Mr. Lewis: First of all, with the market near a high, insurance stocks are consistent and predictable earnings growers, providing a safe haven with the potential for favorable returns with lower risk than the market, in our view.
TWST: How well have the stocks performed this year?
Mr. Lewis: Year to date, through November 14, 1997, the life, health
and annuity providers we follow advanced 32 percent compared to 24
percent for the S&P 500. During 1996, this group advanced 27 percent
compared to 20 percent for the S&P 500.
TWST: Did this come as a surprise to investors?
Mr. Lewis: Not to us. We feel the environment continues to be near
optimal for life insurance companies. This reflects an acceleration in
the earnings growth of the life insurance companies we follow relative
to the S&P 500, which is expected to see a deceleration in earnings.
Every time this has occurred, the group has traded at better than a 75
percent historical relative p/e. We believe that the group is very well
positioned to continue that outperformance for at least the next 12
months. Also, the life and annuity group's earnings are estimated to
grow at near twice the rate of the market.
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.