Barclays on U.S. Insurance/Life: Initiating Coverage of SMid Cap Life Insurers; TMK and RGA Should Generate Strong ROEs
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Price: $242.55 +0.77%
Rating Summary:
12 Buy, 5 Hold, 2 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
12 Buy, 5 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
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Barclays on U.S. Insurance/Life: Initiating Coverage of SMid Cap Life Insurers; TMK and RGA Should Generate Strong ROEs
Analyst, Sarah DeWitt, said, "We are initiating coverage of five small- and mid-cap (SMid cap) life insurers. We rate Reinsurance Group of America (NYSE: RGA) and Torchmark Corp. (NYSE: TMK) Overweight, Protective Life Corp. (NYSE: PL) and Symetra Financial Corp. (NYSE: SYA) Equal Weight, and Delphi Financial Group (NYSE: DFG) Underweight. We view TMK and RGA as the most attractive franchises within SMid cap life, reflecting reduced sensitivity to low interest rates and our outlook for above-average return on equity through 2013. We believe PL and SYA face structural challenges in ROE expansion in a low interest rate environment. Lastly, DFG has a large excess workers' compensation business, and earnings could face headwinds late in the property and casualty (P&C) insurance cycle."
"Life insurance sector earnings face compression from low interest rates and a slow economic recovery. The SMid cap life insurers that can generate attractive ROEs despite these factors include RGA and TMK. Historically, these companies have generated stable and predictable earnings growth with low exposure to financial market volatility. RGA benefits from economies of scale and has potential to grow its high-ROE international life reinsurance businesses. TMK is focused on simple, term life products and benefits from strong affinity relationships. RGA and TMK are likely to generate strong ROEs with attractive P/E valuations."
"We prefer large-cap life insurers over SMid cap life insurers because the smaller life companies have fewer ROE expansion opportunities. Within the overall life insurance sector our top picks are MetLife (NYSE: MET), AFLAC (NYSE: AFL), and Prudential (NYSE: PRU). MET and PRU have diversified international platforms enhanced by acquisitions, and share buyback activity could accelerate. AFL generates the highest ROE in the life insurance industry yet trades in line with the sector P/E."
Analyst, Sarah DeWitt, said, "We are initiating coverage of five small- and mid-cap (SMid cap) life insurers. We rate Reinsurance Group of America (NYSE: RGA) and Torchmark Corp. (NYSE: TMK) Overweight, Protective Life Corp. (NYSE: PL) and Symetra Financial Corp. (NYSE: SYA) Equal Weight, and Delphi Financial Group (NYSE: DFG) Underweight. We view TMK and RGA as the most attractive franchises within SMid cap life, reflecting reduced sensitivity to low interest rates and our outlook for above-average return on equity through 2013. We believe PL and SYA face structural challenges in ROE expansion in a low interest rate environment. Lastly, DFG has a large excess workers' compensation business, and earnings could face headwinds late in the property and casualty (P&C) insurance cycle."
"Life insurance sector earnings face compression from low interest rates and a slow economic recovery. The SMid cap life insurers that can generate attractive ROEs despite these factors include RGA and TMK. Historically, these companies have generated stable and predictable earnings growth with low exposure to financial market volatility. RGA benefits from economies of scale and has potential to grow its high-ROE international life reinsurance businesses. TMK is focused on simple, term life products and benefits from strong affinity relationships. RGA and TMK are likely to generate strong ROEs with attractive P/E valuations."
"We prefer large-cap life insurers over SMid cap life insurers because the smaller life companies have fewer ROE expansion opportunities. Within the overall life insurance sector our top picks are MetLife (NYSE: MET), AFLAC (NYSE: AFL), and Prudential (NYSE: PRU). MET and PRU have diversified international platforms enhanced by acquisitions, and share buyback activity could accelerate. AFL generates the highest ROE in the life insurance industry yet trades in line with the sector P/E."
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