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Kamath: Good Time to Buy U.S. Life Stocks

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The prices of high-quality U.S. life insurer stocks are so low that this is probably a great time to buy the stocks, despite lingering uncertainty about the economy, a securities analyst says.

Suneet Kamath and other analysts at Sanford C. Bernstein & Co. L.L.C., New York, discuss the appeal of U.S. life stocks in a recent comment.

“Clearly, we acknowledge that the operating environment remains uncertain,” the analysts say. “That said, we argue that the life sector’s positioning with respect to asset quality, capital adequacy and overall profitability today should allow the industry to deliver improving book value trends ahead.”

Stock prices are near 1.0 times book value for well-known life insurers, even though insurers seem to be better prepared than they were to withstand deterioration in the economy, the analysts say.

Many investors seem to be intrigued by those low stock prices, and improving flexibility, lower-risk businesses and increased ability to raise annuity and life insurance prices, should lead to higher earnings, the analysts say.

Some investors have been worrying about whether life insurers have enough capital, but most got through the first quarter of 2009 in reasonably good shape and appear to be better insulated today than they were then, the analysts say.

The analysts see the recent appointment of S. Roy Woodall as the independent member with financial expertise on the new Financial Stability Oversight Council (FSOC) as an indication that policymakers will learn about the exist insurance risk-based capital system and the conservative nature of the industry’s statutory reserving practices.

- Allison Bell

Other securities analyst commentary coverage from National Underwriter Life & Health: