Magazine article American Banker

Street Sees Little Upside in Life Insurance Stocks

Magazine article American Banker

Street Sees Little Upside in Life Insurance Stocks

Article excerpt

Life insurance stocks, once a haven for financial sector investors, may not be so safe anymore, according to analysts at Salomon Smith Barney, the brokerage unit of Citigroup Inc.

Colin Devine, who covers life insurers for Salomon, and his colleague, Thomas O'Donnell, who follows the mortgage finance sector, wrote in separate reports Tuesday that these stocks are close to their peak.

The reports followed recent concerns expressed by analysts and strategists at several brokerages about high-trading thrifts and specialty finance companies, also considered safe bets in a time of declining interest and a weak equities market.

Mr. Devine downgraded his rating for Manual Financial Corp., FBL Financial Group Inc., and Mony Group Inc. to "neutral" from "outperform." He reiterated his top-grade "buy" for Lincoln National Corp., John Hancock Financial Services, and UnumProvident Corp. but added that the downgrades reflect an overall sector call.

The U.S. life group is trading at a 10-year high, and chances for more upside are slim in the second half, Mr. Devine wrote. "The time has come to intensify the selectivity of our stock-picking."

Shares of Mony, for example, are trading at 29.3 times Mr. Devine's profit estimate of $1.30 per share, even though the environment for organic earnings growth is more challenging, he said. The stock is a "classic value trap," he added.

Other Wall Street analysts have echoed his view. On Thursday, Vanessa Wilson of Deutsche Banc Alex. …

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