An improved outlook for interest rates (higher) and the hope for an easing of the DOL's new fiduciary rule in a Trump administration mean it's time to shift money into the life insurance sector, says RBC's Mark Dwelle.
P&C insurers face weak pricing expectations, so the focus will be on accident-year margin pressure and the implications for reserves.
Downgraded to Sector Perform are Unum (UNM -1.6%) and Selective Insurance (SIGI -4.6%).
Favored pick in P&C is Chubb (CB -0.2%) as it's a "top underwriter" regardless of pricing, and has a clean balance sheet and attractive valuation.
Upgraded to Outperform are Hartford (HIG +0.5%) and Lincoln National (LNC -0.1%), with LNC a Top Pick thanks to its leverage to higher rates and eased DOL rule.
Top value ideas are AIG (AIG -0.1%) and Voya Financial (VOYA +0.5%). Top growth ideas: Arch (ACGL +0.6%), Principal Financial (PFG -1.1%). Top small-cap picks: American Equity (AEL +3.9%), Kinsale Capital (KNSL +1.1%). Top turnaround/self-help picks: MetLife (MET -0.6%), XL Group (XL -0.1%). Top defensive play: Marsh & McLennan (MMC).