Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Cyril Tuohy
Major life insurers are delivering windfalls in the third quarter as companies rejiggered their product lineup and capitalized on the sale of fee-income products. Analysts with Moody’s Investors Services are looking for the industry to deliver earnings growth in the “low single-digit range.” Here is a wrap up of what some of the largest carriers have reported.
Principal Financial Group reported net income of $245.7 million, an increase of 31 percent over the year-ago period. Net income per diluted share was $0.82 compared to $0.63 per share in the year-ago quarter, the company reported.
Revenues were $2.3 billion, a decrease of 12 percent compared to the year-ago period, the company also said. Adjusting for a single premium sale last year, revenues in the third quarter were up 9 percent, the company said.
Higher profits were due to the company’s expansion strategy in foreign markets, most notably in Chile, where Principal has now absorbed the pension fund Cuprum and several other acquisitions since 2008, the company added.
“The seven strategic acquisitions we have made since the financial crisis are now contributing to our bottom line results and position us well for the future,” Larry D. Zimpelman, Principal’s chairman, president and chief executive officer, said in a statement.
Terry Lillis, senior vice president and chief financial officer, said the company’s fee-based business was giving it “greater financial flexibility in these challenging times.” Fee-based business isn’t sensitive to interest rates, which ticked upward in July before coming back down in late September.
Protective Life Insurance, seller of life, annuities and extended warranties and disability insurance, reported net income of $93.1 million, a 53 percent increase over the year-ago period.
Net income per diluted share was $1.15 compared to $0.73 per share in the year-ago period, the company said.
Third quarter operating income was $121.2 million, an increase of 28 percent over the year-ago period, the company added.
The company’s sales, capital and earnings plans are “on track” despite low interest rates, an “unsettled regulatory environment” and tough competition, John D. Johns, chairman, president and chief executive officer, said in a statement.
“We are particularly pleased to have the MONY transaction closed and expect this acquisition to be immediately accretive to our bottom line in the fourth quarter,” he said. Protective Life announced in April that it would buy MONY for $1.06 billion.
Protective Life booked record annuities sales of $50.8 million in the third quarter, up from $9.4 million in the year-ago period, the company also said.
FBL Financial Group, the holding company for its primary subsidiary Farm Bureau Life, a major life insurer to families and businesses, reported net income of $27.1 million, or $1.04 per diluted common share, compared to $20.5 million, or $0.76 per diluted common share for the third quarter 2012.
Revenues were $173.5 million, an increase of 5 percent from $164.3 million in the year-ago quarter, the company added.
“These results reflect focus on our attractive Farm Bureau niche market and execution of our strategies of emphasizing life insurance sales and diligently managing spreads, expenses and excess capital,” said James P. Brannen, chief executive officer of FBL Financial Group.
Farm Bureau Life has recently overhauled its Farm Bureau Financial Services agency force by strengthening the new agent recruiting process from sourcing new agents, to selecting them and to training them.
Premiums and product charges totaled $76.2 million compared to $67.5 million in the third quarter of 2012, the company said. Interest-sensitive product charges increased 26 percent while traditional life insurance premiums rose 5 percent in the third quarter, the company also said.
Lincoln Financial Group reported third quarter net income of $337 million, or $1.23 per diluted share compared to net income of $428 million, or $1.51 per diluted share in the year-ago period.
Revenues were $3 billion, an increase from $2.96 billion in the year-ago period, the company also said.
Prior-year third quarter net income included $0.34 per diluted share of “additional unlocking benefit compared to the current quarter,” the company said.
Excluding that unlocking benefits, strong sales, “positive net flows,” a robust stock market, product repricing strategies, a business mix favoring higher return products and the sale of more expensive products helped the company deliver “another quarter of strong earnings growth,” president and chief executive officer Dennis R. Glass said in a statement.
The company also reported higher third quarter operating income in its annuity, retirement plan services and group protection business segments compared to the year-ago period. Income from operations in the company’s life insurance segment fell compared to the year-ago period.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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