寿险业展望：基本面疲弱、经济预期下滑以及利率环境充满挑战

1、Life Insurance 2020 OutlookWeak Fundamentals, Downside to Estimates, and Challenging Rate Environment Warrant Cautious ViewOur outlook for the life insurance sector is negative. The lag effect of the strong equity market should help earnings in the near term, but we expect results to weaken through

2、2020. In our view, consensus EPS forecasts for most companies are too high. Also, barring a steady rise in rates, we project life insurers to incur additional balance sheet charges in 2020.Adjusting EPS estimates. We are raising our forecasts for several insurers (BHF, EQH, LNC, MET, PFG) to reflect

3、 the strong equity market, but are lowering numbers for others (AIG, ATH, PRU, VOYA) due to recent asset sales and/or other actions. Our 2020 and 2021 projections for most life insurers are below consensus levels and we feel that Street projections for AIG, ATH, and VOYA are especially optimistic. O

4、n a positive note, consensus forecasts for BHF, LNC, and PFG seem too conservative.We expect life insurers to report healthy earnings in the near term, but poor results through 2020. The robust equity market should drive strong growth in fee income in equity sensitive products in 4Q19 and 1Q20. The

5、momentum in the market is likely to lift private equity returns (recorded on a one-quarter lag) and boost alternative investment income and reported spread margins in the near term as well. Still, we forecast core spreads to continue to compress as the year progresses. Also, barring a material rise

6、in interest rates, we anticipate additional DAC and reserve charges as part of insurers annual actuarial reviews in 2H 2020.Business fundamentals to remain challenging. On a positive note, most life insurers have capital flexibility for ongoing share buybacks and dividend hikes. Also, we expect comp

7、etition in most product lines to be rational. Conversely, our models project insurers to generate lackluster ROEs (12- 13% on operating EPS and 9-10% on net EPS), close to their cost of equity. Furthermore, we expect organic growth in most products to be challenging and remain wary of tail risk in l

8、egacy LTC and VA blocks.New money yields dropped further in 4Q19. Treasury yields rose slightly, but credit spreads in most asset classes in which insurers invest declined by a greater extent. Hence, we estimate that most insurers new money yields dropped 5-10 bps. The EPS impact of low rates is mod

9、est in the short term, but compounds over time. More notably, sustained low rates should drive charges in long-duration products such as LTC, VAs, and individual life.Valuations fair. The sector is trading at 1.3x BV ex. AOCI and 9.2x forward EPS, up from 1.1x and 7.7x, respectively, at 1/1/19. Whil

10、e depressed, we feel that valuations are reasonable given the groups ROE (close to cost of equity), poor earnings quality, and weak business trends.MET is our top pick and we are negative on BHF. Also, we remain bullish on GL and LNC. Among our Neutral-rated stocks, we are negative on AIG and AFL, b

11、ut positive on EQH and UNM.North America Equity Research02 January 2020Insurance - LifeJimmy S. Bhullar, CFA AC(1-212) 622-6397 HYPERLINK mailto:jimmy.s.bhullar jimmy.s.bhullarBloomberg JPMA BHULLAR Pablo S. Singzon AC(1-212) 622-2295 HYPERLINK mailto:pablo.s.singzon pablo.s.singzonBloomberg JPMA SI

12、NGZON J.P. Morgan Securities LLCLife Insurance 2020 OutlookKey Positives:Strong market to lift EPS Capital flexibility for buybacks Disciplined pricingKey Negatives:Poor ROEsModest top-line growth Low rates to drive charges2020 Estimate Changes: Increasing EPS: AEL, BHF, EQH, LNC, MET, PFG, RGA, UNM

13、Reducing EPS: AFL, AIG, ATH, FG, GL, PRU, VOYANo Change: NoneBest Trade Ideas:Top pick: MET Defensive long: GL Short: BHFPair: long LNC, short BHF2020 Outlook Conference Call1/3/20 at 11 am EasternPlease contact us or your JPM representative for details.Please visit our Bloomberg page onJPMA Bhullar

14、 See page 106 for analyst certification and important disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors

15、 should consider this report as only a single factor in making their investment decision. HYPERLINK / Table of Contents HYPERLINK l _bookmark0 Cautious Stance on Life Insurance Stocks5 HYPERLINK l _bookmark1 Adjusting EPS Estimates6 HYPERLINK l _bookmark2 Major Industry Themes10 HYPERLINK l _bookmar

16、k3 Key Topics of Focus with 2020 Results27 HYPERLINK l _bookmark4 Valuations Depressed, but Justifiably32 HYPERLINK l _bookmark5 AFLAC, Inc.35 HYPERLINK l _bookmark6 American Equity Investment Life39 HYPERLINK l _bookmark7 American International Group43 HYPERLINK l _bookmark8 Athene Holding47 HYPERL

17、INK l _bookmark9 AXA Equitable50 HYPERLINK l _bookmark10 Brighthouse Financial54 HYPERLINK l _bookmark11 FGL Holdings58 HYPERLINK l _bookmark12 Globe Life Inc62 HYPERLINK l _bookmark13 Lincoln National65 HYPERLINK l _bookmark14 MetLife, Inc.68 HYPERLINK l _bookmark15 Principal Financial Group71 HYPE

18、RLINK l _bookmark16 Prudential Financial75 HYPERLINK l _bookmark17 Reinsurance Group of America79 HYPERLINK l _bookmark18 Unum Group83 HYPERLINK l _bookmark19 Voya Financial, Inc.87Equity Ratings and Price TargetsCompanyTickerMkt Cap ($ mn)Price ($) Rati Curng PrevCur Price TargetEndPrev DateEnd Dat

19、eAFLAC, Inc.AFL US38,888.3852.90Nn/c57.00Dec-20n/cn/cAmerican Equity Investment LifeAEL US2,721.7229.93Nn/c30.00Dec-2029.00n/cAmerican International GroupAIG US44,651.9751.33Nn/c55.00Dec-20n/cn/cAthene HoldingATH US8,582.9847.03Nn/c55.00Dec-2061.00n/cAXA EquitableEQH US12,122.3824.78Nn/c27.00Dec-20n

20、/cn/cBrighthouse FinancialBHF US4,286.4439.23UWn/c42.00Dec-20n/cn/cFGL HoldingsFG US2,290.1810.65Nn/c11.00Dec-20n/cn/cGlobe Life IncGL US11,667.49105.25OWn/c106.00Dec-20100.00n/cLincoln NationalLNC US11,701.6859.01OWn/c81.00Dec-2092.00n/cMetLife, Inc.MET US46,872.0150.97OWn/c62.00Dec-2061.00n/cPrinc

21、ipal Financial GroupPFG US15,323.0055.00Nn/c60.00Dec-20n/cn/cPrudential FinancialPRU US37,795.9793.74OWn/c110.00Dec-20n/cn/cReinsurance Group of AmericaRGA US10,209.02163.06Nn/c163.00Dec-20156.00n/cUnum GroupUNM US6,012.7929.16Nn/c44.00Dec-2049.00n/cVoya Financial, Inc.VOYA US8,218.6060.98UWn/c62.00

22、Dec-2058.00n/cSource: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 31 Dec 19.Jimmy S. Bhullar, CFA (1-212) 622-6397 HYPERLINK mailto:jimmy.s.bhullar jimmy.s.bhullarNorth America Equity Research02 January 2020J.P. Morgan Life Insurance Coverage12/31/19 12/31/20202

23、0 2021P/BV:JPM EstimatesStreet EstimatesNTMNTM9/30/19 BV/ Share:Annual DividendShares Mkt. Cap.Ticker Company Nam ePriceTargetP/EP/ETotalEx. AOCI4Q-19202020214Q-1920202021EPSROETotalEx. AOCIPer ShareYie ld(MM)($, m il.)OverweightGLGlobe Lif e$105.25$10614.814.01.602.211.727.137.531.727.197.507.0414.

24、8%$65.96$47.58$0.690.7%110.86$11,667LNCLincoln National$59.01$890.852.5010.3311.022.3810.0411.1310.1314.6%$100.85$69.50$1.602.7%198.30$11,702METMetLife, Inc.$50.97$620.941.456.016.451.376.056.475.8410.8%$70.71$54.19$1.763.6%919.60$46,872PRUPrudential Financial$93.74$18

25、0.981.9012.2813.862.2212.4513.8211.2511.7%$162.83$95.87$4.004.3%404.10$37,880NeutralAELAmerican Equity Life$29.93$3061.101.0415.1%$45.34$27.33$0.281.0%91.01$2,724AFLAFLAC, Inc.$52.90$5712.011.51.321.750.974.424.621.024.444.654.3714.5%$40.04$30.18$1.082.0%735.13$38,88

26、8AIGAmerican International Group$51.33$5580.740.984.775.201.015.055.764.516.5%$75.97$69.52$1.282.4%869.90$44,652ATHAthene Holding$47.03$556.56.00.670.771.787.197.781.667.508.527.1011.7%$70.00$60.84$0.000.0%182.50$8,583EQHAXA Equitable Holdings, Inc.$24.78$210.901.184.865.341.124.

27、815.374.8017.4%$30.53$27.53$0.602.6%489.20$12,122FGFGL Holdings$10.65$117.05.71.071.420.301.521.860.331.571.831.3918.5%$9.91$7.51$0.040.4%216.44$2,305PFGPrincipal Financial$55.00$608.88.01.031.131.486.286.871.405.956.526.1112.6%$53.25$48.55$2.204.0%278.00$15,290RGAReinsurance Group$163.06$16311.610.

