Investing.com -- Morgan Stanley upgraded Corebridge Financial to “Overweight” from “Equal-weight” given company’s strategic pivot toward fee-based earnings in its group insurance segment as a defensive move in a less favorable interest rate environment.
Corebridge has reduced its exposure to spread-based earnings from 51% to 44% over the past year, reflecting a shift toward advisory and brokerage services. The firm sees this transition as an opportunity to drive long-term growth, leveraging Corebridge’s large customer base of 1.9 million participants, most of whom are pre-retirement and not yet utilizing advisory services.
Morgan Stanley believes the market is underestimating Corebridge’s fee-based earnings potential, noting that advisory and brokerage premium and deposit growth has increased from $2.1 billion in 2022 to $3.1 billion in 2024. The firm forecasts 2026 EPS of $6.34, above the consensus estimate of $6.11.
Corebridge’s in-house distribution network through VALIC Financial Advisors, which includes 1,100 financial professionals, provides a competitive advantage by allowing the company to shift focus between services as needed.
Morgan Stanley raised its price target to $43, implying 30% upside, and adjusted its valuation methodology to reflect Corebridge’s growing wealth management business. The firm sees potential risks in the pace of required minimum distributions but views Corebridge’s fee-based strategy as well-positioned for the current market.