03-16-2020, 08:19 PM
(03-16-2020, 05:55 PM)benjamen Wrote:benjamin(03-16-2020, 02:33 PM)Kerim Wrote: Anyone looking at AFL? P/E never seems to get to high, but it is under 7 right now. Are they going to get crushed with coronavirus related claims, or are they just down along with everything else? I know the yield is hard to get excited about with some of the other opportunities right now, but still...
A lot of insurance company’s are diving right now for no reason I can find. I have already picked up AFL and PRU, but there are many others like MET and TRV!
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I'm no insurance expert but zero interest rates will hurt profitability. They rely on spreads for some of their products just as a bank does.
Annuities would be an example. They sell an annuity and promise a future payment. They need to safely invest the proceeds at a higher rate so they can profit. That doesn't work when a long dated treasury bills etc are well under 2%. You'll have no interest in an annuity that basically just gives your money back + 0-1% later. Same deal with pensions they manage. They count on earnings from those funds until the payouts. Casualty insurers are required by law to maintain a large cash reserve to pay claims. They have lost much of the yield on that money too. They have other ways to produce revenue, and the 50% selloff seems way overdone. We need to see updated earnings guidance before we really know what they are worth. Revenue and earnings guidance will certainly be lowered.