Wolfe Research launches coverage with positive view on Life Insurance names

Wolfe Research launches coverage on the Insurance sector with a positive view on life insurance names and a more cautious outlook on reinsurance companies. In the commercial lines sector, the industry is hiding behind a generic “casualty” banner, but casualty is really code for commercial auto – a loss leading line where in our view pricing remains inadequate, the analyst tells investors in a research note. Declining property pricing is irrational considering rising average annual losses, though the firm believes it will take a while for sentiment to catch up given the narrow focus on underlying underwriting margins, Wolfe states. For reinsurers, the cost of capital is set to surpass return on capital in 2027, with compressing margins now up against a higher cost of capital vs. last cycle’s trough, the firm added. Among Outperform rated names, Benguigui is positive on Allstate (ALL), noting that its rate cuts can occur in the near-term time horizon, boosting policies in force growth potential, and Chubb (CB), where Wolfe thinks the Street isn’t giving the company credit for higher net interest income from Alts which as reflected in understated ROE estimates. Wolfe also upgrades Ryan Specialty (RYAN), noting that the shares’ recent sell-off is significantly overdone considering its still-strong organic and inorganic growth prospects. For Skyward (SKWD) assumption at Outperform, Wolfe says that following its acquisition of Apollo Group Holdings, it now has access to more niche lines of business via the Lloyd’s platform, while also adding a steady “capital light” fee income stream. Lincoln National (LNC) is among Wolfe’s Underperform-rated names as the firm notes that shares may remain challenged until there is a greater line-of site to an inflection of higher distributable earnings and capital returns.