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Life Insurer Equitable Is a Cheap Way to Play AllianceBernstein -- Barrons.com Life Insurer Equitable Is a Cheap Way to Play AllianceBernstein -- Barrons.com Dow Jones By Andrew Bary Life insurance stocks have some of the lowest price to earnings multiples in the stock market, reflecting concerns about the impact of low rates on their investment returns and their equity exposure. Equitable Holdings (ticker: EQH) could be the cheapest of the bunch. The company's shares, which fell 4.6%, to $19.65, on Monday, fetch just 4.1 times projected 2021 earnings and only 1.7 times estimated 2021 profits when adjusting for Equitable's valuable 65% stake in AllianceBernstein Holding (AB), the investment manager. This calculation is from Credit Suisse analyst Andrew Kligerman, who highlighted Equitable superlow, adjusted price/earnings ratio in a client note Monday and lifted his price target on the stock to $30 from $29. He has an Outperform rating. Kligerman noted that Equitable's life insurance peers trade for an average of 6.5 times projected 2021 earnings. Barron's highlighted Equitable as a way to play AllianceBernstein in a recent favorable article on the money manager. Equitable is valued at about $9 billion, and its stake in AllianceBernstein is worth around $5.9 billion, resulting in a value of just $3.1 billion for Equitable's core life insurance operations, which could earn $1.8 billion in 2021, Kligerman estimates. Kligerman notes that Equitable targets 8% to 10% growth in annual earnings per share, which he views as "attainable." It is possible, given Equitable's excess capital, that the company could bid for the remainder of AllianceBernstein that it doesn't already own, Kligerman has written. A spinoff of its 65% stake in the money manager to Equitable holders is deemed less likely. "EQH's businesses are supported by substantial capital and excellent risk management, including a relatively low risk credit profile," Kligerman wrote. "We estimate $2.3B of pro forma excess capital, or 17%" of a conservative measure of book value." |
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