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The COVID-19 pandemic has triggered a renewed interest in life insurance policies among Americans, creating opportunity for savvy investors. Many life insurance companies reported double-digit percentage increases in policy sales in 2020. In fact, Google searches for life insurance spiked 50% between March and May of 2020.
Unfortunately for buyers and investors, historically low interest rates have also prompted insurers to raise their policy rates to maintain margins.
Life insurance stocks aren’t the most glamourous or high-flying stocks in the market. However, many are trading at very attractive valuations, and many of them pay dividends as well. Here are three ways to invest in life insurance stocks.
Lincoln National Corporation (NYSE:LNC): Lincoln National just missed fourth-quarter earnings estimates. However, Bank of America analyst Joshua Shanker says the company has strong fundamentals, including impressive earnings growth and capital management in recent years. Lincoln National trades at just 5.2 times forward earnings and pays a 3.4% dividend. Bank of America has a buy rating and $56 price target for LNC.
Metlife Inc (NYSE:MET): MetLife’s U.S. business just reported a 51% increase in adjusted earnings in the fourth quarter. The company’s dental business has been much more profitable since the pandemic started, given customers are simply making fewer trips to the dentist. Traffic accident-related claims are also way down due to a steep drop-off in travel. CFRA analyst Catherine Seifert is bullish on MetLife and says the stock is undervalued relative to both its peer group and historical trading range, trading at just 7.8 times Seifert's 2021 EPS estimate. CFRA has a buy rating and $58 price target for MET stock.
iShares US Insurance ETF (NYSE:IAK): For investors who want to take a more diversified approach to the insurance industry, the iShares US Insurance ETF contains about 60 stocks exposed to all types of insurance, including life. The IAK fund’s top holdings include Chubb Ltd (NYSE:CB), car insurer Progressive Corp (NYSE:PGR) and MetLife. The fund has just a 0.42% expense ratio and plenty of liquidity, with 4,779 shares traded per day on average. And it pays a sizable 5.6% dividend.
(Photo by Nathan Dumlao on Unsplash)
