Majority of US life insurers' Q1 earnings projected to grow YOY, sequentially

First-quarter 2024 earnings projections for the US life insurance sector show that a majority of insurers are expected to improve on both a year-over-year and sequential basis.

Of the 15 publicly traded US life insurers for which analyst estimates are available, 12 are expected to book year-over-year increases in first-quarter earnings, according to analyst estimates compiled by S&P Global Market Intelligence.

The same group of insurers is also expected to perform better sequentially, with eight projected to have higher earnings in the first quarter of 2024 than in the preceding quarter.

Brighthouse Financial Inc. has the highest projected first-quarter normalized earnings-per-share estimate at $3.87, followed by Jackson Financial Inc. at $3.76. Both figures reflect an increase from the companies' EPS in the prior quarter and year.

A favorable quarter

UBS analyst Brian Meredith said in a note that the macro environment is creating a "favorable" core outlook for the life insurance industry in the first quarter.

"The strong equity market performance in the quarter should benefit fee income and provide a tailwind for upward EPS estimate revisions," Meredith said. "We expect the strong individual annuities sales the industry saw in 2023 to continue and we expect sustained demand for group annuities and group benefits products."

Individual annuities were at a record high in 2023 with $347.68 billion in individual annuity considerations, which reflects a significant increase from $286.15 billion in 2022.

But Meredith expects the industry will see a headwind when it comes to variable investment income, which is expected to be "weak for most companies."

Piper Sandler analyst John Barnidge said in a note that some life insurers may be exposed to "seasonally higher mortality claims from infectious disease," although he noted that there are some opinions that predict the seasonal high may have already peaked as we are now out of the pandemic.

Meredith said he also favors Reinsurance Group of America Inc. going into first-quarter earnings as the insurer is "best-positioned to benefit from better-than-expected benefits ratios." The analyst also thinks that revenue growth might be better than anticipated as well.

Life insurers are also expected to see higher levels of bond trading activity in 2024 due in part to a temporary accounting change made by the National Association of Insurance Commissioners in 2023. The anticipated trend may be confirmed with the release of first-quarter data.

Of US public life insurers, Corebridge Financial Inc. had the best-performing stock during the first quarter, with its shares gaining 32.6%. Corebridge ranked 10th on the list of best-performing insurance stocks across sectors during the first quarter.

Revenue to increase

Revenue estimates for the life sector also skew toward growth, with only four life insurers for which analyst estimates are available expected to report weaker revenue figures on a year-over-year basis.

Eight life insurers are estimated to book higher revenue when compared to the fourth quarter of 2023, while five companies are projected to record lower revenue than the prior quarter. American Equity Investment Life Holding Co. is the only insurer expected to see no change.

Out of the group, MetLife Inc. is anticipated to book the highest revenue for the first quarter with a mean revenue estimate of $17.73 billion.