5 Best Performing Life Insurance Stocks To Buy For 2019
Zacks Investment Research | Dec 16, 2018 09:51PM ET
The insurance industry saw the wheels of fortune turning in its favor during 2018 with the economy improving significantly owing to the rising interest rates, a growing gross domestic product and the tax cut. A fairly strong 2018 has set the stage for the insurance industry to usher in 2019 with high hopes. Even though the industry might fight challenges in the form of weather-related events and ongoing disputes over tariffs and trade rules, we still expect insurers to maintain a positive trend in the year ahead.
Here we will talk about the life insurance industry and the factors anticipated to aid its overall results in 2019.
The current interest rate environment has given life insurers enough reasons to rejoice as the regulatory body has kept its promise of raising interest rates thrice and with another FOMC meeting around the corner, the air of optimism is at peak among investors surrounding a fourth rate hike. For 2019, the Fed has given an indication of increasing the interest rates thrice with two more lined up for 2020.
Life insurers reinvest premiums, which they receive from policy holders so that enough funds are available at the time of paying future claims or upon maturity. In this case, a favorable interest rate environment enables life insurers to reinvest funds at higher rates, thereby garnering better returns. Thus, rising rates have proved to be a boon to life insurers.
In 2017, life insurers witnessed a decline in premiums due to weak performing annuity business (political and regulatory uncertainties were responsible for this downside). However, progressing interest rates have lent a plausible support to insurers and the annuity business has gradually recovered. We expect this positive trend to remain in the year ahead as well. Per Munich Re’s insurance market outlook, the future of annuities looks bright on the back of a bettering interest rate environment and growth in disposable income with the total U.S. annuity sales projected to climb 5% in 2019 (2018 estimate was in the 5-10% band). Hence, we expect premiums to augment considerably in 2019.
It is important to note here that the United States is currently the most important life insurance market with a global market share of around 20%. The Life Insurance industry is ranked at #18 (representing the top 7% of the Zacks Investment Research
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