Should You Retain Brighthouse (BHF) Stock in Your Portfolio?
Brighthouse Financial, Inc. BHF has been gaining momentum on the back of solid performances by the Annuities, Life and Run-off segments, higher alternative investment income and sufficient liquidity.
Estimate Revision
The Zacks Consensus Estimate for Brighthouse’s 2022 and 2023 earnings has moved 4.3% and 0.6%, respectively, north in the past seven days. This should instill investors' confidence in the stock.
Earnings Surprise History
Brighthouse has a solid track record of beating earnings estimates in each of the last seven quarters.
Zacks Rank & Price Performance
Brighthouse currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 7.5% against the industry’s decrease of 15.9%.
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Return on Equity (ROE)
Brighthouse’s ROE for the trailing 12 months is 11.6%, expanding 520 basis points year over year. This compares favorably with the industry average of 9.2%. ROE reflects the insurer’s efficiency in using shareholders’ funds.
Business Tailwinds
Brighthouse remains well poised for growth, with solid performances by the Annuities, Life and Run-off segments. BHF continues to deliver record sales for both Shield Level annuities and variable annuities with FlexChoice Access.
BHF expects the value proposition, which its annuity products provide in volatile markets, to remain strong, as well as witness overall annuity sales growth in 2022.
Higher fees and higher deferred acquisition costs ("DAC") amortization and lower expenses should benefit the Annuities, while Life and Run-off segments are likely to gain from higher net investment income, higher underwriting margin and lower expenses.
Net investment income in the first quarter was well above the quarterly run rate expectations, owing to a 5.4% alternative investment yield. Asset growth and higher alternative investment income should contribute to the favorable net investment income performance.
The balance sheet and liquidity position remained robust in the first quarter. BHF estimated its combined risk-based capital or RBC ratio in the range of 450% and 470% above the target of 400% to 450% in normal markets. BHF continued to possess significant holding company liquid assets of $1.4 billion at first-quarter end.
BHF expects the business mix to continue to progress with the outflow of older capital-intensive businesses and the addition of higher cash flow generating and less capital-intensive businesses. It expects this continued mix shift to benefit distributable earnings as they are projected to become less market-sensitive and more predictable.
Courtesy of solid financial strength, the insurer engages in capital deployment to enhance its shareholders value. Currently, BHF has $654 million remaining under its common stock repurchase program.
Brighthouse has an impressive Value Score of A. The stock remains undervalued at the current level. BHF currently has a trailing 12-month price-to-book value ratio of 0.29, lower than the industry average of 1.1.
The Zacks Consensus Estimate for Brighthouse’s 2023 earnings per share of $15.50 indicates a year-over-year increase of 5%
Stocks to Consider
Some better-ranked stocks from the insurance industry are MetLife, Inc. MET, MGIC Investment Corporation MTG and James River Group Holdings, Ltd. JRVR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MetLife’s earnings surpassed estimates in each of the last four quarters, the average beat being 42.9%.
The Zacks Consensus Estimate for MetLife’s 2022 and 2023 earnings has moved 0.5% and 0.4% north, respectively, in the past 30 days. In the past year, MET stock has gained 5.2%.
The Zacks Consensus Estimate for MGIC Investment’s 2022 and 2023 earnings has moved 1.8% and 3.2% north, respectively, in the past 30 days.
MTG’s earnings surpassed estimates in each of the last four quarters, the average beat being 10.94%. In the past year, MTG stock has lost 2.7%.
The Zacks Consensus Estimate for James River’s 2022 and 2023 earnings per share indicates year-over-year increases of 136% and 13.1%, respectively.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 15.1% and 4.9% north, respectively, in the past 30 days. In the past year, JRVR stock has lost 28.1%.
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MGIC Investment Corporation (MTG) : Free Stock Analysis Report
MetLife, Inc. (MET) : Free Stock Analysis Report
James River Group Holdings, Ltd. (JRVR) : Free Stock Analysis Report
Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report
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