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Life and Annuity Stocks Outperforming the S&P 500: Morgan Stanley Analysts

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What You Need to Know

  • The S&P 500 Index was about 23% lower at the close of trading June 16 than it was at the start of the year.
  • Most life and annuity issuers had done better than the S&P 500.
  • Unum and RGA were up.

Typical life and annuity issuer stocks have been doing better than other stocks this year, and some are up for the year.

Nigel Dally, a securities analyst at Morgan Stanley, explores the data in a commentary on how the stocks of the life and annuity companies he tracks have been doing since the start of the year and during other periods during the year, since the stretch from May 13 through June 16.

The S&P 500 was 23% lower at the end of the day on June 16 than it was at the start of the year.

Fourteen of the 16 companies Dally tracks had lower stock prices at the close of trading on June 16 than on January 3, but two companies — Unum and Reinsurance Group of America — had stock prices that were up year-to-date, and 10 other companies outperformed the S&P 500.

What It Means

Life and annuity issuer stock performance has been ugly this year, but not as ugly as the performance of the competition.

How investors see life and annuity issuers may affect what kinds of products insurers can sell your clients and what the products will cost.

The Winners

Unum, a major seller of group life insurance and group disability insurance, still has large amounts of long-term care insurance on its books.

The threat of the COVID-19 pandemic to the group life and group disability business may have started to ease, the company has little exposure to the stock market, and the pandemic has cut long-term care insurance claim costs.

Unum’s stock price rose to $32.59 last week, up about 33% from where the price stood at the start of the year, according to Dally’s team.

Reinsurer RGA, which protects life and annuity issuers against big losses, saw its stock inch up 0.4%, to $109.98.

COVID-19 mortality has been less painful for RGA than some have feared, and it also has little exposure to the stock market.

Themes

Dally wrote that this year, lack of exposure to the stock market and improvements in earnings projections are in. A high level of exposure to the stock market and any concerns about capitalization levels are out.

Stock performance statistics suggest that “markets are highly sensitive at this point to any company where capital sufficiency could be at risk,” Dally said.

(Photo: Lucky-photographe/Shutterstock)