Global Aging Will Transform Insurance And Asset Markets

Key Takeaways

• Diversified expansion in asset management, alternative products, and technology is fueling operational efficiency, broadening revenues, and supporting margin improvement.
  
• Strong demand for longevity and private credit solutions, combined with superior risk management, positions the firm for resilient, above-peer growth amid market volatility.
  
• Heavy reliance on related-party transactions and cyclical investor demand exposes earnings, margins, and balance sheet stability to risks from regulatory scrutiny, market shifts, and integration challenges.

Catalysts

Operates as an alternative asset manager and market maker in the United States.

• Robust growth in demand for longevity-based insurance and alternative asset products, fueled by global aging demographics, is driving higher policy originations, record realized gains (26% average spread in Q2), and strong AUM inflows. This sustained trend directly supports future revenue growth and higher profitability.
  
• Expansion into asset and wealth management, including new products and increasing institutional client relationships, is broadening the revenue base and improving fee-related earnings, as seen with $8.8M in asset management revenue and strong momentum in ETF flows; management expects continued improvement in this segment's contribution to overall earnings and margins.
  
• Accelerated velocity and capital efficiency in policy turnover (annualized turnover ratio above target at 2.3x) demonstrates improving operational execution, allowing more rapid capital deployment and realization of gains. This operational leverage is expected to continue enhancing ROE and net margins as the business scales.
  
• Investments in brand recognition, digitization, and technology-driven origination platforms are improving operational scalability and customer acquisition, laying the groundwork for sustainable margin improvement and long-term top-line expansion.
  
• Increasing global investor interest in less correlated, private credit and insurance-linked assets-amid ongoing market volatility and greater regulatory scrutiny-favors Abacus's specialized origination and risk management platform, positioning the company for above-peer revenue growth and resilient earnings.

Abacus Global Management Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Abacus Global Management's revenue will grow by 28.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.7% today to 69.3% in 3 years time.
• Analysts expect earnings to reach $238.7 million (and earnings per share of $2.43) by about August 2028, up from $-1.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.6x on those 2028 earnings, up from -553.0x today. This future PE is lower than the current PE for the US Insurance industry at 14.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.2%, as per the Simply Wall St company report.

Abacus Global Management Future Earnings Per Share Growth

Risks

• A significant percentage (up to 29% in Q2, 17% YTD) of revenues is derived from related-party transactions (Abacus-managed funds purchasing Abacus-originated assets), raising ongoing concerns about potential conflicts of interest, market-driven pricing, and the sustainability of demand should investor scrutiny or regulatory focus intensify-risking future revenues and net earnings.
  
• The business is highly reliant on strong policy origination volumes and premium trade spreads (notably a strong 26% gain on sale this quarter), but this pricing power may prove cyclical and unsustainable if investor appetite for less-correlated assets wanes, potentially compressing margins and reducing earnings during macroeconomic downturns.
  
• The company has recently expanded aggressively via acquisitions in late 2024 and launched larger marketing campaigns, both of which have driven up operating costs; failure to realize anticipated synergies, or a slowdown in origination/fee momentum as integration risk materializes, would put long-term pressure on net margins and earnings.
  
• Abacus's unique origination/syndication model depends heavily on continued strong demand from institutional investors for its specialized assets and on its ability to maintain favorable sale-to-purchase and turnover ratios; should secular trends shift (e.g., rising interest rates, tighter liquidity, or declining appetite for alternative/illiquid assets), AUM growth and recurring revenues may falter.
  
• The company's business model and asset valuation practices rely on recurring realized gains and relatively short holding periods; in the event of market dislocations, asset liquidity issues, or greater regulatory scrutiny into mark-to-market practices, Abacus could face earnings volatility and balance sheet risks undermining investor confidence and share price stability.

Valuation

• The analysts have a consensus price target of $13.3 for Abacus Global Management based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $10.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $344.6 million, earnings will come to $238.7 million, and it would be trading on a PE ratio of 8.6x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of $6.28, the analyst price target of $13.3 is 52.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.