Most of the big, publicly traded life and annuity issuers that Morgan Stanley tracks look as if they’re doing fine —and well enough to be using cash to buy back their own stock by the end of the year.
Nigel Dally and other Morgan Stanley securities analysts give that assessment in a new commentary on the insurers’ upcoming third-quarter earnings announcements.
- A copy of the Morgan Stanley commentary is available, behind a paywall, here.
- An earnings preview article for the second quarter of the year is available here.
The third quarter of the year ended Sept. 30.
The analysts say that many factors could, obviously, cause some of the life insurers Morgan Stanley follows to report third-quarter results that are terrible, and much worse than expected.
But investors have already responded to worries about the future by pushing life insurers’ stock prices down, the analysts write.
In spite of the COVID-19 pandemic, low interest rates, and reports of layoffs, at this point, “we expect the results to show a fundamental position stronger than what is reflected in current valuations,” the analysts write.
One reason for cautious optimism is that the issuers of most of the bonds in life insurers’ investment portfolios have been continuing to make their payments, the analysts write.
Some publicly traded companies show that they’re feeling strong, and have plenty of cash, by buying shares of their own stock back from other investors. The Morgan Stanley analysts say the life insurer buyback activity indicator looks good.
Some publicly traded life insurers suspended stock buybacks while waiting to see what COVID-19 would to spending on life insurance death benefits.
Now, “with only a few exceptions, we expect companies to resume buybacks before year-end,” the analysts write.
Ameriprise, Equitable and Primerica have been buying back stock all year, and MetLife and Globe Life have returned to buying back stock, the analysts write.
The analysts are predicting that CNO Financial, Lincoln and Prudential will probably resume making buybacks, too.
Most of the 841 life and annuity issuers in the United States are owned by another company, one family, or a small group of investors. They do not sell stock to members of the general public. They have to file financial statements with state insurance regulators but not with the U.S. Securities and Exchange Commission.