ING US - Unloved, Underappreciated, And Undervalued
Tim Travis • 23 Comments
Tim Travis • 23 Comments
Fri, Jun. 24, 11:58 AM
- The Too Big To Fail lenders are naturally among the day's big losers following the U.K. vote to leave the EU, but losses in the financial sector are wide and deep as - among other things - interest rates look to be a lot lower for a lot longer.
- Among asset managers, Invesco (IVZ -10.8%) - with a sizable U.K. exposure - is faring about the worst. WisdomTree (WETF -7.8%) takes a hit as the yen is the solo currency surging against the dollar, reducing demand for its popular hedged Japan ETF.
- It's wait till next year (or even 2018 if you believe short-term rate futures markets) for rate hikes, meaning regional lenders can't celebrate their passing of the Fed stress tests last night. Regions (RF -7.8%), KeyCorp (KEY -6.4%), PNC Financial (PNC -5.5%), U.S. Bancorp (USB -4.2%), BB&T (BBT -5.1%).
- Even lower rates put even more pressure on the business models of the life insurers: MetLife (MET -8.8%), Prudential (PRU -7.7%), Lincoln National (LNC -9.9%), Voya (VOYA -7%). Online brokers too: E*Trade (ETFC -9.4%), Schwab (SCHW -9.5%).
- ETFs: KRE, KBE, IAT, KBWB, QABA, KBWR, KRU, KRS, WDRW, DPST
Wed, May 4, 10:11 AM
- The company missed estimates by a mile thanks to alternative investment income - think hedge funds and private equity - that was $56M less than management expectations.
- Q1's volatility is old news, says BTIG's Mark Palmer, and - checking operations - he's not finding anything else of concern in the report. The individual life unit - the cause of a couple of recent earnings misses - posted a $6M Y/Y improvement in adjusted operating earnings to $49M.
- A sizable part of the Voya (VOYA -3.3%) bull case is capital returns, says Palmer, and the insurer took advantage of market weakness to buy back $220M in stock in Q1, leaving about $500M in its authorization.
- He retains his Buy rating and $50 price target (66% upside).
Wed, May 4, 6:01 AM
Tue, May 3, 5:30 PM
- AFAM, ARCC, ARCO, ARQL, ASC, ATRO, AVA, AYR, BDC, BUD, CDW, CHH, CLH, CPK, CRK, CRL, CRTO, CRZO, CSTE, D, DLPH, DNOW, ECYT, EE, ENR, FUN, GEL, GNRC, GTE, HAIN, HE, HFC, HSC, HSNI, HTWR, HYH, ICE, INXN, IONS, IRT, KATE, KLIC, LGND, MEMP, MFA, MMP, MOS, MPW, MTOR, NBL, NGS, NJR, NRZ, NVMI, NXTM, OMF, ONCE, ORBK, PCG, PCLN, RDC, RDS.A, SBGI, SCMP, SE, SERV, SHOP, SMP, SPAR, SR, SRE, SSTK, STRA, TGH, TGI, TMHC, TREE, TWX, VIRT, VOYA, VSI, WD, WIX, ZTS
Wed, Apr. 27, 4:55 PM
Wed, Feb. 24, 11:44 AM
Thu, Feb. 11, 12:51 PM
- At the moment it's yet again looking like "wait till next year," for the sustained rise in interest rates the life insurers need to be able to earn some real money.
- Last night it was Prudential Financial (PRU -10.1%) joining MetLife (MET -4.7%) and Lincoln Financial (LNC -9.2%) in reporting a disappointing Q4, with investment results contributing $105M less this year that they did in Q4 of 2014.
- While still upbeat on the economic outlook, Janet Yellen is spending an uncomfortable amount of time in her Congressional testimony talking about negative interest rates, and a chart of Google searches for "negative interest rates" is through the roof.
- Manulife (MFC -10.3%), Sun Life (SLF -3%), Primerica (PRI -3.7%), Voya Financial (VOYA -4.6%)
- The 10-year Treasury yield is lower by 10 basis points to 1.6%, and short-term rate futures have begun pricing in a rate cut by the Fed.
Wed, Feb. 10, 9:41 AM
- With the stock trading at just 0.47x book value (ex. AOCI), any buybacks done under the new $700M plan will be highly accretive, says BTIG's Mark Palmer, reiterating his Buy rating and $50 price target.
- The fast pace of repurchases, says Palmer, is a key leg to the Voya (VOYA +1.3%) bull story - highlighting the consistent generation of excess capital and the company's willingness to return that money to owners.
- Voya has been hit particularly hard in the market selloff due to its perceived interest-rate sensitivity, but, says Palmer, the actual impact of lower rates is more than reflected in the stock price.
- Previously: Voya Financial boosts buyback by $700M (Feb. 10)
Wed, Feb. 10, 7:57 AM
- Q4 operating earnings of $196M or $0.91 per share vs. $245M and $0.99 one year ago. Excluding items, operating earnings this year of $0.82 per share beat estimates by $0.03.