28、90.891.243.6614.1114.963.6614.0515.0513.7910.4%$184.06$132.02$2.801.7%62.61$10,209UNMUnum Group$29.16$445.04.60.620.631.405.856.331.395.766.185.7312.5%$46.71$45.97$1.143.8%206.20$6,013UnderweightBHFBrighthouse Financial$39.23$440.302.3610.0610.442.259.7710.869.877.6%$162.54$129.90$0.000.0%

29、109.26$4,286VOYA Voya Financial, Inc.$60.98$631.281.135.046.501.575.866.944.649.7%$73.62$47.72$0.601.0%135.00$8,232Source: Bloomberg, Company reports, and J.P. Morgan estimates.Notes: All EPS estimates exclude realized gains/losses.Street estimates refer to Bloomberg consensus forecasts.

30、P/E is based on J.P. Morgan estimates. NTM ROE refers to next-twelve-month earnings divided by current BV/Share.Cautious Stance on Life Insurance StocksThe J.P. Morgan Life Insurance Index rose 27% in 2019 versus a 29% increase in the S&P 500 Index and a 29% rise in the S&P Financials Index. In 2018

31、, the life index declined 21% versus a 6% decrease in the S&P 500 Index and a 15% drop in the S&P Financials Index.Best Trade Ideas:Top Pick: MET Defensive Long: GL High-Beta Long: LNC Short: BHFPair Trade: long LNC, short BHFWe expect lackluster business trends and the challenging interest rate env

32、ironment to preclude material upside in life insurance stocks. We turned bullish on the sector at the beginning of 2019 due to an expected improvement in business trends (particularly in underwriting margins and sales/net flows), the rise in rates through 2018, and the sharp pullback in valuation le

33、vels (especially in December 2018). The group outperformed the broader market in the first half of 2019 despite the significant drop in interest rates. Also, while underwriting margins were healthy, the expected improvement in sales and flows did not materialize. As such, we shifted our view on the

34、group to neutral in early July and negative in October. Life insurance stocks modestly underperformed the market in the second half of last year and valuation levels appear depressed on a relative basis. Although select stocks seem enticing, we feel that the risk-reward for the overall group is nega

35、tively skewed. Our key investment ideas for 2020 are:Top Pick: MET. Our bullish view of MET reflects its de-risked business profile, high capital flexibility, healthy operating trends, and attractive valuation. The ROE drag from Met Holdings and low interest rates remain concerns, but our outlook fo

36、r trends in the companys business is upbeat, especially for the group benefits and international divisions. Furthermore, we expect steady free cash flow to enable MET to remain active with share buybacks. Valuation is attractive as well, as MET trades at a discount to the sector on both P/BV and P/E

37、 and offers one of the highest dividend yields in the group. We expect MetLifes improving risk profile to help expand the stocks valuation multiple over time.Top Long for investors with a defensive bias: GL. Our bullish stance on GL reflects the companys superior ROE, steady free cash flow, and limi

38、ted EPS sensitivity to the equity market and interest rates. While the stocks valuation is likely to limit upside potential, we feel that it will outperform the sector if macro conditions deteriorate. Also, our outlook for fundamentals in GLs business is significantly more constructive than that for

39、 other high-quality, low-beta firms such as AFL and RGA, and we view improving direct response margins and sales as potential positive catalysts for the stock.Top short for those with a negative bias on macro trends: BHF. In our opinion, sustained low interest rates, a weak equity market, and/or a d

40、eterioration in the credit markets would pressure the entire life insurance sector. However, we believe that BHF is more vulnerable than peers given its higher-risk business mix (VAs account for over half of capital and earnings) and challenging business trends. The stocks valuation seems compelling

41、, but is not as attractive as it appears when considering its poor earnings quality. BHF trades at a sizable discount to the sector on operating EPS (4x vs. 9x), but less of a discount on net EPS (7x vs. 12x), which we feel is justified by the companys poor ROE, limited free cash flow generation, an

42、d high tail risk.Most compelling 3- to 6-month pair trade: Long LNC, Short BHF. Both LNC and BHF are likely to perform well if the equity market stays strong and interest rates rise. However, we believe that BHF has considerably more downside risk if the macro environment worsens. Our fundamental ou

43、tlook for LNC is positive, and we expect the company to report strong free cash flow, healthy underwriting margins, and steady sales/flows. Although LNCs sizable VA exposure makes it susceptible to the equity market and to interest rates, we feel that the companys block is less risky and higher-qual

44、ity than peers such as BHF and EQH.Adjusting EPS EstimatesTable 1: Summary of EPS Estimate ChangesPer share amountsWe are adjusting EPS estimates to reflect the benefit of the strong equity market, weaker US$, and a few company-specific factors. Partly offsetting the tailwind from the robust market

