Piper Sandler Recommends Owning Life Insurance Stocks; Here Are 3 Names to Watch

Market legend Warren Buffett has said, ‘Insurance will always be essential for both businesses and individuals,’ and that statement embodies a truth that investors should consider. Insurance protects assets; we pay premiums now, at a manageable rate, to avoid financial disaster in the event of some unlikely, but expensive, event or catastrophe.

The underlying truth of the insurance industry ensures that, no matter what the economic conditions, there will always be a market for the service. In hard times, even if the premiums become somewhat of a burden, the protection grows in importance, while in good times, appreciating assets may require more extensive insurance policies.

According to John Barnidge, an analyst at Piper Sandler, it’s a smart move to have some life insurance stocks in your portfolio. He believes that these stocks are doing well because concerns about credit issues and policy cancellations have eased as interest rates have “backed off highs.”

However, there are some nuances to keep an eye on, such as investment income and trends in the asset management sector. Overall, claims are staying manageable, but we are “transitioning from seasonally strongest mortality quarter to winter months elevation,” according to Barnidge.

Bottom-line, against this backdrop, Barnidge has picked 3 names to watch in life insurance, and we’ve used the TipRanks database to find out how the rest of Wall Street also feels about them. Here are the details, and the analyst’s comments.

Globe Life (GL)

Tracing its roots back to 1900, Globe Life has been providing life insurance policies for well over a century. In 2006, the company moved from its original Alabama home to Texas, and now offers a range of services, including whole life insurance, term life insurance, children’s life insurance policies, accident and accidental death insurance, and final expense insurance. Other policies include Medicare supplements, critical illness policies, hospital insurance, cancer insurance, and ICU insurance. Customers can even purchase mortgage protection policies, as stand-alone policies or with their life insurance policies.

In October of last year, Globe Life expanded its health insurance offerings through the acquisition of Dallas-based Evry Health, a health insurance firm that has been innovating on using software automation and ‘mobile-first’ to lower the cost of health insurance. The acquisition will bring Evry’s policy base into Globe Life’s family – as well as Evry’s tech innovations.

In addition to offering its insurance policies, Globe Life also aims to educate its customers. While most businesses have experts on staff to handle claims, disputes, and distributions from insurance policies, the retail customer most likely does not have this expert knowledge. Globe offers, online or in person, full explanations of how to collect benefits, how insurance benefits can impact other policies or aspects of life, how and when customers should purchase life insurance, and other relevant issues.

Globe Life will release its 4Q23 earnings results at the end of this month, so for now let’s look back at the company’s last results, from 3Q23. GL posted revenues of $1.38 billion, up 6.2% year-over-year – although sliding just under the forecast by a modest $10 million. The company’s net income, by non-GAAP measures, was $2.71 per share, a strong gain from the prior-year quarter’s $2.19. The current EPS beat the forecast by 6 cents per share.

Turning to top expert Barnidge, we find that he bases his bullish take for GL stock on an overall appreciation of the company’s sound position. The analyst writes, in some detail, “We continue to like shares of GL. It never screens cheap relative to the rest of the group but actually is ~1x below its 5-year average and with a consistency of earnings rarely seen elsewhere in the broader coverage universe. The company has a historic focus on collective bargaining-driven distribution (~30%) where wage growth seemingly strongest. Better agent recruitment trends bode well for future improvement in sales distribution. ’24 EPS guidance was set with 3Q23, so we would be surprised to see it tweaked just a quarter later and before any actual results for the year, but there could be some tweaking of sales guidance possibly.”

“Recall,” Barnidge further adds, “agent recruitment trends turned throughout ’23 and built as the year progressed with that being a good leading indicator of future sales volume. This company is well positioned to benefit from the secular demand tailwinds to core life and supplemental health products in the insurance industry.”

Barnidge goes on to give GL an Overweight (Buy) rating, and he sets a price target, $143, that implies a 16% one-year upside potential. (To watch Barnidge’s track record, click here)

Overall, Wall Street is willing to give Globe Life a Moderate Buy consensus rating, based on 9 recent reviews that include 4 Buys to 5 Holds. The shares are trading for $122.89, and their $134.44 average target price suggests a gain of 9% in the next 12 months. (See GL stock forecast)

Voya Financial (VOYA)

New York City-based Voya Financial is more than just an insurance company – it’s a financial services firm, offering various life and financial insurance policies, but it also has its hands in retirement and investment services. The company’s insurance arm reinforces the financial services, as insurance policies protect assets, while retirement funds and financial/wealth management are designed to grow those assets.

