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The 2016 All-Europe Research Team: Insurance, No. 3: Jonathan Hocking & team
Jonathan Hocking and his Morgan Stanley squad in London are down one rung to No. 3.
Total appearances: 28
Team debut: 1989
Jonathan Hocking and his Morgan Stanley squad in London are down one rung to No. 3. “Jon combines excellent company analysis with a clear and well-articulated sector view,” remarks one fund manager. “He is a good stock picker with low ‘recommendation turnover,’ and is very accessible and an excellent communicator.” The researchers foresee regional insurance shares’ “continuing to trade as a bond proxy given the demand for dividend income,” says Hocking, 42. From a fundamental bottom-up perspective, however, they project increasing headwinds, so their view overall is still cautious. “The sector’s dividend yield remains attractive in a context of very low, or even negative, risk-free yields in much of Europe, and earnings are also resilient, especially when compared to cyclical sectors’,” he notes. “However, for us the paradox remains that the market is placing an ever higher value on the insurers’ dividend stream as it becomes inherently riskier.” Of the 30 companies in the team’s sector portfolio, French property/casualty insurer AXA Group and U.K.-based life insurance underwriter Aviva are top picks for this year. “AXA has demonstrated the relative stability of its economic balance sheet and has an attractive business mix given the macro outlook we see in 2016,” Hocking explains. Its stock was trading at €22.77 in mid-January, and the analysts peg it at €28.90. For its part Aviva significantly underperformed its regional peers last year, owing to “a combination of negative earnings revisions, driven by completion of the Friends [Life Group] deal and unfavorable foreign exchange and lack of clarity over Solvency II,” the crew chief says. “We believe disclosure of Solvency II and a new cash metric will be positive catalysts, making the shares look inexpensive on full-year 2017 multiples.” At 654p, Morgan Stanley’s price objective for Aviva implies a 40.8 percent upside to the shares’ trading value in mid-January. “Jon is a very experienced analyst and manages to inject some good humor into a relatively dry sector, as well as making by and large good stock calls,” another backer offers.