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瑞银_美股_保险行业_美国寿险:估值是否足够?_2019.1.7_98页

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文本描述
US Life Insurance 7 January 2019Table of Contents
Executive Summary .. 4
If They Couldn't Work Last Year… ........... 4
Revisiting Our Four Key Investment Themes .......... 4
Key Near-to-Intermediate Term Modeling Considerations . 6
Summary of Changes to Ratings & Price Targets and UBS Estimates vs.
Consensus . 10
Relative Coverage Ranking . 13
Upside to UBS Price Targets Relative to Downside Risk ....... 14
Absolute and Relative Valuation..... 15
Putting Sector Valuations into Context; Are Life Stocks Pricing in a Crisis
.. 15
Forward P/E Ratios - Current Valuations Relative to Historical Averages .. 17
Price/Book Value per Share (ex. AOCI) Ratios - Current Valuations Relative
to Historical Averages ..... 18
ROE vs. Price-to-Book ..... 19
Free Cashflow vs. Adjusted Market Capitalization .......... 20
Life Index P/E vs. S&P 500, P&C and Banks Over Time .... 21
Absolute & Relative Stock/Subsector Performance .. 23
Life Coverage Stock Performance - Annual ......... 23
Life Insurance Sector Performance vs. Other Financial Subsectors - Annual
.. 24
Life Coverage Stock Performance – Quarterly ..... 25
Life Insurance Sector Performance vs. Other Financial Subsectors –
Quarterly26
Discussion on Credit ........... 27
Recent Credit Work ........ 27
CLO Exposure – Quick Takeaways .......... 27
High Level View of Invested Asset Portfolios ....... 28
BBB-Exposure ..... 29
Exposure to PG&E Debt Across Our Coverage .... 30
Spreads Recently Widening Above Long-Term Averages . 31
New Money Yields are Rising ......... 32
Corporate Credit Spreads Now Above Long-Term Average ........ 33
Uptick in High Yield Spreads – Now In Line with Historical Average ........... 34
High Yield Spreads Now In Line with the Long-Term Average ..... 35
John Nadel
Analyst
john.nadel@ubs
+1-212-713 4299
Wesley Carmichael, CFA
Analyst
wesley.carmichael@ubs
+1-212-713 9903
Michael Ward
Associate Analyst
michael.a.ward@ubs
+1-212-713 3518
US Life Insurance 7 January 2019Macro Drivers Embedded in Our Modeling36
Meaningful GAAP Accounting Changes Coming ... 37
Company Pages ...... 41
Appendix .... 87
American Equity Investment Life .... 42
AFLAC Inc. . 45
Ameriprise Financial ........... 49
Assurant, Inc. ......... 52
Athene Holding Ltd ........... 55
Brighthouse Financial, Inc. . 58
FGL Holdings ......... 61
Lincoln National Corp. ....... 63
MetLife ...... 66
Principal Financial Group .... 70
Prudential Financial Inc. ..... 73
Reinsurance Group of America Inc.76
Torchmark Corp. ... 79
Unum Group ......... 82
Voya Financial ........ 84
US Life Insurance 7 January 2019Executive Summary
If They Couldn't Work Last Year…
The UBS Life Index fell 6.7% in 1Q18 and 8.6% in 2Q18 before rallying 7.8% in
3Q18 and ultimately dropping 19.6% in 4Q18. For the full year, our Life Index fell
25.7% vs. the S&P 500 down 6.2% and the XLF down 14.7%. Setting aside the
poor performance in 4Q18, we note the UBS Life Index was down 8.3% through
September 30th against a backdrop where the S&P 500 was up 9% and the 10-
Year and 30-Year Treasury yields were up 62bps and 43bps, respectively. Also
during the first 9 months of the year, investment grade and high yield credit
spreads widened 20bps and tightened 28bps, respectively. In short, for the first 9
months of 2018, the key macro drivers suggested life insurance stocks should have
been outperforming, and yet they underperformed (collectively) materially.
So now where do we stand From September 30, 2018 through January 4, 2019,
the S&P 500 has fallen 13%, the XLF is down 12%, the yields on the 10-Year and
30-Year Treasuries have fallen 40bps and 22bps, respectively, and investment
grade and high yield credit spreads have widened 55bps and 189bps, respectively.
So during the past 90+ days, the key macro drivers suggested life insurance stocks
should have been underperforming, and that's exactly what they did, with the UBS
Life Index down 16.5% during that same period.
So what are investors to do In a lengthy period where macro conditions were
highly supportive, life insurance stocks underperformed materially. And more
recently, during the past 90+ days where macro conditions were clearly a
significant headwind, life insurance stocks underperformed further.
Beyond the inability to make money on the long side within the Life Insurance
sector under either macro condition, it appears valuation isn't providing a floor at
all, with our Life Index now trading at a NTM P/E of 7.3x and P/BVPS excl. AOCI of
1.13x, levels not seen since February 2016 when the S&P 500 was below 2,000,
the 10-Year Treasury yield was around 1.70% and investment grade and high yield
credit spreads were roughly 40bps and 250bps higher relative to today.
No doubt, we find valuation extremely attractive on all key metrics (P/E, P/B, P/FCF)
as well as on an absolute and relative basis (vs. the market, vs. P&C stocks and vs.
Banks). However, with increasing concerns over late cycle (see how much
spreads have widened over the past few months), material negative estimate
revisions, and a significant retracement of long-term interest rates, we remain
concerned that generalists will continue to avoid the sector.
Revisiting Our Four Key Investment Themes
When we launched coverage on the US Life Insurance sector on March 1, 2018
(link here), we took a different approach given the inherent sensitivity of the group
to macro conditions. Rather than attempt to make a macro call we instead
identified four key themes we expect will create value over time and highlighted
the companies within our coverage best levered to those themes.
With 10+ months since our launch, we wanted to revisit the four key themes and
assess whether the outlook has changed materially.
Life stocks are trading near
valuations not seen since the S&P
500 was below 2,000, the 10-year
Treasury yield was ~1.70% and IG
and HY credit spreads were 40bps
and 250bps higher, respectively。