Fidelity Gains on Insurers as Paulson Bets on Conseco

何鸿燊

By Andrew Frye and Jamie McGee

Oct. 16 (Bloomberg) -- Fidelity Investments, Goldman Sachs Group Inc. and Paulson & Co. are gaining from the surge in U.S. life-insurance stocks after placing bets on an industry that lost $52 billion last year.

Fidelity became the biggest shareholder in Lincoln National Corp. and Genworth Financial Inc. in the second quarter, and Goldman Sachs added to stakes in at least nine carriers whose stocks extended a rally begun in March. Paulson announced an increased holding in Conseco Inc. on Oct. 13, and shares in the Carmel, Indiana-based insurer jumped 37 percent in two days.

Funds are building stakes in an industry burned by asset declines and abandoned by investors after American International Group Inc.’s near failure last year. Carriers that cut jobs, tapped credit lines and borrowed from subsidiaries during the credit crunch are enjoying a return to favor amid investment gains and injections of private and government capital.

“The industry got beaten down to near-death type valuations,” Steven Schwartz, an analyst with Raymond James & Associates Inc., said in an interview. “Opening of the capital markets was really the key” to the rally, Schwartz said.

The Standard & Poor’s Supercomposite Life & Health Insurance Index has more than tripled from March 9 as Philadelphia-based Lincoln tapped an unprofitable unit for funds to meet a $700 million debt maturity, Genworth of Richmond, Virginia, sold shares in a Canadian subsidiary and Hartford Financial Services Group Inc. won $3.4 billion in U.S. aid.

Fidelity’s Gains

The 27.7 million Lincoln shares that Fidelity bought in the second quarter gained $193.9 million, assuming the purchases came at the highest intraday price of the period, or $19.99, and subtracting that from the stock’s close yesterday of $26.99. The 40.6 million Genworth shares purchased by Fidelity advanced $186.4 million, assuming the high price of $7.41 and using the company’s $12 close. By assuming the purchases came at the average second-quarter prices, or $14.17 for Lincoln and $4.44 for Genworth, the two new positions grew $662 million.

Assets managed by Goldman Sachs are positioned to benefit from gains after June 30 as Lincoln rose 57 percent, Principal Financial Group Inc. advanced 58 percent, and Hartford more than doubled. In the second quarter, New York-based Goldman Sachs boosted its Lincoln stake by 84 percent and more than tripled investments in Principal and Hartford.

Life insurers helped lead a broader equity rally that pushed the Dow Jones Industrial Average to its steepest advance in seven decades and above 10,000 for the first time in a year. Genworth, which was spun off from General Electric Co., closed at $12 yesterday, compared with 84 cents on March 6. Insurers may rise more, some industry equity analysts said.

Analyst Recommendations

About half of the 20 analysts that track Lincoln have a “buy” rating on the shares, while none say sell. Hartford is recommended by 37 percent of analysts, while 16 percent expect the shares to fall. MetLife Inc., the biggest U.S. life insurer, has 13 “buy” ratings, eight “holds” and no “sells.”

“These are good companies and they have good prospects, so over time they’ll do well,” said Jim Glickenhaus, whose New York-based Glickenhaus & Co. bought about 180,000 shares of Lincoln in the second quarter.

Paulson agreed to invest as much as $277.9 million in Conseco, whose streak of quarterly losses was snapped this year at eight. Goldman Sachs also invested in Conseco in the second quarter, as well as in New York-based MetLife, Genworth, Aflac Inc., Protective Life Corp. and Prudential Financial Inc., the No. 2 life insurer.

Asset managers earn fees based on the size and performance of their investments. Fidelity, the world’s largest mutual-fund company, managed $1.36 trillion in assets as of June 30. Goldman Sachs, the most profitable securities firm in Wall Street history, invests its own assets and those of clients.

Last Year’s Decline

Life insurance shares plummeted in the second half last year on concern carriers would have to sell assets at depressed prices to meet obligations. The September 2008 bankruptcy of Lehman Brothers Holdings Inc. pushed down investment values and locked credit markets, prompting at least 12 insurers to ask the U.S. Treasury for a bailout.

Goldman Sachs, which owned 2.9 million Hartford shares on Dec. 31, slashed its stake 62 percent in the first quarter before building it up to 3.9 million at the end of June. The shares, which sank to a record $3.33 on March 6, ended yesterday at $28.23 on the New York Stock Exchange.

Hartford lost $3.44 billion in the final six months of 2008 on costs to protect savers from stock declines and writedowns of securities issued by Lehman and other troubled firms. The losses narrowed in the first half, and Hartford may report its first profit in more than a year in third quarter, according to the average estimate of three analysts surveyed by Bloomberg.

Lincoln is preparing to report what may be its first profit in four quarters. Investment firm Neuberger Berman Group LLC raised its stake in Lincoln more than 100-fold in the second quarter and stands to make a gain of about $42 million on the purchase. Its 3.3 million-share stake is valued at about $89.1 million as of yesterday’s close. Neuberger owned four times that amount in June 2007 in a stake valued at $1 billion.

Melissa Daly, a Goldman Sachs spokeswoman, and Neuberger Berman’s Randall Whitestone declined to comment. Sophie Launay of Fidelity, owned by Boston-based FMR LLC, had no comment.