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The insurance sector is one of the prime beneficiaries of a rate hike, as these are able to earn higher returns on their investment portfolio of longer-duration bonds. At the same time, these firms incur loss as the value of longer-duration bonds goes down with rising interest rates. Nevertheless, since insurance companies have long-term investment horizons, they can hold investments until maturity and hence, no actual losses will be realized (read: 5 Must-Buy ETFs With Fed Tightening in the Cards).
Upbeat earnings from the leading players in the insurance industry added to the strength as some of the prominent players surpassed estimates for both earnings and revenues. This has paved the way for further rally in insurance funds SPDR S&P Insurance ETF (KIE - Free Report) and iShares U.S. Insurance ETF (IAK - Free Report) .
Insurance Earnings in Focus
MetLife (MET - Free Report) , the U.S. life insurance behemoth, reported earnings of $2.17 per share, which outpaced the Zacks Consensus Estimate by 75 cents and increased 6.9% from the year-ago quarter. Revenues dipped 1.8% year over year to $20.21 billion and breezed past the consensus estimate of $16.87 billion. Prudential Financial (PRU - Free Report) , the second-largest U.S. life insurer, also beat on earnings and revenue estimates. Earnings per share of $3.18 topped the Zacks Consensus Estimate of $2.39 and increased 13.6% from the year-ago earnings. Revenues declined 5.8% year over year to $13.74 billion but surpassed the consensus mark of $13.44 billion.
One of the leading property and casualty insurers, Chubb Corp (CB - Free Report) , outpaced the Zacks Consensus Estimate for the top and the bottom lines by $277 million and 54 cents, respectively. Earnings per share improved 19.8% year over year. Another property and casualty insurer, Allstate (ALL - Free Report) , came up with earnings per share of $2.75, topping the consensus estimate by a penny but plunging 46.9% year over year. Revenues grew 18.7% year over year to $12.74 billion.
Earnings per share of $1.58 reported by Aflac (AFL - Free Report) , a seller of supplement health insurance, trumped the Zacks Consensus Estimate by 3 cents and increased 19.6% from the year-ago earnings. Revenues dropped 8.1% year over year to $5.43 billion and beat the consensus mark by 1.4% (see: all the Financial ETFs here).
Personal property and casualty insurer Travelers (TRV - Free Report) posted earnings per share of $5.20, exceeding the Zacks Consensus Estimate by $1.34 and improving 6% from the year-ago earnings. Revenues grew 7% year over year to $8.95 billion and outpaced the consensus mark of $8.71 billion.
SPDR S&P Insurance ETF follows the S&P Insurance Select Industry Index, holding 53 stocks in its basket. Each of the in-focus firms accounts for around 2% share. About 45.1% of the portfolio is allocated to property and casualty insurance, while life & health insurance and insurance brokers round off the next two spots with double-digit exposure.
SPDR S&P Insurance ETF has managed $500.2 million in its asset base and trades in a good average daily volume of about 855,000 shares. The product has an expense ratio of 0.35% and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Guide to Interest Rates Hikes and ETFs: 5 Ways to Play).
With AUM of $132.5 million, iShares U.S. Insurance ETF offers exposure to U.S. companies that provide life, property and casualty, and full line insurance. It tracks the Dow Jones U.S. Select Insurance Index and holds 61 securities in its basket with the in-focus six firms occupying the top eight positions and collectively making up 40.3% of the assets.
Property & casualty insurance accounts for the largest share at 52.2%, while life & health insurance and multiline insurance round off the next two spots with a double-digit exposure each. iShares U.S. Insurance ETF charges 42 basis points in annual fees and trades in an average daily volume of 16,000 shares per day. It has a Zacks ETF Rank #3 with a Medium risk outlook.
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Insurance ETFs to Rally on Solid Q4 Earnings
The insurance sector is one of the prime beneficiaries of a rate hike, as these are able to earn higher returns on their investment portfolio of longer-duration bonds. At the same time, these firms incur loss as the value of longer-duration bonds goes down with rising interest rates. Nevertheless, since insurance companies have long-term investment horizons, they can hold investments until maturity and hence, no actual losses will be realized (read: 5 Must-Buy ETFs With Fed Tightening in the Cards).
Upbeat earnings from the leading players in the insurance industry added to the strength as some of the prominent players surpassed estimates for both earnings and revenues. This has paved the way for further rally in insurance funds SPDR S&P Insurance ETF (KIE - Free Report) and iShares U.S. Insurance ETF (IAK - Free Report) .
Insurance Earnings in Focus
MetLife (MET - Free Report) , the U.S. life insurance behemoth, reported earnings of $2.17 per share, which outpaced the Zacks Consensus Estimate by 75 cents and increased 6.9% from the year-ago quarter. Revenues dipped 1.8% year over year to $20.21 billion and breezed past the consensus estimate of $16.87 billion. Prudential Financial (PRU - Free Report) , the second-largest U.S. life insurer, also beat on earnings and revenue estimates. Earnings per share of $3.18 topped the Zacks Consensus Estimate of $2.39 and increased 13.6% from the year-ago earnings. Revenues declined 5.8% year over year to $13.74 billion but surpassed the consensus mark of $13.44 billion.
One of the leading property and casualty insurers, Chubb Corp (CB - Free Report) , outpaced the Zacks Consensus Estimate for the top and the bottom lines by $277 million and 54 cents, respectively. Earnings per share improved 19.8% year over year. Another property and casualty insurer, Allstate (ALL - Free Report) , came up with earnings per share of $2.75, topping the consensus estimate by a penny but plunging 46.9% year over year. Revenues grew 18.7% year over year to $12.74 billion.
Earnings per share of $1.58 reported by Aflac (AFL - Free Report) , a seller of supplement health insurance, trumped the Zacks Consensus Estimate by 3 cents and increased 19.6% from the year-ago earnings. Revenues dropped 8.1% year over year to $5.43 billion and beat the consensus mark by 1.4% (see: all the Financial ETFs here).
Personal property and casualty insurer Travelers (TRV - Free Report) posted earnings per share of $5.20, exceeding the Zacks Consensus Estimate by $1.34 and improving 6% from the year-ago earnings. Revenues grew 7% year over year to $8.95 billion and outpaced the consensus mark of $8.71 billion.
ETFs in Focus
SPDR S&P Insurance ETF (KIE - Free Report)
SPDR S&P Insurance ETF follows the S&P Insurance Select Industry Index, holding 53 stocks in its basket. Each of the in-focus firms accounts for around 2% share. About 45.1% of the portfolio is allocated to property and casualty insurance, while life & health insurance and insurance brokers round off the next two spots with double-digit exposure.
SPDR S&P Insurance ETF has managed $500.2 million in its asset base and trades in a good average daily volume of about 855,000 shares. The product has an expense ratio of 0.35% and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Guide to Interest Rates Hikes and ETFs: 5 Ways to Play).
iShares U.S. Insurance ETF (IAK - Free Report)
With AUM of $132.5 million, iShares U.S. Insurance ETF offers exposure to U.S. companies that provide life, property and casualty, and full line insurance. It tracks the Dow Jones U.S. Select Insurance Index and holds 61 securities in its basket with the in-focus six firms occupying the top eight positions and collectively making up 40.3% of the assets.
Property & casualty insurance accounts for the largest share at 52.2%, while life & health insurance and multiline insurance round off the next two spots with a double-digit exposure each. iShares U.S. Insurance ETF charges 42 basis points in annual fees and trades in an average daily volume of 16,000 shares per day. It has a Zacks ETF Rank #3 with a Medium risk outlook.