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Goldman Sachs analyst Alex Scott changed the rating on several insurance stocks, expecting a mixed insurance industry environment in 2024, with potentially improving book value compounding.
The analyst is more positive about life insurers as he sees improved capital positions, stronger cash flow, and the lagged benefits of higher long-term interest rates.
MET: Scott upgraded MetLife Inc (NYSE:MET) to a Buy (from Neutral) rating at an increased price target of $80 (from $70).
The analyst writes that MET has already priced in pressure from CRE with its underperformance in 2023 and has a strong organic growth profile, a favorable capital position, and ample buyback capacity following the completion of the reinsurance transaction with Global Atlantic.
The analyst expects continued strength in Group Benefits, Asia, LatAm, and EMEA, with Group Benefits specifically running strong.
Scott estimates an adjusted EPS of $1.73 and an adjusted operating EPS of $2.13 in Q4, reflecting favorable equity market impacts, unfavorable alternative investment performance, and lowered interest rates from Q3.
VOYA: The analyst downgraded Voya Financial Inc (NYSE:VOYA) to Neutral from a Buy rating with an increased price target of $82 (from $80).
The downgrade is partly due to the expected 401k/403b defined contribution market to remain competitive with ongoing secular headwinds associated with retirees.
Also, the analyst writes that the integration of the AllianzGI and Benefit focus acquisitions is taking longer to settle and potentially causes earnings volatility and potential spread pressure due to the crediting actions taken in H2 FY22 and 2023, which muted some of the spread benefits relative to peers during 2023 and could cause pressure with a downward pointing forward curve.
However, the analyst still expects VOYA to achieve its target three-year 12%-17% EPS CAGR through FY24.
For Q4, the analyst estimates an adjusted EPS of $1.78 (vs. consensus of $2.02) and adjusted operating EPS of $1.97, reflecting favorable equity market impacts, unfavorable alternative investment performance, and lowered interest rates Q/Q.
CB: The analyst also downgraded Chubb Ltd (NYSE:CB) to a Neutral (from Buy) rating at a lowered price target of $222 (from $244).
The company's exposure mix is likely to experience pricing deceleration from multiple years of strong returns at a time when liability risks are picking up, writes the analyst.
Scott says they see challenges to the company's bottom line not being able to release reserves at the same historical levels, especially given its track record.
Consequently, the analyst has revised the estimates, resulting in a lower earnings run-rate, specifically from fewer favorable releases.
For Q4, the analyst estimates EPS of $5.15, with a lower favorable PYD ratio of 80bps (vs. the street of 1.3pts) and a slightly lower catastrophe loss estimate of 4.2pts (vs. 4.6% estimate); meanwhile, the analyst estimates higher expectation for net interest income.
Price Action: VOYA is trading lower by 1.17% at $73.21, CB by 1.46% at $224.37 and MET is trading higher by 0.15% at $69.02 on the last check Monday.
Photo via Chubb
