The insurance sector is known for generating solid long-term profits as it thrives in both flourishing and challenging economic periods. Below, I have highlighted three fundamentally sound insurance stocks, namely, MetLife, Inc. (MET), Prudential Financial, Inc. (PRU), and Lincoln National Corporation (LNC). These companies offer attractive dividend yields, providing a blend of income stability and potential for capital appreciation.
The recent half-point interest rate cut by the Federal Reserve is beneficial for the insurance industry because it reduces borrowing costs. For life insurance companies that invest in long-term, fixed-rate securities, the value of their investments is likely to increase, even if some indexed products face short-term challenges. On the property and casualty side, the rise in portfolio values could lead to lower insurance costs in the near future.
According to Statista, the global insurance market is anticipated to reach a gross written premium of $9.02 trillion by 2029, growing at a CAGR of 2.4%.
Moreover, while the rate cuts may result in higher premiums, they also encourage the adoption of advanced technologies like AI and GenAI, pushing insurers to explore these innovations to enhance their operations. As a result, AI in the insurance industry is projected to reach $35.77 billion by 2030, exhibiting a CAGR of 33.1%.
With that in mind, let’s evaluate the fundamentals of three Insurance - Life stocks, beginning with #3.
Stock #3: Lincoln National Corporation (LNC)
LNC and its subsidiaries operate multiple insurance and retirement businesses through four segments: Annuities; Life Insurance; Group Protection; and Retirement Plan Services. The company distributes its products through consultants, brokers, planners, agents, financial advisors, third-party administrators, and other intermediaries.
On August 22, buoyed by strong financial performance, the company declared a quarterly dividend of $0.45 per share, payable on November 01, to the shareholders of record on October 10, 2024.
LNC pays an annual dividend of $1.80, which translates to a yield of 5.88% at the current share price. Its four-year average dividend yield is 4.72%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 4.6% over the past five years.
In the same month, LNC enhanced its Lincoln PathBuilder Income® product by adding a lifetime income guarantee to its asset allocation fund. This upgrade, part of Lincoln’s broader suite of guaranteed income solutions, offers greater flexibility and customization for plan sponsors and participants. This development will likely increase LNC’s appeal in the retirement planning market and boost its revenue potential.
For the second quarter of 2024, which ended on June 30, LNC’s revenue increased 75.9% year-over-year to $5.15 billion. Its net income available to common stockholders stood at $884 million, up 76.1% year-over-year, while its net income available per share amounted to $5.11, representing an increase of 73.8% from the last year.
Street expects LNC’s revenue for the fiscal fourth quarter (ending December 2024) to increase 136.6% year-over-year to $4.65 billion. Moreover, its EPS estimate of $1.79 for the same period indicates a 23.6% year-over-year growth.
LNC shares have surged 26.4% over the past year and 13.5% year-to-date to close the last trading session at $30.61.
LNC’s stance is apparent in its POWR Ratings. The stock has an A grade for Momentum and a B for Value. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 26 stocks in the B-rated Insurance - Life industry, it is ranked #25. Click here to see the additional ratings for LNC (Growth, Stability, Sentiment, and Quality).
Stock #2: Prudential Financial, Inc. (PRU)
PRU provides insurance, investment management, and other financial products and services internationally. It operates through five segments: PGIM; Retirement Strategies; Group Insurance; Individual Life; and International Businesses.
On September 12, the company paid its shareholders a quarterly dividend of $1.30 per common stock. With 15 years of consecutive dividend growth, PRU pays an annual dividend of $5.20, which translates to a yield of 4.37% at the current share price. Its four-year average dividend yield is 4.84%. Moreover, its dividend payouts have increased at a CAGR of 5.7% over the past five years.
On August 20, PRU announced an agreement to reinsure a portion of its guaranteed universal life block with Wilton Re. The terms state that Wilton Re will reinsure approximately $11 billion of reserves backing Prudential’s guaranteed universal life policies. This transaction advances PRU’s strategic progress toward becoming a higher-growth and more capital-efficient company.
PRU’s total adjusted operating income before income taxes for the second quarter (ended June 30, 2024) increased 11.1% year-over-year to $1.61 billion, while the PGIM segment reported an adjusted operating income before taxes of $206 million, indicating a 15.1% growth from the prior-year quarter. The company’s attributable net income came in at $1.19 billion and $3.28 per share, up 134.4% and 137.7% year-over-year, respectively.
Analysts expect PRU’s revenue for the third quarter (ended September 2024) to increase 11.9% year-over-year to $13.66 billion, while its EPS for the same period is expected to grow 1.8% from the prior year to $3.50. Moreover, it topped the consensus revenue estimates in three of the trailing four quarters, which is promising.
Over the past year, the stock has surged 27.4%, closing the last trading session at $118.95.
PRU’s mixed fundamentals are reflected in its POWR Ratings. The stock has an A grade for Growth and Momentum. It is ranked #18 in the same B-rated industry. Click here to see the other PRU rating for Value, Stability, Sentiment, and Quality.
Stock #1: MetLife, Inc. (MET)
MET is a financial services company that provides insurance, annuities, employee benefits, and asset management services to individual and institutional customers. It operates through six segments: Group Benefits; Retirement and Income Solutions (RIS); Asia; Latin America; Europe, the Middle East and Africa (EMEA); and MetLife Holdings.
On September 10, demonstrating its commitment to returning value to shareholders, the company paid a quarterly dividend of $0.55 per share. MET pays an annual dividend of $2.18, which translates to a yield of 2.67% at the current share price. Its four-year average dividend yield is 3.14%. Also, the company’s dividend payouts have increased at a CAGR of 4.4% over the past five years.
During the second quarter that ended on June 30, 2024, MET’s total revenues increased 7.2% year-over-year to $17.82 billion, while the company’s adjusted premiums, fees and other revenues, excluding PRT came in at $11.77 billion, reflecting an increase of 3.6% from the prior year quarter. In addition, its adjusted earnings amounted to $1.63 billion and $2.28 per share, reflecting an increase of 9.1% and 17.5% year-over-year, respectively.
The consensus revenue estimate of $18.54 billion for the fiscal third quarter (ended September 2024) represents a 16.9% increase year-over-year. The consensus EPS estimate of $2.26 for the same quarter indicates a 14.6% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the EPS estimates in three of the trailing four quarters.
The stock has gained 32.6% over the past year and 21.4% over the past nine months to close the last trading session at $81.79.
It’s no surprise that MET has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and Momentum. Out of 26 stocks in the Insurance - Life industry, MET is ranked #7.
Beyond what is stated above, we’ve also rated MET for Value, Stability, Sentiment, and Quality. Get all MET ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MET shares were trading at $81.50 per share on Thursday morning, down $0.29 (-0.35%). Year-to-date, MET has gained 26.20%, versus a 20.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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