Brighthouse Financial, Inc. BHF shares have rallied 21.7% in three months compared with the industry's growth of 14%. The Finance sector and the Zacks S&P 500 composite have returned 2.6% and 10.1%, respectively, in the same time frame. With a market capitalization of $2.97 billion, the average volume of shares traded in the last three months was 0.3 million.

BHF Outperforms Industry, Sector, S&P in 3 Months

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BHF Trading Above 50-Day and 200-Day Moving Average

Currently priced at $50.10, the life insurer is trading above its 50-day and 200-day simple moving average (SMA) of $48.86 and $46.62, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

BHF’s Growth Projection

The Zacks Consensus Estimate for Brighthouse Financial’s 2024 earnings per share indicates a year-over-year increase of 32%. The consensus estimate for revenues is pegged at $8.67 billion, implying a year-over-year improvement of 3.5%. 

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 9% and 4.5%, respectively, from the corresponding 2024 estimates.

Mixed Analyst Sentiment on BHF

One of the four analysts covering the stock has raised estimates for 2024 while two have lowered the same over the past 30 days. For 2025, two of the six analysts have raised estimates while two have lowered estimates over the same time frame.

The consensus estimate for 2024 has moved 0.9% south, while the consensus estimate for 2025 has moved 0.8% north in the past 30 days.

Brighthouse Financial’s Return on Capital

BHF’s trailing 12-month return on equity is 23.5%, ahead of the industry average of 15.4%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.

Factors Acting in Favor of BHF

Brighthouse Financial is one of the largest providers of life insurance products in the United States. Given the expansive and compelling suite of life products, the company should benefit from the growing individual insurance market.
The insurer remains focused on ramping up sales of life insurance products and expanding its distribution network, aiming to become a premier player in the industry.

BHF remained focused on enhancing its product portfolio with the launch of Shield Level Pay Plus, which is an addition to the suite of Shield Annuities.
Strong Shield Level Annuity sales and higher fixed indexed annuity sales from the company's recently launched SecureKey product boosted the Annuity sales. Fixed deferred annuities also contributed to the growth. Improved underwriting margin and net investment income should contribute to higher Life insurance sales.

Brighthouse Financial should benefit from the growing individual insurance market. BHF remains focused on ramping up new sales of life insurance products, strengthening annuity products and expanding its distribution network, aiming to become a premier player in the industry. Strong Shield Level Annuity sales and higher fixed indexed annuity sales from the recently launched SecureKey product contributed to higher Annuity sales. Higher underwriting margins and net investment income boosted Life insurance sales. Execution of the life insurance strategy, including the addition of new distribution partners and wholesalers, is expected to drive growth.

Net investment income has been exhibiting an improving trend over the past few quarters. Riding on alternative investment income, asset growth and higher interest rates, the insurer expects the metric to improve in the future. Given a well-diversified and high-quality portfolio as well as a conservative investment strategy, we expect the metric to improve in the future. BHF estimates a 9-11% annual yield over the long term on the alternative investment portfolio.

Brighthouse Financial continued to focus on maintaining the strength of the balance sheet. As of Sept. 30, 2024, the estimated combined risk-based capital ratio was 365-385%. Given enhanced financial strength and flexibility, the company remains committed to returning capital to shareholders and intends to maintain an opportunistic share repurchase program to create significant value for them.

BHF Shares are Affordable

Brighthouse Financial is trading at a discount compared with the industry average. It presents a compelling investment opportunity with its attractive forward 12-month price-to-book ratio of 0.54X, lower than the industry average of 2.05X. Also, it has a Value Score of A.

Shares of other life insurers like Voya Financial, Inc. VOYA, Reinsurance Group of America, Incorporated RGA and Manulife Financial Corp MFC are also trading at a discount to the industry average.

Headwinds

BHF has been incurring higher expenses over the last several years, attributable to an increase in policyholder benefits and claims and a deteriorating margin. While total expenses increased 30.2% to $3.9 billion in the first nine months of 2024, the net margin was negative 24.4%, eroding from negative 2.3% in the year-ago period. Corporate expenses were $610 million on a year-to-date basis. BHF expects an increase in the fourth quarter expenses as a result of typical seasonality. 

Though the debt balance remained unchanged from the 2023-end level, leverage as well as times interest earned compares unfavorably with the industry average.

Conclusion

Higher annuity and life insurance sales, high-quality portfolio, financial flexibility and effective capital deployment poise the multi-line insurer well for growth.

However, the specific challenges facing the company like escalating expenses and high leverage cannot be ignored.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Manulife Financial Corp (MFC) : Free Stock Analysis Report

Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report

Voya Financial, Inc. (VOYA) : Free Stock Analysis Report

Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report

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