Following ING U.S. (VOYA) hitting his $37 price target, BTIG's Mark Palmer downgrades the stock to a Neutral.
"Our view that improved performance in VOYA’s closed block variable annuity (CBVA) unit would drive stock appreciation has been validated, as the shares now trade at 0.89x Q3 book value excluding AOCI of $41.49, which is more in line with the valuation of peers such as Hartford Financial."
"We appreciate the boost that VOYA potentially stands to benefit from higher interest rates that serve as a tonic to its CBVA unit ... However, the likelihood of potential equity offerings from ING, which still owns 57% of VOYA, has become greater as its share price has risen."
Palmer notes ING must reduce its stake in VOYA to 50% by the end of the year and fully divest its holdings by the end of 2016.
Shares -1.2% premarket after a tidy near-80% run since the May IPO. Kudos.