Zacks Industry Outlook Highlights: Protective Life, StanCorp Financial Group, China Life Insurance, WellPoint and UnitedHealth

Zacks Industry Outlook Highlights: Protective Life, StanCorp Financial Group,
            China Life Insurance, WellPoint and UnitedHealth Group

PR Newswire

CHICAGO, May 22, 2013

CHICAGO, May 22, 2013 /PRNewswire/ --Today, Zacks Equity Research discusses
the U.S. Insurance, including Protective Life Corporation (NYSE:PL), StanCorp
Financial Group Inc. (NYSE:SFG), China Life Insurance Co. Ltd. (NYSE:LFC),
WellPoint Inc. (NYSE:WLP) and UnitedHealth Group, Inc. (NYSE:UNH).


A synopsis of today's Industry Outlook is presented below. The full article
can be read at 


A reduction in underwriting expenses and a modest increase in premiums have
been helping life insurers increase net income in the last few quarters. But
downward pressure on investment yields due to a low interest rates, higher
hedging costs, lower income from the variable annuity business and more
burdensome capital requirements will continue to mar profitability going
forward. Also, low rates are spoiling life insurers' efforts to grow fixed
annuities and universal life insurance sales.

As the Federal Reserve plans to hold interest rates at low levels through
mid-2015, life insurers will have to seek alternative asset classes to
optimize return from investments. However, the addition of any risky asset
class in their investment portfolios with hopes of better yield may lead to
further losses.

As the industry's statutory capital level fell sharply during the recession,
life insurers will need to optimize their capital levels to address the
ensuing challenges. In the short term, traditional sources of capital are
expected to fulfill most of what life insurers need in order to stay in good
shape. However, non-traditional sources of capital will take years to
strengthen financials.

The underlying trends amid a recovering economy indicate stability in the
sector over the medium term with respect to credit profile and financial
prospects. However, higher-than-average asset losses, primarily resulting from
their real estate exposure, will remain a major concern.

Further, the sluggish pace of economic recovery is making it difficult for
life insurers to expand their customer base. In fact, insurers are struggling
to even retain their existing clientele. Narrowed disposable income owing to
high unemployment and huge credit card debt has made it difficult for
Americans to invest in retirement products such as life insurance. Americans,
primarily the youth, have significantly reduced expenditures on life insurance
products, and are instead choosing alternative investments that promise better

Though the carriers are transforming their products and businesses to make
them attractive and profitable for customers, significant improvement in
demand is not expected in the near term.

In December, Fitch Ratings has affirmed the credit outlook for the U.S. life
insurance industry at stable for 2013. This action was primarily based on the
expectation of insurers' improved liquidity and balance sheet strength.

However, the rating agency expects statutory capital growth to be moderate in
2013 given subdued earnings growth due to the low interest rate environment.
Also, the agency does not expect a significant improvement in portfolio credit
quality due to the expected weakness in investment income.

Currently, the life insurers with favorable Zacks Ranks worth considering
includeProtective Life Corporation (NYSE:PL) and StanCorp Financial Group Inc.
(NYSE:SFG) with a Zacks Rank #1 (Strong Buy), and China Life Insurance Co.
Ltd. (NYSE:LFC) with a Zacks Rank #2 (Buy).

Health Insurers

As U.S. health insurers are preparing themselves to comply with the mandates
of the health care reform, their financials are expected to remain strong.
Broad-based moderation in utilization has been primarily boosting the bottom
line of health insurers. Also, increased access to capital and better
retention opportunities are helping them grow consistently despite tardy
economic growth.

Moreover, the carriers have been witnessing better credit quality in the
recent quarters, reflecting a moderate industry risk.

In 2010, the historic health care reform legislation – The Patient Protection
and Affordable Care Act (PPACA) – was passed by the Congress with the
intension of making health care facilities more affordable, preventing private
health insurers from continuing with the pre-existing condition clause and at
the same time reducing the number of uninsured by bringing in 32 million more
people under coverage by 2019.

The legislation had many detractors who contested several of its stated
benefits and considered it another entitlement program that the country can
ill afford. Finally, in Jun 2012, the U.S. Supreme Court ruled in favor of the
reform, rejuvenating the industry by removing major uncertainties. Further,
Obama's re-election in Nov 2012 essentially ensured a future to the law.

While the legislative overhaul brings more regulatory scrutiny for private
insurers such as WellPoint Inc. (NYSE:WLP) and UnitedHealth Group, Inc.
(NYSE:UNH), the net negative effect is expected to be far softer than was
initially feared.

Although the full implementation of PPACA will be in 2014, the industry is
expected to see gradual changes through the reminder of 2013. While bringing
more people under coverage will add prospects for growth, the requirement to
reduce health care costs will lead to margin compression.

Also, while the reform will provide more cross-selling opportunities for
health insurers, their overall profitability will be limited over the long run
as the negative impact of Medicare Advantage payment cuts, industry taxes and
restrictions on underwriting practices will more than offset the benefits of
bringing more people under the umbrella.

Consequently, substantial growth in industry revenue is not expected until
2015 as insurers will be forced to adjust the benefits to comply with the
health care legislation. Among others, providing coverage to everyone
regardless of an expensive pre-existing condition would put their top lines at

About Zacks is a property of Zacks Investment Research, Inc., which was formed
in 1978 by Leonard Zacks. As a PhD from MIT Len knew he could find patterns in
stock market data that would lead to superior investment results. Amongst his
many accomplishments was the formation of his proprietary stock picking
system; the Zacks Rank, which continues to outperform the market by nearly a 3
to 1 margin. The best way to unlock the profitable stock recommendations and
market insights of Zacks Investment

Research is through our free daily email newsletter; Profit from the Pros. In
short, it's your steady flow of Profitable ideas GUARANTEED to be worth your
time! Register for your free subscription to Profit from the Pros at

Visit for information about the performance
numbers displayed in this press release.

Follow us on Twitter:

Join us on Facebook:

Disclaimer: Past performance does not guarantee future results. Investors
should always research companies and securities before making any investments.
Nothing herein should be construed as an offer or solicitation to buy or sell
any security.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339

SOURCE Zacks Investment Research, Inc.

Press spacebar to pause and continue. Press esc to stop.