Recovering Fundamentals and Macro Tailwinds for Life Insurance Stocks as P&C Names Tread Water: Josh Stirling, Analyst at Sanford C. Bernstein & Co., Discusses His Coverage of the Insurance Space

Wall Street Transcript

67 WALL STREET, New York - June 24, 2014 - The Wall Street Transcript has just published its Insurance Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Low Profitability and Low Interest Rates - Commercial Line Brokers and Underwriters - Consolidation Trends - Emerging Market Expansion - Analysis Of Personal, Commercial & Reinsurance Subsectors

Companies include: Lloyds Banking Group plc (LYG), American International Group, (AIG), ACE Limited (ACE), Progressive Corp. (PGR), Procter & Gamble Co. (PG), Allstate Corp. (ALL), The Travelers Companies, Inc. (TRV), The Chubb Corporation (CB) and many more.

In the following excerpt from the Insurance Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Last year we saw recovery in housing, a rally in equities and rising rates. In your view, which segments of the insurance sector stand to benefit most, or are already benefiting as a result of that?

Mr. Stirling: The insurance sector is often thought of as sort of boring and stable, but it is actually fairly macro-driven. The key point of course is that life insurers and housing-related insurers benefit very directly from the recovery in broader equity markets and the recovery in the housing sectors.

Further, the Fed's decision to taper quantitative easing and allow interest rates to rise is a huge benefit for the solvency and long-term financial returns of life insurers. The life and housing-related insurers - mortgage and title, which is half of the broader insurance complex, benefits in a rising economic environment in a recovery to normalcy in housing and equities as well as interest rates.

On the other hand, the P&C group is very low-beta; they tend to invest mostly in high-grade bonds, and there is not that much direct linkage in their underlying business model to the health of the underlying economy, since customers nearly always have to buy your insurance no matter the strength of the economy.

As such, P&C names are much more like utility stocks or consumer staples, and they are, within financials, very defensive names.

In the environment with interest rates rising and people generally bullish in the economy, and the stock market making new highs, there has been a lot less interest in the stocks in the P&C side simply because, as defensive stocks, they're not particularly well-positioned for the macro environment that we're in...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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