Analyst: Life Sector Will Outperform Market

By Steve Tuckey

June 27, 2005 at 08:00 PM

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Publicly traded life insurers should do better than other public companies over the next 6 months, and life insurers with relatively light exposure to fluctuations in stock prices should do especially well.[@@]

Suneet Kamath, a life sector analyst at Sanford C. Bernstein & Company L.L.C., New York, gives those predictions in a mid-year review.

"In our opinion, future performance will likely resemble that of the past 6 months," Kamath writes in the mid-year review. "On a year-to-date basis, the life sector is outperforming the market by about 300 basis points."

Life insurers that focus on businesses with high returns on equity and operate strong stock buyback programs should do better than others, Kamath writes.

Kamath also is looking for insurers that can cope with sluggish stock prices, low interest rates and future increases in minimum capital requirements.

Prudential Financial Inc., Newark, N.J., and Principal Financial Group Inc., Des Moines, Iowa, are 2 insurers that seem to be poised to do well, Kamath writes.

"In contrast, we feel other insurers in our coverage are reporting peak ROEs and will see declines in profitability as prepayment income slows and higher capital requirements potentially emerge," Kamath writes.

In some cases heavy exposure to individual life and individual annuity products could hurt an insurer's performance, Kamath writes.

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