Kesselschacht

Goldman Note Stirs Activity in Insurance Companies
By TENNILLE TRACY
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Traders adopted a bearish view of life insurers Tuesday after Goldman Sachs Group issued a cautious note about the near-term fate of the industry.
Trading was particularly robust in Principal Financial Group Inc., Lincoln National Corp. and Hartford Financial Services Group Inc. -- three companies whose shares Goldman advised investors to sell, saying "we see no reason to own the stock" in the near term.
In Principal Financial, where activity in the options market jumped to eight times the normal level, investors picked up 400 calls that allow them to buy the company's stock and 6,000 puts that allow them to sell it, according to market data provider Trade Alert.
Traders showed interest in November puts that convey the right to sell Principal Financial for $22.50 a share. The contracts are priced at $3.50 and show a profit if Principal Financial dips below $19 before Nov. 21. The shares closed Tuesday at $20.63, down 15%.
Traders also showed a preference for bearish contracts in Lincoln National, picking up 1,000 calls and 4,000 puts. Here, they focused on November $12.50 puts that cost 60 cents and that show a profit if Lincoln National drops below $11.90. The shares closed at $16.31, down 15%.
In Hartford Financial, traders gravitated toward November $5 puts. The contracts are priced at 20 cents and will show a profit if Hartford slips below $4.80. The shares fell 23% to $11.24.
Analysts at Goldman Sachs struck a cautious tone on the sector because they believe life insurers will suffer from asset deterioration in the next 12 to 18 months, most notably from commercial real-estate investments, as well as losses from embedded guarantees in annuity products.
The warning also prompted trading in Prudential Financial Inc., where investors showed equal interest in both calls and puts. Among the most popular contracts were December $45 calls and November $20 puts. Prudential fell 11% to $27.61.
Providing a bright spot -- albeit a small one -- Goldman Sachs assigned a neutral rating to MetLife Inc. and said the company, compared with the others, has a less pressing need to raise capital.
In the options market, trading in MetLife was muted but nonetheless bearish, and investors picked up three times as many puts as calls. MetLife slid 7.7% Tuesday to $30.55.
Write to Tennille Tracy at tennille.tracy@dowjones.com