Morgan Stanley: differentiated performance will drive insurance stocks

Investing.com -- Insurance stocks are set to diverge further as investors reward companies showing clearer performance differentiation following third-quarter results, according to Morgan Stanley.

Morgan Stanley analyst Bob Jian Huang said that “companies that had more differentiated performance are likely to see more durable share price performance,” with profitable growth remaining “king” in P&C and durable earnings the focus in life insurance.

In life insurance, Morgan Stanley argues that earnings were stronger than share-price reactions suggested, saying “all three primary pillars of life earnings (i.e., fee, underwriting, and spread) came in generally favorably.”

Fee-related income stood out, with results “exceeding the high bar” set by stronger equity markets.

Underwriting also reportedly showed bright spots, including Principal and Voya in group benefits as “margin over growth remains a theme,” and Globe Life and Primerica, which benefited from “positive actuarial assumption impacts.”

Morgan Stanley notes that spread income faces compression, particularly in annuities, but says companies have been “proactive in mitigating the compression,” including expanding pension risk-transfer activity.

The bank highlights strong set-ups in “turnaround-oriented companies like Lincoln and Voya,” as well as Equitable, MetLife and Globe Life. Corebridge, however, faces headwinds from potential Fed cuts and “offers fewer catalysts,” prompting a downgrade to Equal-weight.

In P&C, Morgan Stanley sees a “softening cycle heading into 2026,” with decelerating growth despite strong combined ratios.

Competition in personal and commercial property lines is said to be weighing on pricing, while reinsurers should see easing rates at Jan. 1 renewals. Differentiated performers include Aon and Ryan Specialty among brokers, and Arch and RenRe among reinsurers.

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