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Solid Q4 Earnings Drive Insurance ETFs Outlook

Sweta Killa
Updated
Asbury Automotive (ABG) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

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

Insurance Earnings in Focus

MetLife, the U.S. life insurer behemoth, reported robust earnings of $1.11 per share, which beat the Zacks Consensus Estimate by a penny and increased 3% from the year-ago quarter. Revenues increased 8.2% year over year to $15.79 billion but were well below estimates of $15.89 billion. PRU, the second-largest U.S. life insurer, also beat earnings estimates by 9 cents. Earnings improved 9.3% year over year. Revenues increased 13.6% year over year to $15.3 billion, surpassing the consensus estimate of $12.87 billion.

One of the leading property and casualty insurers, Chubb, outpaced the Zacks Consensus Estimate on both the top and bottom lines by $750 million and 86 cents, respectively. Another property and casualty insurer, Allstate, also topped the Zacks Consensus Estimate on earnings and revenues by 39.3% and 15.3%, respectively. On a year-over-year basis, earnings declined 3.7% while revenues grew 4.7%.

AIG, one of the largest commercial insurers in the United States and Canada, missed earnings estimates by 26.9%. Earnings per share of $1.60 reported by Aflac, a seller of supplement health insurance, trumped the Zacks Consensus Estimate by 3.2% and increased 11.1% from the year-ago quarter. However, revenues fell 10% year over year to $5.4 billion and fell short of estimates by 0.3%.

Personal property and casualty insurer Travelers posted earnings per share of $2.26, easily crushing the Zacks Consensus Estimate by 76 cents but declining 28.8% year over year. Revenues grew 3.6% year over year to $7.5 billion and were ahead of the estimated $7.1 billion (read: 6 Dow Stocks That Should Drive These ETFs Higher).

ETFs in Focus

Although insurance ETFs have witnessed terrible trading over the past month due to global market rout, robust Q4 results reinvigorated confidence in the space, compelling investors to cash in on beaten down prices. SPDR S&P Insurance ETF KIE is down 3.7% while iShares U.S. Insurance ETF IAK shed 5%. KIE has a Zacks ETF Rank #4 (Sell) while IAK has 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 each. About 40.7% of the portfolio is allocated to the property and casualty insurance, while life & health insurance accounts for 24.8% share. The ETF has managed $737.2 million in its asset base and trades in a good average daily volume of about 408,000 shares. The product has an expense ratio of 0.35% (read: Short These Sector ETFs on Rising Rate Concerns).

IAK

With AUM of $176.9 million, this product tracks the Dow Jones U.S. Select Insurance Index and charges 44 bps in annual fees. Volume is light, trading in roughly 13,000 shares per day. In total, the fund holds 63 securities in its basket with the in-focus seven firms occupying the top seven positions and collectively making up for 46% of the assets. Here also, property & casualty insurance accounts for the largest share at 45.1%, while life & health insurance and multiline insurance round off the top three with a double-digit exposure each.

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ISHARS-US INSUR (IAK): ETF Research Reports
 
SPDR-KBW INSUR (KIE): ETF Research Reports
 
Aflac Incorporated (AFL) : Free Stock Analysis Report
 
American International Group, Inc. (AIG) : Free Stock Analysis Report
 
MetLife, Inc. (MET) : Free Stock Analysis Report
 
Prudential Financial, Inc. (PRU) : Free Stock Analysis Report
 
The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
 
D/B/A Chubb Limited New (CB) : Free Stock Analysis Report
 
Allstate Corporation (The) (ALL) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
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