Sluggish operating results could translate into soft stock prices for U.S. life insurers.[@@]

Suneet Kamath, a life analyst at Sanford C. Bernstein & Company L.L.C., New York, gives that assessment in a review of the life sector.

Kamath acknowledges that life company net income is up, and that rising net income has helped push life company stock prices up 15%.

“One could conclude that 2005 is shaping up to be a blow-out year for U.S. life insurers,” Kamath writes.

In the past, some life companies classified factors that hurt earnings as “unusual items,” to imply that operating earnings were stronger than net income.

This year, Kamath writes, life companies are improving their net results by adding many positive unusual items to operating earnings.

Excluding unusual items, U.S. life industry year-to-date performance has been just average, Kamath writes.

“We expect contributions from such items to decline in coming quarters,” Kamath writes.

Kamath observes that life insurers compete with other types of businesses for the assets of investors who want to put money in the financial services sector.

Rising property-casualty insurance rates could make p-c insurers more attractive, and any hint that the Federal Reserve Board might stop raising interest rates could make regional bank stocks more appealing, Kamath writes.

Sales of many types of life and annuity products were flat or down during the first half of the year, Kamath writes.

“Moreover, the only products that are growing are those that face rising capital requirements such as variable annuities with guaranteed living benefits and universal life with no-lapse guarantees,” Kamath writes.