Insurance ETFs Looking Good Post Q2 Earnings

The insurance industry has performed well this reporting cycle with robust earnings from leading players. Prominent players such as MetLife MET, Chubb Corp CB and Allstate ALL surpassed earnings and revenue estimates. While American International AIG and Travelers TRV missed earnings estimates, Aflac AFL lagged revenue estimates. Prudential Financial PRU missed on both fronts (see: all the Financial ETFs here).

Insurance Earnings in Focus

MetLife, the U.S. life insurance behemoth, reported earnings of $1.30 per share, which beat the Zacks Consensus Estimate by 13 cents and improved 25% from the year-ago quarter. Revenues climbed 20.7% year over year to $21.22 billion and were well above estimates of $15.79 billion. PRU, the second-largest U.S. life insurer, missed both earnings and revenue estimates. Earnings per share of $3.01 were well below the Zacks Consensus Estimate of $3.08 but 44% higher than the year-ago earnings. Revenues of $13.04 billion also fell short of the estimated $14.19 billion though it rose 0.1% year over year.

One of the leading property and casualty insurers, Chubb outpaced the Zacks Consensus Estimate on both the top and the bottom lines by $916 million and 5 cents, respectively. Another property and casualty insurer, Allstate also topped the Zacks Consensus Estimate on earnings and revenues by 31.03% and 21.31%, respectively. On a year-over-year basis, its earnings increased 37.7% while revenues grew 2.9%.

AIG, one of the largest commercial insurers in the United States and Canada, missed earnings estimates by 11.76%. Earnings per share of $1.07 reported by Aflac, a seller of supplement health insurance, trumped the Zacks Consensus Estimate by 9.18% and increased 15.2% from the year-ago quarter. Though revenues rose 3.7% year over year to $5.59 billion. it fell short of estimates by 1.86% (read: Mid-Cap ETFs to Profit From Earnings Growth Amid Trade Woes).

Personal property and casualty insurer, Travelers posted earnings per share of $1.81, missing the Zacks Consensus Estimate by 62 cents and declining 5.7% year over year. Revenues grew 4.1% year over year to $7.44 billion and were ahead of the estimated $7.35 billion.

ETFs in Focus

The Q2 earnings had a positive impact on insurance ETFs that saw smooth trading over the past month. SPDR S&P Insurance ETF KIE and iShares U.S. Insurance ETF IAK gained more than 3% each. Both the funds have a Zacks ETF Rank #3 (Hold). Below, we have highlighted them in detail.

KIE

This fund follows the S&P Insurance Select Industry Index, holding 50 stocks in its basket. Each of the in-focus firms accounts for around 2% share. About 44.1% of the portfolio is allocated to the property and casualty insurance, while life & health insurance accounts for 26% share. The ETF has managed $775 million in its asset base and trades in a good average daily volume of about 406,000 shares. The product has an expense ratio of 0.35% (read: 5 Safe and Sound ETF Strategies for 2H).

IAK

With AUM of $114.7 million, this product tracks the Dow Jones U.S. Select Insurance Index and charges 43 bps in annual fees. Volume is light, trading in roughly 16000 shares per day. In total, the fund holds 63 securities in its basket with the in-focus seven firms occupying the top eight positions and collectively making up 44% of the assets. Here also, property & casualty insurance accounts for the largest share at 47.1%, while life & health insurance and multiline insurance round off the top three with a double-digit exposure each.
 

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