U.S. markets open in 8 hours 24 minutes
  • S&P Futures

    3,695.00
    +25.00 (+0.68%)
     
  • Dow Futures

    29,521.00
    +178.00 (+0.61%)
     
  • Nasdaq Futures

    11,398.00
    +81.75 (+0.72%)
     
  • Russell 2000 Futures

    1,678.70
    +16.20 (+0.97%)
     
  • Crude Oil

    77.15
    +0.44 (+0.57%)
     
  • Gold

    1,638.80
    +5.40 (+0.33%)
     
  • Silver

    18.50
    +0.02 (+0.11%)
     
  • EUR/USD

    0.9640
    +0.0029 (+0.30%)
     
  • 10-Yr Bond

    3.8780
    0.0000 (0.00%)
     
  • Vix

    32.26
    +2.34 (+7.82%)
     
  • GBP/USD

    1.0772
    +0.0089 (+0.84%)
     
  • USD/JPY

    144.5410
    -0.1390 (-0.10%)
     
  • BTC-USD

    20,056.55
    +1,225.16 (+6.51%)
     
  • CMC Crypto 200

    459.02
    +25.92 (+5.98%)
     
  • FTSE 100

    7,020.95
    +2.35 (+0.03%)
     
  • Nikkei 225

    26,565.89
    +134.34 (+0.51%)
     

Fight Higher Interest Rates With These 3 Top Insurance Stocks

·4 min read

We’ve landed in a highly challenging macroeconomic environment after coming out of a once-in-a-lifetime pandemic. Inflation remains historically elevated, even after the Fed’s hawkish pivot.

In addition, Fed Chairman Jerome Powell has been very clear in his message that the rate hikes will continue until inflation returns to the 2% target rate.

Financial service stocks, such as insurance firms and banks, can see their profit margins expand in higher interest rate environments.

Three highly-ranked stocks in the Zacks Finance Sector include Unum Group UNM, Reinsurance Group of America RGA, and Brighthouse Financial BHF. Below is a year-to-date chart of all three companies with the S&P 500 blended in as a benchmark.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Let’s take a deeper dive into each one.

Unum Group

Unum Group UNM provides disability insurance, long-term care insurance, life insurance, and employee-paid group benefits and related services.

The company sports the highly-coveted Zacks Rank #1 (Strong Buy), telling us it’s enjoyed favorable analyst estimate revisions over the last several months.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

UNM’s projected growth is undoubtedly worth highlighting – earnings are forecasted to soar nearly 40% in FY22 and a further 2% in FY23.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In addition to a favorable growth profile, Unum Group shares could be seen as undervalued, as displayed by its Style Score of an A for Value.

UNM’s forward earnings multiple resides at a cheap 6.5X, representing a staggering 55% discount relative to its Zacks Finance Sector.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

For investors seeking an income stream, UNM’s got that covered; the company’s annual dividend yields a rock-solid 3.3%, and the company has increased its dividend payout four times over the last five years.

Further, the yield is much higher than its Zacks Finance Sector average.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Reinsurance Group of America

Reinsurance Group of America RGA is a leading global provider of traditional life and health reinsurance and financial solutions with operations in the United States, Canada, Europe, and many others.

Over the last several months, analysts have raised their earnings outlook significantly – a bullish signal.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Like UNM, Reinsurance Group of America’s growth prospects are stellar; earnings are forecasted to skyrocket a quad-digit 1050% in FY22 and an additional double-digit 20% in FY23.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Further, RGA shares look cheap when paired with the forecasted growth trajectory. RGA’s forward earnings multiple sits at 9.9X, well beneath its 12.2X five-year median and representing an enticing 32% discount relative to its Zacks Sector.

Reinsurance Group of America carries a Style Score of a B for Value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Who doesn’t love getting paid? RGA’s annual dividend yields a notable 2.5%, just above its Zacks Sector average.

In addition, the company has upped its dividend payout four times over the last five years, paired with a five-year annualized dividend growth rate of a substantial 9.2%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Brighthouse Financial

Brighthouse Financial BHF is one of the largest providers of annuity and life insurance products in the United States, utilizing multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners.

BHF’s earnings outlook has turned very bright over the last several months.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The company’s bottom-line is forecasted to take a hit in FY22, with the Zacks Consensus EPS Estimate of $11.58 penciling in a 46% Y/Y drop.

However, Brighthouse Financial’s earnings picture turns back to green in FY23, with earnings forecasted to climb 23%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In addition, BHF has a strong earnings track record – the company has exceeded the Zacks Consensus EPS Estimate in nine of its previous ten quarters.

Top line results have also been robust, with Brighthouse Financial penciling in eight revenue beats across its last ten prints. Below is a chart illustrating the company’s revenue on a quarterly basis.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Bottom Line

A challenging macroeconomic environment has sent stocks tumbling in 2022. With inflation at historically high levels, the Fed had to pivot to a Hawkish stance, cranking borrowing rates.

During times of high-interest rate environments, insurance providers can see their profit margins expand, such as Unum Group UNM, Reinsurance Group of America RGA, and Brighthouse Financial BHF.

These insurers carry many longer-duration assets, such as safe long-term bonds, to back their policies.


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
 
Unum Group (UNM) : Free Stock Analysis Report
 
Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
 
Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research