Analyst Gloomier About Life Earnings

By Trevor Thomas

May 08, 2002 at 08:00 PM

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NU Online News Service, May 8, 10:35 a.m. – At least one financial analyst is thinking of downgrading earning-per-share estimates for a number of life insurance companies, in light of an 8.3% decline in the S&P 500 index since the start of the year.

Life insurers' income from variable life and variable annuity products is likely to be hurt by the decline in the equity market, says Andrew Kligerman, a Bear Stearns & Company Inc. analyst in New York.

Because insurers' VL and VA fee income is based on a percentage of assets under management, current market conditions have forced Kligerman to rethink his forecast of 8% market appreciation for the year. Such a decline would in turn affect asset values, sales, deposits and fee income, he points out.

Kligerman says he will probably cut his earnings estimates for the industry for the remainder of the year if earnings don't improve soon.

The analyst expects the life insurers most affected by a continued equity market slump to be the Hartford Life Insurance Company, Simsbury, Conn.; Lincoln National Corp., Fort Wayne, Ind.; Nationwide Financial Services Inc., Columbus, Ohio; Principal Financial Group Inc., Des Moines, Iowa; Phoenix Companies, Inc., Hartford; and Prudential Financial Inc., Newark, N.J.

"More than 30% of these companies' 2002 operating EPS are estimated to come from equity-sensitive products," Kligerman notes.

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