NEW YORK (AP) – An analyst upgraded some life insurance companies on Wednesday, saying a recent pullback in the stocks provides a good buying opportunity.
Jay Gelb of Barclays boosted MetLife Inc. and Prudential Financial Inc. to “Overweight” from “Equal Weight,” saying both have big U.S. operations that will benefit from rising U.S. interest rates.
Insurers collect premiums from customers and invest that money, and higher interest rates can boost their earnings. U.S. rates have been rising in anticipation of a pullback in bond buying by the Federal Reserve.
Gelb was upbeat on the companies despite the risk of tougher oversight. Both companies may be labeled nonbank “systemically important financial institutions” — potential threats to the financial system that need greater oversight. They would be regulated by the Federal Reserve and required to hold a larger capital cushion against losses, which could affect their ability to buy back stock.
Buybacks can boost earnings per share.