"Strong case" for re-valuation higher of life insurance sector: Evercore ISI

Investing.com - A "strong case" can be made for a re-valuation higher of the life insurance sector, according to analysts at Evercore ISI.

In a note to clients, the analysts led by Thomas Gallagher argued that a number of recent sources of pressures on the industry are expected to ease over the next three to five years, including a series of divestitures and new public life insurers coming to market as well as uncertainty fueled by the COVID-19 pandemic.

The overall macroeconomic environment has also become "more favorable" for these companies following the US presidential election, potentially leading more investors to take a closer look at life insurance players, the analysts said.

At the moment, the sector trades at 8.5 times forward earnings estimates, they noted, adding that this is in line with its 10-year average and a "modest premium" to its 5-year average. The level is at a discount to property and casualty insurers, banks and traditional asset managers as well, the analysts said.

"Some of these investors are likely just tourists, while others have dipped their toes in the water," the analysts said. "As the investor base broadens, we see the stocks headed higher, with tail risks shrinking."

They increased their price target by 15% to 25% across the sector, saying some of these businesses will be positively impacted by a post-election bump in equities and credit spreads. They upgraded their rating of Unum Group (NYSE:UNM) to "Outperform" from "In Line" and Prudential Financial Inc (NYSE:PRU) to "In Line" from "Underperform."