AMP, VOYA: UBS Says These Two Life Insurers Are The Best In A Cautious Industry

Ameriprise Financial, Inc.

and Voya Financial Inc

are the best bet in a cautious life insurance industry, according to UBS. UBS said: "If frecent market volatility / macro uncertainty continues, we would expect an increased focus on excess capital positions, largely for two reasons. First, companies with sizable excess capital levels could upsize their capital return ahead. Second, and perhaps more important, much like they did in 2008/09, these same companies could benefit from a flight-to-quality, should credit concerns increase further." Analyst Suneet Kamath noted that industry fundamentals such as EPS / ROE revisions are skewed to the downside, and, as such, should not justify outperformance ahead. In addition, he is concerned over the macro environment, including an increasingly likely rise in credit costs that will limit upside to what we view as already negative sentiment on the space. The analyst thinks that both investor sentiment and the outlook for interest rates are reminiscent of year-end 2012. Comparing industry fundamentals and valuations for these periods, he sees a weaker outlook with respect to the former and some incremental downside for the latter. "Specifically, re-testing YE 2012 levels suggests possible downside of 11% for NTM P/E, 28% for PEG ratio and 13% for P/B. Further, our view that credit quality concerns and DOL regulatory risks were not critical issues circa YE 2012, while they clearly are key issues today, suggests even further downside potential," Kamath added. Kamath, who has a "buy" rating on both AMP and VOYA shares, has cut the price target of AMP stock by $5 to $115 and VOYA by $2 to $40.