An Insurer You Can Bank On?

One of the big games on the Street these days is spotting stocks likely to be takeover targets in anticipation of the demise of the Glass-Steagall Act. This law bars banks from underwriting securities or owning insurance companies. And brokers are banned from commercial banking.

The manager of a large New York hedge fund thinks he has found one: Security-Connecticut Life Insurance (SRC), whose principal products are term and universal life-insurance policies--with about $30 billion in force---and annuities, where it has $600 million in assets.

He believes Security-Connecticut's mix of business will be tempting to a bank because the markets for annuities and universal life insurance are growing much faster than bank deposits. "In a merger or takeover, Security-Connecticut would be worth 40 to 50 a share," says this pro. A takeover wouldn't be new to Security-Connecticut: It was acquired by Lincoln National in 1979. In January, 1994, Lincoln took it public at 22 a share. It's now trading at 24.

Even with no takeover, Security-Connecticut is "a very attractive stock," says Ed Wachenheim III, chairman of Greenhaven Associates in Purchase, N.Y. "It's a well-managed and high-quality company whose stock remains undervalued." He sees the company making $3.35 a share this year and $3.75 next, up from 1994's $3.

A year out, he's betting the stock will sell at 11 to 12 times his projected 1966 earnings, or 41 to 45 a share.

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