45、and weaker US$ is lower than previously assumed accretion from share buybacks given the uptick in most companies stock prices. Also, our revised models reflect the dilutive impact of company-specific factors for several insurers (sale of Fortitude Re at AIG, sale of individual life business at Voya,

46、 Apollo deal at Athene, wellness initiative at Prudential, etc.).Company4Q19(Old)4Q19(New)2020(Old)2020(New)2021(Old)2021(New)Reasons for ChangeAEL1.094.23higher sales given recent product changesAFL0.980.974.474.424.674.62weaker yenAIG1.120.984.814.775.285.20less share buybacks and Fort

47、itude sale, partly offset by healthy equity market and lower interest expenseATH1.771.787.847.198.357.78dilution from APO deal, partly offset by equity market benefit and spread margin adjustmentsBHF2.322.369.6910.0610.0610.44healthy equity market and more accretion from share buybacksEQH

48、54.865.255.34equity market benefit and acceleration of buybacks, offset by preferred dividendsFG0.301.551.521.911.86lower share buyback assumptionGL1.777.53less accretion from share buybacksLNC2.432.509.9910.3310.6911.02healthy equity market and more accretion from share buybacksMET1.455

49、.846.016.306.45benefit from unit cost initiative and healthy equity marketPFG1.461.486.116.286.696.87tailwind from healthy equity market, partly offset by less accretion from share repurchasesPRU2.651.9012.5012.2813.6313.86lower margins and drag from wellness initiative, partly offset by healthy equ

50、ity marketRGA3.633.6613.9214.1114.7614.96benefit from weaker US$UNM1.405.845.856.356.33stronger UK pound and more accretion from share buybacks, partly offset by lower Unum US marginsVOYA1.546.656.50sale of individual life, partly offset by lower interest expense, higher buybacks, and eq

51、uity market benefitSource: J.P. Morgan estimates.Note: the “New” column is blank for periods with no change in estimates.Table 2: EPS Sensitivity to Macro Factors% impact of a 10% increase in the S&P 500 Index/100 bps increase in interest rates to normalized 2020E EPS (excludes DAC and reserve adjus

52、tments)AELAFLAIGAMPATHBHFCNOEQHFGGLHIGLNCMETPFGPRURGAUNMVOYA10% change in the equity market 100 bps change in interest ratesNM 3.4%NM 1.2%2.1%2.6%7.4%0.9%0.6%7.8%6.4%2.5%NM 3.0%8.1%1.0%NM 5.1%NM 1.7%0.8%2.1%5.6%2.5%0.9%1.7%5.2%1.3%2.8%2.0%0.9%1.6%NM 2.2%4.6%2.5%Source: Company reports and J.P. Morga

53、n estimates. NM implies not meaningful.Note: The numbers above are not adjusted for AIGs sale of Fortitude Re and VOYAs sale of the individual life block as these will most likely not close until the second half of 2020.Following are the major changes to our earnings models:Equity market performance

54、 significantly better than assumed previously: The S&P index rose 8.5% in 4Q19, well above our 1.7% assumption. On an average daily balance basis, which drives fee income, the market was 6.1% higher in 4Q19 than in 3Q19, also better than our 1.5% assumption. Overall, the strong equity market in 4Q19

55、 resulted in upward earnings revisions for equity- sensitive businesses (variable annuities, asset management, defined contribution plans, etc.) at our companies. Among our coverage companies, earnings for BHF, LNC, PFG, and VOYA are the most sensitive to equity market trends.Alternative investment

56、income to remain healthy in 4Q19 and likely to be robust in 1Q20: Most insurers report private equity returns on a 1-quarter lag and hedge fund returns on a 1-month lag (PRU and AIG report hedge fund income on a concurrent basis). In our opinion, variable investment income, which is driven mostly by

57、 private equity for our coverage companies, will remain healthy in 4Q19 and strengthen further in 1Q20 given the lag effect of recent market performance. Additionally, hedge fund returns, which are reported on a 1- month lag, should contribute to variable investment performance in 4Q19, due to stron

58、g equity market appreciation from the end of August to the end of November (up +7%). Among our coverage companies, we expect AIG, ATH, BHF, FG, LNC, MET, PRU, PRU, and VOYA to benefit the most from favorable alternative investment performance. Although our models assume some of the benefit, we belie

59、ve that actual results in the fourth quarter have a greater chance of beating our projections than missing.Foreign currency a tailwind for results: In 4Q19, the US$ weakened against the currencies of most major countries where U.S. life insurers operate, including the Canadian $, the euro, and the U

60、K pound. Currency trends were also similar in Latin America as the US$ depreciated against the Mexican peso and the Brazilian real. The only exceptions were the Japanese yen and the Chilean peso, which both weakened against the US$. Among our coverage companies, we expect the foreign exchange to hel