After a stellar ride early in 2017, the insurance industry has lost its momentum despite the fact that it tends to flourish with a rise in interest rates. With a Fed rate hike in March and another lift-off expected next month, the stocks are not as strong as they should ideally be. Even robust earnings from leading players in the industry failed to boost optimism.
In particular, MetLife (MET – Free Report) , Prudential Financial (PRU – Free Report) , Chubb Corp (CB – Free Report) , Allstate (ALL – Free Report) , and American International (AIG – Free Report) surpassed both our earnings and revenue estimates while Aflac Inc. (AFL – Free Report) lagged revenue estimates. Meanwhile, Travelers (TRV – Free Report) missed on earnings but topped revenue estimates.
Insurance Earnings in Focus
MetLife, the U.S. life insurer behemoth, reported robust earnings of $1.46 per share, which trumped the Zacks Consensus Estimate of $1.27 and improved 12.3% from the year-ago quarter. Revenues grew 2% year over year to $16.88 billion and were well ahead of our estimated $16.78 billion. On the other hand, PRU, the second largest U.S. life insurer, also beat our earnings estimate by 15 cents. Earnings improved 28% year over year. Revenues increased 6.3% year over year to $12 billion.
One of the leading property and casualty insurers – Chubb – reported earnings per share of $2.48, outpacing the Zacks Consensus Estimate by four cents and improving 9.7% from the year-ago quarter. Revenues of $7.59 billion also edged past our estimate of $7.25 billion. Another property and casualty insurer, Allstate, also topped the Zacks Consensus Estimate with a huge earnings beat of 60 cents and revenue beat of $942 million. On a year-over-year basis, earnings and revenues grew 95% and 6.3%, respectively.
AIG, the largest commercial insurer in the U.S. and Canada, beat our earnings and revenue estimates by 22.52% and 2.84%, respectively. Earnings per share of $1.67 reported by Aflac, the seller of supplement health insurance, trumped the Zacks Consensus Estimate by a nickel but declined 3.5% from the year-ago quarter. However, revenues of $5.31 billion fell short of our estimate of $5.55 billion.
Personal property and casualty insurer Travelers posted earnings per share of $2.16, missing our estimate by 24 cents and declining 7.3% year over year. Revenues rose 3.8% year over year to $6.9 billion and were slightly ahead of our estimate of $6.8 billion.
ETFs in Focus
Despite the string of Q1 earnings beat, insurance ETFs – SPDR S&P Insurance ETF (KIE – Free Report) and iShares U.S. Insurance ETF (IAK – Free Report) – are underperforming the other corners of the financial space over the past one month. This is especially true as KIE and IAK gained 1.8% each when compared with gains of 4% for the broad financial ETF (XLF – Free Report) and 4.9% for the bank ETF (KRE – Free Report).
