Manulife Financial Corporation (MFC) and Primerica, Inc. (PRI) are slated to disclose their fiscal fourth-quarter earnings (ended December 2023) on February 14 and February 13, respectively, after the market closes. Wall Street expects MFC’s fourth-quarter revenue to come in at $2.91 billion, while its EPS for the same quarter is projected to decline 4.1% year-over-year to $0.63.
Meanwhile, Wall Street has high expectations for PRI, with its anticipated fourth-quarter revenue climbing by 5.4% year-over-year to reach $723.85 million, while its EPS for the same quarter is forecasted to soar by 22.4% year-over-year to $4.27.
However, before we delve deeper into the fundamentals of the highlighted stock, let's briefly examine the industry dynamics first.
Despite encountering numerous macroeconomic headwinds, the life insurance sector is experiencing heightened demand for its savings and retirement products. Accenture maintains an optimistic view regarding the industry's growth in emerging markets, forecasting an average revenue increase of 5.1% for both 2024 and 2025.
Meanwhile, Statista predicts global gross written premiums in the life insurance market to reach a whopping $3.67 trillion this year and further escalate to $3.92 trillion by 2028, growing at a 1.7% CAGR spanning 2024 to 2028, signaling a steady growth for the life insurance industry.
Moreover, the integration of Artificial Intelligence (AI) presents significant potential for transforming the life insurance landscape, improving risk assessment, underwriting processes, and overall customer satisfaction.
The generative AI market within life insurance is witnessing substantial expansion driven by a rising need for data-driven decision-making tools and insurers' quest for operational excellence. The global generative AI in the life insurance market is expected to hit $1.74 billion by 2033, demonstrating a robust CAGR of 28.8% from 2024 to 2033.
Given the solid industry prospects, both MFC and PRI should gain. However, in terms of price performance, PRI appears to have outshined MFC by surging 15.7% year-to-date compared to MFC’s 1.4% year-to-date gain. Likewise, over the past nine months, PRI’s shares climbed 31.7% versus MFC’s 18.6% gain.
Additionally, PRI’s shares soared 8.7% over the past month to close the last trading session at $237.50. In contrast, MFC’s shares gained 5% over the past month to close the last trading session at $22.40.
However, to find out which Insurance - Life is the better pick, let’s dive deeper into their fundamentals:
Recent Developments
On January 17, 2024, MFC partnered with UpLink, the World Economic Forum's (WEF) innovation platform, to shape the future of longevity investment. Through this three-year collaboration, they are set to host annual Global Longevity Innovation challenges and support broader efforts to address the challenges of a global aging population, aiming for longer, healthier lives.
On February 8, 2024, PRI declared a quarterly dividend of $0.75 per share, payable to its shareholders on March 12, 2024. This dividend payment reflects a 15% rise from the previous quarter’s dividend.
The company’s annual dividend of $3 translates to a 1.26% yield on the prevailing price level, while its four-year average dividend yield is 1.32%. Its dividend payouts have grown at CAGRs of 17.6% and 21.1% over the past three and five years, respectively. Also, it has a record of 13 years of consecutive dividend growth.
Recent Financial Results
For the fiscal third quarter, which ended on September 30, 2023, MFC’s APE sales increased 23% from the prior-year quarter to $1.66 billion. During the same quarter, the company’s attributable net income and EPS came in at $1.01 billion and $0.52, respectively.
In the fiscal third quarter, which ended on September 30, 2023, PRI’s total revenues increased 13.8% from the prior-year quarter to $710.93 million. Meanwhile, the company’s net income and EPS improved 91.1% and 100.5% from the year-ago value to $152.06 million and $2.62, respectively.
Past Financial Performance
MFC’s revenue has declined at CAGRs 34.5% and 15.2% over the past three and five years, respectively. In addition, its total assets have decreased at a 1.6% CAGR over the past three years.
Conversely, PRI’s revenue has improved at CAGRs of 8.8% and 8.5% over the past three and five years, respectively. Moreover, its total assets have grown at a marginal CAGR over the past three years.
Profitability
PRI’s trailing-12-month asset turnover ratio of 0.19x is higher than MFC’s 0.02x. Likewise, PRI’s trailing-12-month Return On Total Assets (ROTA) of 3.27% is higher than MFC’s 1.66%. Furthermore, PRI’s trailing-12-month cash per share of $13.26 is higher than MFC’s $8.96.
Thus, PRI is more profitable.
POWR Ratings
MFC has an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. Conversely, PRI has an overall rating of B, translating to a Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. MFC has a D grade for Growth, justified by its bleak financial growth over the past few years. Whereas, PRI has a B grade for Growth, consistent with its solid historical growth.
Moreover, MFC’s A grade for Momentum is in sync with its share price, which is currently trading above its 50-day moving average of $21.44 and 200-day moving average of $19.47. Likewise, PRI’s A grade for Momentum is consistent with its share price trading above the 50-day moving average of $217.55 and 200-day moving average of $203.36.
Furthermore, MFC’s C grade for Stability is in sync with its 25-month beta of 1.08. In contrast, PRI’s B grade for Stability is consistent with its 25-month beta of 0.80.
Among the 26 stocks in the B-rated Insurance - Life industry, MFC is ranked #17, while PRI is ranked #5.
Beyond what we’ve stated above, we have also rated both stocks for Value, Sentiment, and Quality. Click here to view MFC ratings. Get all PRI ratings here.
The Winner
In a world full of uncertainty, life insurance provides individuals and families with a vital safety net, ensuring lasting financial security throughout their lives while also offering insurance companies a steady revenue stream.
Considering the essential nature of the industry and its bright outlook, both MFC and PRI should reap the benefits. However, PRI’s stronger financial position, solid historical growth, higher profitability, and optimistic analyst estimates could position it as a superior investment choice compared to MFC.
Our research shows that the odds of success increase when one invests in stocks with an overall rating of Strong Buy. View all the top-rated stocks in the Insurance - Life industry here.
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MFC shares were trading at $22.31 per share on Tuesday morning, down $0.31 (-1.37%). Year-to-date, MFC has gained 0.95%, versus a 4.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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