Top-line growth for the life insurance industry will vary between three and four percent in 2014 and 2015, new research shows.
Keefe, Bruyette & Woods reveal this forecast in a report detailing the outlook for life insurers in 2014. Underpinning the growth forecast, the study indicates, are “solid investment flows” and fees derived from “strong equity markets.” The industry can also look forward to an increase in sales of fixed annuities and life insurance products.
“Better new money yields should create less of a draft on investment compared to recent years,” the report states. “For most companies, international growth remains good on a local currency basis, but the stronger U.S. dollar does provide an earnings translation headwind for 2014.
“Given industry discipline around VAs and riskier life products, we view the quality of growth as generally high,” the report adds.
The report additionally forecasts these developments:
- Capital management will add about 3.5 percent to average earnings per share (EPS) growth in 2014 and 3 percent in 2015;
- Life insurers’ book value growth will add 20 percent or more to the industry’s median investment returns;
- Median earnings per share will grow by 7.3 percent in 2015 and 9.5 percent in 2015.
The report notes also median stocks have appreciated by 62 percent year-to-date. The appreciation was driven by “growing earnings, positive estimate revisions and significant multiple expansion.”
The industry’s performance “soundly trumped the S&P 500 (up 25 percent) and the KBW Financial Index (up 38 percent),” the report adds.
Editor’s Note: An earlier version of this story incorrectly noted that median life insurance product prices have appreciated by 62 percent year-to-date. The Keefe, Bruyette & Woods report in fact states that median life insurance stocks have appreciated by 62 percent YTD.