5 Life Insurance Stocks to Watch Amid a Low Interest Rate Environment

Redesigning and repricing of products and services to maintain sales and profitability have been driving Zacks Life Insurance industry players. Increased automation is expected to drive premium growth and boost the efficiency of Sun Life Financial Inc. SLF, Reinsurance Group of America, Incorporated RGA, Primerica PRI, Voya Financial Inc. VOYA and Lincoln National LNC. However, with three 50 basis points interest rate cuts and two more expected this year, life insurers will likely face challenges as they invest a large portion of their premiums to meet contractually guaranteed obligations of policyholders. Also, with accelerated digitalization, expenses are likely to increase. Prudently pricing the products and balancing customers' preferences and claim costs are a challenge.About the IndustryThe 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. Economic growth instills confidence. Per a Statista report, the life insurance market is expected to grow, with gross written premium expected to be $1.34 trillion in 2025. The industry has also been witnessing the accelerated adoption of technology. However, rising mortality or loss cost trends may impact the profitability of insurers.3 Trends Shaping the Future of the Life Insurance IndustryInterest Rate Lowered: In 2024, the Fed cut the interest rate three times for a total of 150 basis points after four years. The Fed also hinted at two more cuts in 2025.  Life insurers are direct beneficiaries of improved rates as they invest the premiums to meet the contractually guaranteed obligations of policyholders. Thus, rate cuts will likely weigh on the investment return. Nonetheless, in times of persistently low interest rates, life insurers direct their funds into alternative investments like private equity, hedge funds and real estate. They, thus, know how to navigate the low-rate environment. These insurers are also focused on navigating the challenges faced by their commercial real estate portfolio.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 about having coverages continues to support the life insurance business. A compelling product portfolio will thus aid sales of life insurers. Also, prudently pricing products and balancing customers' preferences and claim costs will be the key to driving growth. Per a report published in ReporterLinker, global life insurance gross written premium is expected to be $2.5 trillion by 2026. Per Statista’s report, gross written premium is expected to show an annual growth rate (CAGR 2025-2029) of 3.54%. Per Deloitte, life premiums are projected to rise 1.5% in 2025 in advanced markets. Solid sales in emerging markets like China, India, and Latin America are expected to boost premiums by 5.7% in 2025, per the report.Increased Adoption of Technology: Per Statista, the United States is experiencing a shift toward digital platforms and online sales in life insurance. Carriers have started selling policies online that appeal to the tech-savvy population. At the same time, the use of real-time data makes premium calculation easier and reduces risk. Increased automation is expected to drive premium growth and boost efficiency. Moreover, accelerated digitization, as evident from the increased adoption of generative AI, 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, players must shield themselves from falling prey to cyber threats.Zacks Industry Rank Indicates Bright ProspectsThe group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright prospects for the near term.The Zacks Life Insurance industry, within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #85, which places it in the top 34% 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.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 500The stocks in this industry have collectively gained 26.9% compared with the Finance sector’s increase of 22% and the Zacks S&P 500 composite’s increase of 26.9% in the said time frame.One-Year Price Performance Life Insurance Industry's Current ValuationOn 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 1.91X compared with the S&P 500’s 8.67X and the sector’s 3.97X.Over the past five years, the industry has traded as high as 2X, as low as 0.65X, and at the median of 1.34X.Price-to-Book (P/B) Ratio (TTM)Price-to-Book (P/B) Ratio (TTM) 5 Life Insurance Stocks to Watch Here, we present one stock with a Zacks Rank #1 (Strong Buy), one with a Zacks Rank #2 (Buy) and three stocks with a Zacks Rank #3 (Hold) from the industry.   You can see the complete list of today’s Zacks #1 Rank stocks here. Reinsurance Group of America: This Zacks Rank #1 insurer is a leading global provider of traditional life and health reinsurance and financial solutions with operations in the United States, Latin America, Canada, Europe, the Middle East, Africa, Asia and Australia. This insurer is set to benefit from the changing life reinsurance pricing environment, expanding business in the pension risk transfer market and disciplined capital management.    The Zacks Consensus Estimate for Reinsurance Group’s 2025 earnings indicates a year-over-year increase of 5.5%. It has moved up 0.4% in the past 60 days. RGA delivered a four-quarter average earnings surprise of 17.74%. It has a VGM Score of A.Price and Consensus: RGAPrimerica: 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 for this Zacks Rank #2 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 2025 earnings indicates a year-over-year increase of 7.2%. It has moved 0.7% upward in the last 60 days.  PRI delivered a four-quarter average earnings surprise of 4.89%.Price and Consensus: PRI Sun Life Financial: Based in Toronto, SLF is the third largest insurer in Canada. This Zacks Rank #3 company is well diversified by geography and product, providing protection and wealth management products and services to individual and group customers worldwide. Its focus on Asia operations, asset management businesses’ growth, scale-up and integration of U.S. operations and strategic buyouts bode well for growth. The underlying return on equity continues to trend toward a medium-term financial objective of 18% plus, thus reflecting a sustained emphasis on capital-light businesses.The Zacks Consensus Estimate for Sun Life’s 2025 earnings indicates a 10.6% year-over-year increase. The expected long-term earnings growth rate is 7%. The company delivered a four-quarter average earnings surprise of 1.69%.Price and Consensus: SLFLincoln Financial: Headquartered in Radnor, PA, Lincoln National is a diversified life insurance and investment management company. A fast-recovering Group Protection business, a strong fixed annuity business and positive flows in the Retirement Plan Services coupled with pricing discipline and new product introductions should favor this Zacks Rank #3 insurer. The Zacks Consensus Estimate for Lincoln Financial’s 2025 earnings indicates a year-over-year increase of 9%. It has moved 2 cents north in the past 30 days. The expected long-term earnings growth rate is pegged at 17%, better than the industry average of 15.6%. LNC delivered a four-quarter average earnings surprise of 15.85%.Price and Consensus: LNC Voya Financial: Based in New York, 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. Expansion of the distribution network and achievement of efficiencies through automation are expected to drive Voya Financial’s performance. This insurer carries a Zacks Rank #3.The Zacks Consensus Estimate for Voya Financial’s 2025 earnings indicates a year-over-year increase of 26.3%. The expected long-term earnings growth rate is pegged at 15.9%, better than the industry average. It delivered a four-quarter average earnings surprise of 6.77%.Price and Consensus: VOYA 7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sun Life Financial Inc. (SLF): Free Stock Analysis Report Lincoln National Corporation (LNC): Free Stock Analysis Report Reinsurance Group of America, Incorporated (RGA): Free Stock Analysis Report Primerica, Inc. (PRI): Free Stock Analysis Report Voya Financial, Inc. 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