The life insurance sector earnings story for the third quarter does not bode well for a particularly robust 2006, according to 2 analysts.[@@]
Suneet Kamath, senior life insurance analyst for Bernstein Research Inc., says low new-money yields marred the quarter in spite of favorable equity market trends.
He sees other factors, too, that ultimately may spell growth challenges for 2006.
“We remain concerned that the second quarter of 2005 increase in variable annuity outflows could reflect the fact that much of the business sold in the 1990s now has low withdrawal penalties,” Kamath writes.
In addition, one-time items boosted third quarter earning figures, he says.
“Our concern is that if these unusual items are driving positive revisions, and if these revisions are in turn driving relative stock price performance, the life sector may trade off as they disappear or turn negative,” Kamath writes.