoln National Corporation (LNC - Free Report)
While Voya operates as a retirement, investment, and employee benefits company in the United States, Lincoln National operates multiple insurance and retirement businesses. Both these stocks 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 Performance
Voya has outperformed both Lincoln National and the industry year to date. While shares of Lincoln National have lost 30.9%, Voya has lost 23.3%.
Return on Equity (ROE)
Lincoln National with a return on equity of 10% exceeded Voya’s ROE of 7.4%. However, both lagged the industry average of 11.9%. Lincoln National thus has an edge.
Valuation
Price to book value is the best multiple used for valuing insurers. Compared with the life insurance industry’s P/B ratio of 1.16, both Voya with a reading of 0.71 and Lincoln National with a reading of 0.5 are undervalued. Lincoln National with a lower valuation multiple is cheaper.
Dividend Yield
Lincoln National with dividend yield of 3.9% betters Voya’s 1.3% as well as the industry’s average of 2.7%. Lincoln National thus has an edge over Voya.
Debt-to-Equity
Both Lincoln National and Voya’s debt-to-equity ratio is higher than the industry average of 13. Lincoln National with a lower reading of 40.7 is cheaper than Voya’s ratio of 61.8.
Earnings Surprise History
Voya outpaced expectations in two of the last four trailing quarters, delivering positive average surprise of 8.55%. Though Lincoln National also surpassed estimates in two of the last four reported quarters, it delivered average negative surprise of 0.46%.
Voya has an edge in this respect.
Growth Projections
For Lincoln National, the Zacks Consensus Estimate for earnings per share is $8.59 for 2020, indicating a year-over-year increase of 96.1%. Revenues are expected to increase 1.2%
For Voya, the Zacks Consensus Estimate for earnings per share is $4.29 for 2020, implying year-over-year increase of 22.6%. Revenues are expected to decrease 6.6%
Lincoln National scores better than Voya.
To Conclude
Our comparative analysis shows that Lincoln National has an edge over Voya with respect to return on equity, valuation, leverage, dividend yield and growth projections. Meanwhile, Voya scores higher in terms of price and earnings surprise history.
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Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
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