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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 losses 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: Fed Hike Slows Down But Set to Remain Steady: ETFs to Gain).
A slew of solid 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 led to a rally in insurance ETFs like SPDR S&P Insurance ETF (KIE - Free Report) and iShares U.S. Insurance ETF (IAK - Free Report) . Both ETFs have gained 3.3% and 7%, respectively, so far this year.
Insurance Earnings in Focus
Both the U.S. life insurance behemoths MetLife (MET - Free Report) and Prudential Financial (PRU - Free Report) missed on both earnings and revenue estimates. MetLife reported earnings of $1.55 per share, which missed the Zacks Consensus Estimate by 19 cents and declined 29% from the year-ago quarter. Revenues declined 21.6% year over year to $15.84 billion and were below the consensus estimate of $17 billion. The second-largest U.S. life insurer, missed on both earnings and revenue estimates. Earnings per share of $2.42 lagged the Zacks Consensus Estimate of $2.57 and decreased 23.9% from the year-ago earnings. Revenues declined 9% year over year to $12.65 billion and fell short of the consensus mark of $12.79 billion.
One of the leading property and casualty insurers, Chubb Corp (CB - Free Report) , lagged the Zacks Consensus Estimate for earnings per share by 17 cents and topped the revenue estimate by $91 million. Earnings per share improved 6.3% year over year. Another property and casualty insurer, Allstate (ALL - Free Report) , came up with a loss per share of $1.36, narrower than the Zacks Consensus Estimate of a loss of $1.37. The company reported earnings of $2.75 in the year-ago quarter. Revenues grew 6.3% year over year to $13.5 billion, well above the consensus mark of $12.49 billion.
Earnings per share of $1.29 reported by Aflac (AFL - Free Report) , a seller of supplemental health insurance, trumped the Zacks Consensus Estimate by 8 cents and improved 0.8% from the year-ago earnings. Revenues dropped 26.2% year over year to $4 billion and lagged the consensus mark of $4.47 billion (see: all the Financial ETFs here).
Personal property and casualty insurer Travelers (TRV - Free Report) posted earnings per share of $3.40, in-line with the Zacks Consensus Estimate but declining 35% from the year-ago earnings. Revenues grew 7.5% year over year to $9.63 billion and beat the consensus mark of $9.61 billion.
SPDR S&P Insurance ETF follows the S&P Insurance Select Industry Index, holding a well-diversified 49 stocks in its basket. About 46.5% 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 $518.8 million in its asset base and trades in a good average daily volume of about 861,000 shares. The product has an expense ratio of 0.35% and a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Insurance ETFs At 52-Week Highs: More Gains Ahead?).
With AUM of $581.8 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 56 securities in its basket with a double-digit concentration on the top two firms.
Property & casualty insurance accounts for the largest share at 57.3%, 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 39 bps in annual fees and trades in an average daily volume of 58,000 shares per day. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
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Insurance ETFs Rising on Q4 Earnings Results
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 losses 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: Fed Hike Slows Down But Set to Remain Steady: ETFs to Gain).
A slew of solid 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 led to a rally in insurance ETFs like SPDR S&P Insurance ETF (KIE - Free Report) and iShares U.S. Insurance ETF (IAK - Free Report) . Both ETFs have gained 3.3% and 7%, respectively, so far this year.
Insurance Earnings in Focus
Both the U.S. life insurance behemoths MetLife (MET - Free Report) and Prudential Financial (PRU - Free Report) missed on both earnings and revenue estimates. MetLife reported earnings of $1.55 per share, which missed the Zacks Consensus Estimate by 19 cents and declined 29% from the year-ago quarter. Revenues declined 21.6% year over year to $15.84 billion and were below the consensus estimate of $17 billion. The second-largest U.S. life insurer, missed on both earnings and revenue estimates. Earnings per share of $2.42 lagged the Zacks Consensus Estimate of $2.57 and decreased 23.9% from the year-ago earnings. Revenues declined 9% year over year to $12.65 billion and fell short of the consensus mark of $12.79 billion.
One of the leading property and casualty insurers, Chubb Corp (CB - Free Report) , lagged the Zacks Consensus Estimate for earnings per share by 17 cents and topped the revenue estimate by $91 million. Earnings per share improved 6.3% year over year. Another property and casualty insurer, Allstate (ALL - Free Report) , came up with a loss per share of $1.36, narrower than the Zacks Consensus Estimate of a loss of $1.37. The company reported earnings of $2.75 in the year-ago quarter. Revenues grew 6.3% year over year to $13.5 billion, well above the consensus mark of $12.49 billion.
Earnings per share of $1.29 reported by Aflac (AFL - Free Report) , a seller of supplemental health insurance, trumped the Zacks Consensus Estimate by 8 cents and improved 0.8% from the year-ago earnings. Revenues dropped 26.2% year over year to $4 billion and lagged the consensus mark of $4.47 billion (see: all the Financial ETFs here).
Personal property and casualty insurer Travelers (TRV - Free Report) posted earnings per share of $3.40, in-line with the Zacks Consensus Estimate but declining 35% from the year-ago earnings. Revenues grew 7.5% year over year to $9.63 billion and beat the consensus mark of $9.61 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 a well-diversified 49 stocks in its basket. About 46.5% 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 $518.8 million in its asset base and trades in a good average daily volume of about 861,000 shares. The product has an expense ratio of 0.35% and a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Insurance ETFs At 52-Week Highs: More Gains Ahead?).
iShares U.S. Insurance ETF (IAK - Free Report)
With AUM of $581.8 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 56 securities in its basket with a double-digit concentration on the top two firms.
Property & casualty insurance accounts for the largest share at 57.3%, 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 39 bps in annual fees and trades in an average daily volume of 58,000 shares per day. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.