Voya works with a wide range of customers, including individuals, employers, financial professionals, and institutional investors, providing proven, successful back-up for retirement investments, employee benefits, and investment funds. The company can work with individual retail customers to make financial decisions simple, and with large scale businesses and institutions to provide employee benefits and corporate health policy management. Life insurance plays its usual protective role in all of these areas.

As a financial services company, offering life insurance as a defensive measure to its customers, Voya’s financial base is doubly important for investors to note. At the end of the last reported quarter, 3Q23, the company reported it had a strong capital position, deploying $300 million in excess capital during the quarter. Voya also has $770 billion in total assets under management, and serves more than 14 million customers.

Getting to the company’s results, we find that Voya reported a non-GAAP income of $1.74 per diluted share. This missed expectations by 31 cents per share. The firm’s net income available to shareholders came to $2.29 per share, and fully supported the 40-cent common share dividend, paid out in December. The annualized rate of $1.60 gives a forward yield of 2.2%.

Once again, analyst Barnidge is upbeat on this insurance stock. He notes the company’s idiosyncrasies, writing of it, “We are below consensus though suspect that consensus has not fully adjusted for 4Q23 market movement along with the update regarding its expectation for variable investment income performance for the quarter. The majority of earnings come from the Wealth Solutions business. Health Solutions is the area of the business where premiums rise the most from inflation in healthcare given the product portfolio is driven by those dynamics as well as utilization trends, which was decidedly negative in 3Q23 after a sustained period of over-earning. We suspect we are beyond the air pocket of headwinds from some divested business within Investment Management.”

Getting to the bottom line, Barnidge says of Voya’s prospects, “We look to reiteration of net flow guidance for ’24 and a possible expense reduction program being key to stock price outperformance prospectively. That is what the company has done well in its history – grow the asset base and drive margin improvement that allows for sustained free cash flow conversion.”

Taken all together, these comments back up the analyst’s Overweight (Buy) rating. He puts an $85 price target here, pointing toward a 12-month gain of 17.5% for the stock.

These shares get another Moderate Buy from the Street’s consensus; the 10 reviews here include 7 to Buy against 3 to Hold. The shares are currently priced at $72.33 and have an average target price of $83.70 – this suggests the stock will appreciate by 16% over the next year. (See Voya stock forecast)

Assurant (AIZ)

Last on our Piper Sandler-backed list, Assurant, is the longest-lived of the life insurance stocks we’re looking at; the company can trace its origins to 1892. Assurant manages a global business from its Atlanta headquarters, taking advantage of its position in one of the major business, financial, and travel hubs of the fast-growing Southeast region. The company has a market cap of $8.88 billion, and generated $10.8 billion in total revenue for the 12 months ending on September 30, 2023.

Assurant offers a wide array of financial and insurance services, across most of the industries that impact our day-to-day lives. To list just a few, the company offers credit card benefits, automotive insurance and reinsurance options, rental insurance policies, flood protection, commercial equipment coverage, and, of course, life policies. The company offers policies for health coverage and retirement, as well as life and disability insurance plans.

Earlier this month, Assurant’s Board announced the next dividend payment, set at 72 cents per common share, for 1Q24. The forward yield, based on an annualized rate of $2.88 per common share is a modest 1.7%.

On results, Assurant brought in $2.77 billion at the top line in 3Q23, a revenue figure that was up 8.6% year-over-year and was $70 million better than had been anticipated. The company’s bottom line in the quarter, $4.29 per diluted share by non-GAAP measures, beat the forecast by an impressive $1.70 per share.

Shares in Assurant are up more than 30% in the last 12 months, but that does not dissuade Barnidge from taking a bullish outlook on the stock. He says in his recent note here, “We remain Overweight on the company despite shares having meaningfully moving higher off the lows as Global Housing began to benefit from rate increases earning into premiums. We believe that dynamic is going to be happening for the auto warranty business in the larger Global Lifestyle segment. Valuation remains attractive, ~1.5x < 5-year average valuation multiple. We also think shares tend to do well when the company is leaning into increased share repurchases, which is occurring. February will be the next near-term catalyst with the setting of guidance.”

That Overweight (Buy) rating is paired with a $192 price target, indicating the analyst’s confidence in a 13% increase on the one-year horizon. (To watch Barnidge’s track record, click here)

This stock gets a Strong Buy consensus rating from the Steet, and it is unanimous – all 3 of the recent reviews are positive. AIZ shares are trading for $169.53 and have an average price target of $189; together, these imply a 11.5% upside potential in the year ahead. (See Assurant stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.