[Christian Harris]

The insurance sector, particularly life insurers, experienced significant turbulence on Tuesday, March 4, 2025, as treasury yields declined, underscoring the industry’s sensitivity to interest rate fluctuations.

Major players in the life insurance space, including Brighthouse Financial (BHF), Lincoln National (LNC), and MetLife (MET), saw notable declines in their stock prices.

Brighthouse Financial, for instance, saw its shares drop by 3.05%, continuing a downward trend that has persisted over the past month.

The company’s stock is currently trading below its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, indicating challenging short-term performance.

With a price-to-earnings (P/E) ratio of 2.70, significantly lower than the industry average, Brighthouse’s valuation reflects investor concerns about its future prospects.

The decline in treasury yields has raised concerns among analysts about the potential squeeze on profitability for life insurers.

These companies rely heavily on investment income from their bond portfolios to meet long-term policyholder obligations.

As yields fall, insurers may need to reassess their rate assumptions, potentially leading to adjustments in product pricing and features.

The uncertain trade policy environment, exacerbated by recent tariff announcements, further complicates the outlook for the insurance sector.

Kenneth Saldanha, insurance lead for the Americas at Accenture, notes that geopolitical instability is causing significant volatility for insurance companies.

“We’ve seen carriers revise their earnings releases three times in a week based on shifting conditions,” Saldanha stated.

The potential for tariffs to curtail economic activity and dampen long-term growth is a particular concern.

Historically, insurance growth has closely mirrored GDP growth, typically within a few basis points. Any downturn in GDP resulting from trade tensions could directly impact underwriting volumes and profitability across the industry.

Moreover, the ripple effects of tariffs extend beyond macroeconomic concerns.

For instance, tariffs on Canadian imports are expected to hit the auto manufacturing sector hard, which has direct implications for auto insurance.

Higher costs for auto parts could lead to increased claims expenses, further pressuring insurers’ bottom lines.

In response to these challenges, insurance executives are focusing on areas within their control, particularly cost management.

“We expect two major effects: a slowdown in multinational underwriting and an intensified focus on cost management as insurers navigate volatility,” Saldanha explained.

As the situation continues to evolve, investors and industry observers should closely monitor several key factors: interest rate movements and their impact on insurers’ investment portfolios, changes in underwriting practices – especially in multinational coverage – cost-cutting measures implemented by insurers to maintain profitability, and potential revisions to earnings forecasts as companies adjust to the new economic landscape.

The interplay between trade policy, interest rates, and broader economic conditions will likely continue to shape the insurance sector’s performance in the coming months, making it crucial for stakeholders to stay vigilant and adaptable.

With global insurance premiums expected to grow and return on equity projected to improve to about 10.7% in 2025, according to Deloitte’s outlook, the sector faces both challenges and opportunities in navigating this complex economic environment.

Sources: eToro, MarketScreener

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