4 Best Bets To Invest In Top-Ranked Life Insurance Industry

 | Mar 09, 2018 04:38AM ET

The insurance industry seems well-poised for growth on the back of favorable operating conditions. Life insurers largely benefit from an improving rate environment owing to sensitivity to interest rates.

The Fed kept its promise of three interest rate hikes in 2017 and announced three more in 2018 as well as two in 2019. These moves reflect President Trump’s bias for higher interest rates and the central bank’s confidence in improving U.S. economy.

Though the rate is improving, it is still low and the magnitude is not enough to considerably benefit insurers. The life insurers have lowered exposure to interest-sensitive product lines and shifted to riskier asset like equities only to fetch in more returns from the policyholders’ claims. Nonetheless, improving investment income raises optimism in the stocks.

Gradual increase in interest rate will tend to lower hedging costs and coupled with control over underwriting expenses might further margin expansion.

Life insurers have redesigned and re-priced products, which should help write higher premiums.

Improving GDP (Fed predicts GDP to grow at 2.5% in 2018 and at 23.1% in 2019) and lowered unemployment rate (Fed expects it to decline to 3.9% both in 2018 and in 2019) among others indicate more disposable income with people opting for more insurance coverages.

On a positive note, the Value Score and northbound estimates in the past 60 days. Shares of these companies have also outperformed the industry in a year.

Primerica, Inc. (NYSE:PRI) distributes financial products to middle-income households in the United States as well as Canada. The stock sports a Zacks Rank #1 (Strong Buy) and has a favorable Value Score of B. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 19.3% upward and moved 21.9% north for 2019 over the last 60 days.

Primerica also outpaced expectations in three of the last four quarters and has an expected long-term earnings growth rate of 10%. Shares gained 24.2%, outperforming the industry's increase of 7% in a year. You can see .