Financial Institutions – Insurance: Second

Jonathan Hocking & team
Morgan Stanley

Rising one rung to second place is the Morgan Stanley squad under Jonathan Hocking. The team, with four analysts in London and one in Mumbai, added coverage of six companies over the past year, bringing its total to 42. “The models they provide on the companies they follow are exceptional,” says one Lisbon-based money manager. The researchers upgraded U.K.-based life insurer Aviva from neutral to overweight in July, at 282.37p, on management’s efforts to shore up the company’s balance sheet by disposing of noncore assets. The shares had bolted to 373p by the end of the year — gaining 32.1 percent and besting the sector by 9 percentage points — and the team continues to recommend them. “The stock has consistently traded at a material discount to its European peers Allianz and Zurich [Insurance Group],” Hocking points out. The group is also bullish on Prudential, believing that the U.K.-based multiline insurer offers investors a strong combination of sales growth and rising cash flow, but it is cautious on other companies. “The average investment leverage of the sector is 470 percent,” he notes. “We estimate that with the current asset allocation, asset yields will fall 140 basis points over the next five years, taking 6.6 percentage points off the return on tangible equity.” — Leslie Kramer