< The 2014 All-America Research TeamNigel DallyMorgan StanleyFirst-place appearances: 0

Total appearances: 11

Team debut: 2003Morgan Stanley’s Nigel Dally, who repeats in third place, maintains that the U.S. life insurance industry’s fundamentals are sound. Companies in the sector enjoy strong capital positions and significant operating-margin expansion across a range of different products, which is boosting earnings estimates — although several issues warrant monitoring, he cautions. Since this is a macroeconomics-sensitive group, the interest rate outlook is key, he advises. “The consensus view was they’re going to be headed higher. In contrast, they’ve headed significantly lower, and they’re at a level now where, if they stay there for a prolonged period of time, that could be a meaningful challenge for the group,” Dally contends. “That’s probably the No. 1 risk factor that we’re looking at.” Also of concern is continued regulatory uncertainty surrounding the implications for insurers that are designated as systemically important financial institutions, he notes. Against this backdrop, among the names Dally recommends overweighting are CNO Financial Group of Carmel, Indiana; New York’s MetLife; and Newark, New Jersey–based Prudential Financial. CNO he deems a cash-flow story with a recapitalization opportunity toward the end of next year. MetLife’s positives include its broad diversity, very cheap valuation and substantial expense-reduction program, the analyst says; and Prudential Financial is posting operating-margin expansion that is delivering results ahead of expectations, as well as an attractive valuation. “Nigel has good corporate access and tends to see the big picture within his coverage universe,” applauds one money manager.