- Retirement operating earnings of $137M down 9% Y/Y; Annuities of $63M down 3%; Individual life of $103M flat; Investment management of $42M down 11%. Employee benefits of $24M down 58%.
- Employee benefits loss ratio for Group Life was 78.7% vs. 72.2% a year ago. Loss ratio for Stop Loss of 75.9% vs. 61.9%. The expected annual loss ratio for both is in the 75-80% range.
- 6.26M shares bought back during quarter at average price of $39.97 each. 34.3M shares repurchased during 2015 at average price of $43.39 each. Company lifts authorization by $700M today. Book value per share (excl. AOCI) of $57.44.
- Previously: Voya Financial beats by $0.12, beats on revenue (Feb. 10)
- VOYA flat premarket
Wed, Feb. 10, 6:05 AM
Tue, Feb. 9, 5:30 PM
Thu, Feb. 4, 5:09 PM
Mon, Jan. 11, 12:27 PM
- Kennedy-Wilson's (KW -2.3%) near-14% decline last week puts that stock at prices not seen since Dec. 2013, says BTIG's Mark Palmer. Funding is a key part of the company's business, so concerns capital markets might seize up would certainly spook investors, but KW just a month ago announced a new $475M revolver.
- Maybe more likely, is that a significant portion of the stock's owners are hedge funds who may be needing to raise cash or just get out of the way until things settle.
- After a 12% decline last week, Voya Financial (VOYA -1.5%) sells for just 0.57x book value ex-AOCI - no better than the valuation when the company went public in May 2013. Yet Voya has made good progress on all aspects of its strategy since then, says Palmer, including returning ample excess capital to owners. The silver lining to the cheap valuation is that it makes buybacks even more accretive to book value.
- While plenty of volatility in the shares of high-profile fintech companies are the norm, the 13.6% decline in Square (SQ +3.4%) last week was excessive even as the firm readies its initial earnings presentation.
Mon, Jan. 4, 2:41 PM
- Voya Financial (VOYA -1.5%) is the stock most poised to benefit from a series of Fed rate hikes, writes Mark Palmer, as they would have a particularly large impact on the company's closed block variable annuity (CBVA) unit. He rates the stock a Buy with $50 price target (current price $36.35).
- Bond insurers MBIA (MBI +0.3%) and Assured Guaranty (AGO -1.3%) could see more demand for their services should rate move higher, he adds. If issuers have low borrowing costs thanks to low rates, than the savings offered by bond insurance doesn't seem so impactful. Let those costs rise, though, and we're likely to see a meaningful uptick in new insurance written.
Dec. 10, 2015, 1:12 PM
- Raymond James (NYSE:RJF), Bank of New York Mellon (NYSE:BK), Northern Trust (NASDAQ:NTRS), and Bank of America (NYSE:BAC) are best-positioned in the event of a one-and-done move from the Fed, says Goldman, as they get most the earnings upside from the initial move higher in rates, rather than needing "normalization."
- "Deposit betas" may be a source of underappreciated surprise, says Goldman, which doesn't believe banks will pass along much of the initial 50 basis point hike in rates to customers. Poised to benefit here: JPMorgan (NYSE:JPM), BofA, Wells Fargo (NYSE:WFC), PNC Financial (NYSE:PNC), and E*Trade (NASDAQ:ETFC).
- Finally, clarity on the interest rate picture should allow bank managements to get moving in growing returns, Favored "self-help" stories: AIG, Ally Financial (NYSE:ALLY), Oaktree Capital (NYSE:OAK), Voya Financial (NYSE:VOYA), and Zions Bancorp (NASDAQ:ZION).
Dec. 4, 2015, 2:51 PM
- Whoever invented the life insurance business model probably never figured on an extended period of barely visible interest rates.
- “If interest rates stay low for another three or four years, all bets are off as to how many follow,” says one broker, as major insurers break a long-standing taboo of hiking rates on policies sold to clients many years ago.
- The type of coverage at issue is universal life, which combines a death benefit with a tax-advantaged savings account, and since the 80s these policies have accounted for at least 25% of all new individual life insurance sales.
- Annual rate increases range from about $150 for those with $250K in coverage, to six figures for coverage topping $10M.
- Higher costs aren't the only issue - those tax-advantaged savings accounts aren't earning nearly as much interest as hoped.
- Among those hiking rates are AXA (OTCQX:AXAHY) and Voya (NYSE:VOYA), though both say only a small percentage of accounts are affected.
- Source: WSJ
Voya Financial, Inc. is a retirement, investment and insurance company serving the financial needs of individual and institutional customers. The company operates through folloeing segments: Retirement, Annuities, Investment Management and Individual Life. The Retirement provides an insurance... More
Country: United States
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