Why Life Insurance Stocks Are Outpacing the Market Right Now (And Which 5 You Should Watch)

The Federal Reserve just cut rates by 25 basis points to 3.5%-3.75% in December, and it’s already reshaping the insurance playbook. While traditional bond investors are sweating, life insurance stocks are quietly becoming the smarter play for 2025. Here’s what’s shifting the game.

The Rate Cut Reality: Why Life Insurance Stocks Benefit

Lower interest rates sound bad for insurers at first glance—they’ve got huge reserves earning less. But here’s where it gets interesting: in a low-rate environment, insurers are forced to get creative. They’re pivoting to alternative investments (private equity, hedge funds, real estate), and they’re redesigning products to stay competitive. The industry estimates show life insurance sales could grow 2%-6% in 2025, with strong momentum across indexed universal life, fixed annuities, and whole life policies.

The Zacks Life Insurance industry currently ranks #74 out of 243 industries—placing it in the top 31%. Translation: the market’s catching on.

Three Market Shifts Reshaping Life Insurance Stocks in 2025

Digital-First Is No Longer Optional: Carriers are ditching traditional channels. AI and machine learning are now customizing coverage in real-time, while automation is slashing operational costs and expanding margins. This efficiency boost directly feeds earnings growth—something that matters when rates are tight.

Product Redesign Is Creating Winners and Losers: Insurers aren’t just sitting around hoping for higher rates. They’re launching hybrid products bundling retirement income, life coverage, and healthcare into single policies. These “living benefits” appeal to baby boomers more than classic death-benefit-only plans. Companies executing this pivot are seeing premium acceleration.

The Demographic Tailwind: The baby boomer wave isn’t slowing down. Global life insurance premiums are projected to hit $2.5 trillion by 2026, with emerging markets leading growth. Life insurance stocks positioned in Asia and institutional markets are catching this wave early.

The 5 Life Insurance Stocks Positioned for Growth

Jackson Financial (JXN) – The Annuity Specialist Registered Index-Linked Annuities (RILA) now represent over 30% of Jackson’s retail annuity sales, and LIMRA expects this to accelerate through 2025. The stock carries a Zacks Rank #1 (Strong Buy). Management is deploying $700-$800 million for buybacks and dividends in 2025. Earnings are expected to jump 17% this year and another 8.5% in 2026. The stock has delivered a 7.1% average earnings surprise over the past four quarters.

F&G Annuities & Life (FG) – The Fee-Shift Play FG is executing a deliberate shift from product-heavy, capital-intensive business to high-margin, fee-based solutions. This Zacks Rank #1 pick is positioned to capitalize on untapped Middle Market demand for life insurance and the quiet migration of CD holders into fixed annuities. The consensus estimate for 2026 earnings shows a massive 42.5% year-over-year jump—suggesting the market is still underpricing the transition.

AIA Group (AAGIY) – The Pan-Asian Leader This Hong Kong-based Zacks Rank #2 insurer benefits from an exclusive bancassurance network, a solid agent force, and a shareholder-friendly capital return program. 2025 earnings are expected to grow 5.6%, accelerating to 20.2% in 2026 as Asian markets expand and digitalization gains traction.

Manulife Financial (MFC) – The Diversified Powerhouse Headquartered in Toronto, this Zacks Rank #2 company dominates its home market while expanding rapidly in the U.S. and Asia. The wealth and asset management division is growing faster than the core insurance business. Consensus estimates show 1.4% earnings growth for 2025 and 9.4% for 2026, with management guiding for 10%-12% core EPS growth over the medium term. The company has delivered a 4.93% average earnings surprise.

Lincoln National (LNC) – The Turnaround Story This Zacks Rank #2 diversified insurer benefits from a recovering Group Protection business, strong fixed annuity flows, and solid Retirement Plan Services. The stock is positioned to deliver 11.2% earnings growth in 2025 and 2.2% in 2026, with a 12.7% long-term growth rate. Notably, LNC has delivered the highest average earnings surprise at 12.03% over four quarters.

How These Life Insurance Stocks Stack Up Against the Broader Market

Here’s the reality: the Life Insurance industry gained just 4.7% year-to-date, while the S&P 500 climbed 18.6% and the Finance sector jumped 15%. Translation: life insurance stocks are still undervalued relative to the opportunity ahead.

On a price-to-book basis (TTM), the industry trades at 1.89X versus the S&P 500 at 8.51X and the Finance sector at 4.22X. Historically, this industry has ranged from 1.04X to 2.11X over the past five years. The current valuation suggests room to run as rates stabilize and product redesigns generate returns.

The Bottom Line

Life insurance stocks are executing a quiet transformation—rate cuts are forcing innovation, demographics are favoring growth, and the shift to digital and fee-based models is expanding margins. While the broader market has gotten ahead of itself on AI and tech, life insurance stocks remain undervalued relative to 2025-2026 earnings growth expectations. Jackson Financial, F&G Annuities, AIA Group, Manulife Financial, and Lincoln National represent the best-positioned names to capture this secular shift.