Evercore ISI analyst Thomas Gallagher downgraded Ameriprise Financial Inc. to "in line" after analyzing insurers' long-term care blocks following GE's $6.2 billion charge related to the business line for the fourth quarter of 2017.
He concluded that while GE's block is worse than the average insurer it was not a major outlier, signalling the potential for significant charges for other insurers over the next few years.
While Ameriprise Financial's net reserves are small compared with its market capitalization, Gallagher thinks Ameriprise is among the most at risk for a material reserve charge.
He noted that a new disclosure in Ameriprise Financial's annual SEC filing indicates that the company does not expect to take large charges on a year-to-year basis since it updates assumptions every year, and termination assumptions have been stable for the last several years.
But the company adjusted morbidity experience on its comprehensive reimbursement long-term care policies upward in 2017 based on emerging experience trends, Gallagher wrote.
The analyst has a target price of $170 on the company's stock. Gallagher expects EPS of $14.34 and $16 for 2018 and 2019, respectively.
