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Brighthouse Rides on Cost Control & Investment in Technology

Zacks Equity Research

Brighthouse Financial BHF is well-poised to gain on the back of growth opportunities and strong market presence.

This Zacks Rank #3 (Hold) life insurer aims to provide products that are cost-effective. In a bid to achieve its goal of reducing expenses, the company exited Transition Service Agreements (TSA) with MetLife. The company estimates to fully reduce expenses from 2019 onward with gradual exits from TSAs. The company targets to exit all TSAs by 2021.

Brighthouse also aims to lower costs. The company expects to lower expenses by $150 million on a run-rate basis by the end of 2020 and another $25 million by 2021.

The company also focuses on heavy investments in technology infrastructure. The company expects establishment costs in the range of $120 million and $130 million, $150 million to $160 million and $25 million to $35 million in 2019,  2020 and 2021, respectively, on a pre-tax basis.

Given a solid operational performance and cost savings initiatives, the company is likely to achieve the goal easily. The company has a decent earnings surprise history, wherein it beat estimates in two of the trailing four quarters, the average beat being 0.70%.

The Zacks Consensus Estimate for 2020 earnings per share is pegged at $9.84, indicating an improvement of 100.6% from the year-ago reported figure. The expected long-term earnings growth is pegged at 10.8%. The stock also carries a favorable Value Score of A.

Estimates for Brighthouse Financial have been revised upward over the past seven days, indicating investor optimism in the stock. The Zacks Consensus Estimate for 2019 earnings per share has moved up 0.2% in the said time frame.

Shares of the company have gained 31.3% year to date outperforming the industry’s rally of 26%.


Stocks to Consider

Some better-ranked life insurance stocks include American Equity Investment Life Holding Company AEL, Manulife Financial Corporation MFC and Primerica Incorporation PRI. While American Equity Investment Life Holding Company sports a Zacks Rank #1 (Strong Buy), Manulife Financial Corporation and Primerica Incorporation carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

American Equity Investment Life Holding provides life insurance products and services in the United States. The company issues fixed index and rate annuities; and single premium immediate annuities, as well as life insurance products. The company came up with average four-quarter positive surprise of 47.63%.

Manulife Financial Corporation provides financial advice, insurance, and wealth and asset management solutions for individuals, groups, and institutions in Asia, Canada, and the United States.  The company delivered average four-quarter positive surprise of 2.81%.

Primerica provides financial products to middle income households in the United States and Canada. The company pulled off an average four-quarter positive surprise of 4.10%.

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