Sector Snap: Insurance stocks drop

NEW YORK - Shares of major insurance companies mostly fell Tuesday, after a handful of analysts gave bleak outlooks on the sector, noting expectations for continued asset deterioration.

Goldman Sachs Group Inc. analyst Chris Neczypor changed his view on the life insurance sector to "Cautious" from "Neutral" Tuesday, saying he expects life insurers to face further deterioration in assets and increased losses from guarantees embedded in annuity products over the next 12 to 18 months.

Lincoln National Corp., Prudential Financial Inc., Principal Financial Group Inc. and Hartford Financial Services Group Inc. are all likely to need to raise capital and face the possibility of ratings downgrades, possibly as early as the end of this year, Neczypor wrote in a research note. All four companies are rated "Sell" by Goldman Sachs.

Lincoln National shares dropped $2.65, or 14 percent, to $16.60 in afternoon trading. Prudential lost $2.95, or 9.5 percent, to $28.

Principal Financial stumbled $3.20, or 13 percent, to $21.03. Hartford plunged $3.30, or 23 percent, to $11.25.

Keefe, Bruyette & Woods analyst Jeffrey Schuman, meanwhile, trimmed his fourth-quarter profit estimate on MetLife Inc. to 83 cents per share from $1.02 per share to reflect expectations for weak investment income and a negative impact from disruption in the equity markets. He also cut his 12-month price target on the stock to $48 from $51.

MetLife shares lost $2.58, or 7.8 percent, to $30.53.

Schuman also revised his estimates on Prudential. He now expects full-year earnings of $5.70 per share, down from a prior estimate of $6.08 per share. He also cut his price target on the stock by $7 to $60.

KBW analyst Jukka Lipponen trimmed the target price on National Financial Partners by $1 to $10 and lowered fourth-quarter estimates by 1 penny to 60 cents per share.

"The macroeconomic environment, including the life insurance market, remains challenging and we now expect organic growth to remain negative through 2009," Lipponen said.

National Financial shares fell 46 cents, or 11 percent, to $3.75, after falling as low as $3.51 earlier in the session.

On Monday, credit ratings agency Moody's Investors Service cut its senior debt rating on Genworth Financial Inc., as well as the financial strength rating of its primary life insurance subsidiaries. Moody's cited the negative effect of credit market troubles on the firm's profitability.

Genworth shares dropped $1.40, or 51 percent, to $1.32 in afternoon trading. Shares hit a low of $1.21 earlier in the session.

On the heels of receiving a $150 billion bailout plan, insurer American International Group Inc. on Tuesday defended itself against a media report of a sales meeting held at a luxury resort in Phoenix last week, saying the event was an "essential training meeting."

On Monday, the U.S. government announced a restructuring of a bailout plan for the insurer, boosting aid to the company to around $150 billion.

AIG shares tumbled 16 cents, or 7 percent, to $2.12.

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