EARNINGS PREVIEW: US Life Insurers Face Headwinds, But Some May Shine
July 27 2011 - 2:14PM
Dow Jones News
TAKING THE PULSE: U.S. life insurers faced headwinds in the
second quarter from weak equity markets, low interest rates and a
still-struggling economy. Wall Street is well aware of those
trends, and life insurers are currently trading below historical
levels. Analysts say investors may be surprised by the way some
companies still managed to buy back a substantial number of shares
in the quarter, and some theorize the sector could appear more
attractive by the end of the earnings season when results are
compared to those put up by their cousins in the property-casualty
sector.
COMPANIES TO WATCH:
MetLife Inc. (MET)--reports July 28.
Wall Street Expectations: Analysts surveyed by Thomson Reuters
expect $1.10 a share in operating profit on average. (Operating
earnings exclude some investment results.) A year earlier, the
company earned $1.23 a share, before it issued stock to acquire
Alico, a massive international life insurer from American
International Group Inc. (AIG)
Key Issues: Steven Kandarian, who took over as chief executive
in May, will no doubt spend time discussing Alico's performance on
the company's conference call. He may also touch on what it would
take for the company to do another deal after the company
reportedly missed out on acquiring the Latin American insurance
operations of ING Groep NV (INGA.AE) just this week. Another topic:
the shifting regulatory landscape in Washington, which could result
in greater scrutiny of the country's largest insurers.
Prudential Financial Inc. (PRU)--reports Aug. 3.
Wall Street Expectations: Analyst consensus is an operating
profit of $1.55 a share. The insurer earned $1.51 a share in the
same period a year earlier.
Key Issues: Prudential is certain to discuss Japan, where it
expanded with its own purchase of AIG operations in February. In
the U.S., both Prudential and MetLife have grown to dominate the
variable annuity space in recent years, and analysts will look to
see whether efforts by smaller rivals to reclaim a portion of the
business are gaining traction. Prudential instituted a $1.5 billion
share buyback program in June, its first since 2007.
Aflac Inc. (AFL)--July 27.
Wall Street Expectations: Wall Street expects $1.54 in operating
profit. Aflac earned $1.35 a share in last year's second
quarter.
Key Issues: While operating results are expected to improve, the
company has already warned that net income will be hurt because it
sold off some investments at a $610 million loss as it repositioned
its portfolio. The company is seeking to reduce risk in the
portfolio by unloading some of its sovereign and bank debt from
financially stressed regions, and reducing the size of the largest
positions in the portfolio. While CEO Dan Amos has said the Japan
earthquake won't be a substantial drag on results, it remains a
topic of interest for investors.
Hartford Financial Services Group Inc. (HIG)--reports Aug.
3.
Wall Street Expectations: In a pre-announcement that took much
of the drama out of the company's coming Aug. 3 announcement, the
company warned last week second-quarter core earnings, its closest
equivalent to operating earnings, were about $12 million. That's
roughly zero cents per share after paying a dividend on preferred
stock. A year ago it had core earnings of 17 cents a share.
Key Issues: The company's lack of per-share earnings were a
result of issues on the property-casualty side of its operations.
The problems were two-fold: high claims costs from record
tornadoes, and a boost in reserves for asbestos claims it's gotten
on commercial insurance policies. On the life insurance side,
Hartford is among the companies trying to climb back in to the
fight for variable annuity customers.
-By Erik Holm, Dow Jones Newswires; 212-416-2892;
erik.holm@dowjones.com
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