Second quarter earnings reports dominated the news from the world of life and annuity companies this week. Among the developments of note in the earnings reports was that second quarter was a good one for American Equity Life, which took advantage of two competitors who scaled back on their annuity offerings, allowing American Equity to gain market share.
The other development of note this week came from MetLife, which announced that the Financial Stability Oversight Council (FSOC) was expected to file a brief Friday opposing the company’s motion for summary judgement to dismiss the Systemically Important Financial Institution (SIFI) designation.
American Equity Investment Life Holding Co.
American Equity Investment Life Holding Co., a top seller of fixed index annuities, on Wednesday reported second quarter 2015 profit of $82.8 million, or $1.05 per diluted share, compared to profit of $36.7 million, or $0.46 per diluted share, in the year-ago period.
Revenue dropped 34 percent to $441 million, due mostly to changes in the market value of derivatives, the company also reported.
Operating income rose 32 percent to $50.9 million, or 64 cents per share, compared to operating income of $38.5 million, or 48 cents per share in the year-ago period. Four analysts surveyed by Zacks Investment Research were looking for 60 cents per share.
The company benefited from a changing competitive landscape in which a competitor withdrew an annuity from the market and another competitor scaled back its annuity sales.
Market share gains fueled annuity sales to a record $1.8 billion, a 73 percent increase over the year-ago period, and investment spreads also widened, the company also said.
“We are optimistic we will have a record year for sales but the first half surge may settle down somewhat,” CEO John Matovina said in a news release.
With several competitors increasing annuity payout rates, Matovina said the company was responding by adjusting its own payout factors to lifetime income benefit riders beginning Thursday. “Some factors will be lowered while others will be raised,” he said.
The company is planning to hire more operations personnel to handle the higher sales volume, he also said.
Unum Group, the long-term care, disability, life and voluntary benefits carrier, on Wednesday reported a second-quarter profit of $224.3 million, or 90 cents per diluted share, compared to a profit of $239.4 million, or 93 cents per diluted share in the year-ago period.
Analysts were looking for the company to earn a profit of 90 cents per share.
Operating revenue in the second quarter climbed to $2.7 billion from $2.6 billion in the year-ago period, the company also said.
“Our second quarter results remained solid,” President and CEO Richard P. McKenney said in a news release. “The favorable growth trends we have been experiencing continued into the second quarter with premium growth in our core segments continuing to show positive momentum.”
Unum’s U.S. group disability line of business saw second quarter operating income decline 16 percent to $61.2 million compared to the year-ago quarter. But premium income rose to $561 million, an increase of 7.1 percent over the year-ago period, the company reported.
Second quarter operating income for Unum’s group life and accidental death and dismemberment line was $52.5 million, a drop of 13.4 percent from the year-ago period, the company reported. Premium income rose 7.3 percent to $369.3 million on higher sales, the company also said.
The company’s Colonial Life subsidiary reported second quarter operating income of $77.6 million, an increase of 3.6 percent over the year-ago period, and premium income at Colonial Life rose 6 percent to $335.9 million, Unum also reported.
MetLife on Wednesday reported second quarter net income of $1 billion, or 92 cents per diluted share, compared with net income of $1.3 billion, or $1.17 per share diluted, in the year-ago period.
Second quarter net income dropped 22 percent after the company booked $593 million in after tax derivative losses due to rising interest rates and a weaker dollar, the insurer also reported.
Earnings, adjusted for nonrecurring costs, came to $1.56 per share beating analysts’ estimates of $1.47 per share.
Operating earnings in the second quarter were $1.8 billion, an increase of 11 percent from the year-ago period, the company said. Operating revenues were $17.3 billion, a 2.4 percent drop from $17.8 billion in the year-ago period, the company also said.
“MetLife delivered strong double-digit operating earnings growth in the second quarter,” Steven A. Kandarian, chairman, president and CEO of MetLife, said in a news release. “Investment margins remained healthy despite persistent low interest rates, and underwriting margins improved year over year for the fourth consecutive quarter.”
In a conference call with analysts, Kandarian also said that the Financial Stability Oversight Council (FSOC) was expected to file a brief Friday opposing the company’s motion for summary judgement with regard to a designation of the company as a Systemically Important Financial Institution, or SIFI.
The company will file a final reply to the FSOC brief Aug. 21.
“At this time, the judge has not informed us whether she will be holding an oral hearing. And the timing of a final decision is difficult to predict,” he said.
Designating MetLife as a SIFI affects the company’s capital position and reserving requirements.
Lincoln Financial Group
Second-quarter net income dropped 14 percent to $344 million, or $1.35 per diluted share, compared with $398 million, or $1.48 per share diluted in the year-ago period, Lincoln Financial Group reported Wednesday.
Second-quarter earnings, adjusted for investment costs, were $1.46 per common share. Analysts were looking for the company to deliver $1.54 per share.
Operating revenue climbed 4 percent to $3.4 billion from $3.3 billion in the year-ago period, the company also said.
“Significant improvement in group protection earnings and continued momentum in annuities largely offset abnormally high claims severity in Individual life,” Dennis R. Glass, president and CEO of Lincoln Financial Group, said in a news release.
Second quarter income from operation for the life insurance segment were $105 million compared to $148 million in the year-ago quarter, the company said.
Legal expenses cost the company 3 cents a share in the second quarter, the company also said.
Second quarter net income plunged 30 percent to $573 million from the year-ago period, as revenue dropped 9 percent to $5.2 billion compared with the year-ago quarter, Aflac reported Tuesday.
The company also reported second quarter net income of $1.32 per diluted share, a drop of 26 percent from the year-ago period.
Operating earnings in the second quarter were $651 million, compared with $757 million in the second quarter of 2014, the company also reported.
Second-quarter operating earnings, adjusted for investment costs, were $1.50 per share. The average estimate of a dozen analysts surveyed by Zacks Investment Research was for earnings of $1.52 per share.
Operating earnings included a charge of $10.5 million, or $.02 per diluted share, reflecting the write-off of some software development costs related to modernization activities at Aflac Japan, the company also said in a statement.
The weaker yen-dollar exchange rate decreased operating earnings, the company also said.
Torchmark reported Monday second quarter net income of $127.1 million, or $1 per share, down from $131 million or 98 cents per share in the year-ago quarter.
The company also reported net operating income of $1.05 per share compared with $1.02 per share in the year-ago period. Zacks Investment Research analysts were looking for net operating income of $1.07 per share.
Torchmark, a holding company specializing in life and supplemental health insurance for middle-income Americans, reported second-quarter revenue of $1.03 billion.
The holding company, sells insurance through direct response distribution channels and exclusive and independent agencies.
It owns the following brands: American Income Life, National Income Life, Globe Life, Liberty National, United American, First United American and Family Heritage Life.
Symetra Financial on Thursday reported second quarter net income of $31.2 million, or 27 cents per common share diluted, compared with net income of $71.5 million, or 62 cents per common share diluted in the year-ago period.
Operating income, adjusted for lower investment income, was $49.6 billion, or 43 cents per share, compared with $55.3 million, or 48 cents per share in the year-ago period. Five analysts surveyed by Zacks Investment Research were looking for the company to deliver operating income of 45 cents per share.
Tom Marra, Symetra president and CEO, said in a statement that the company’s fundamentals were solid with rising premiums in the company’s benefits segment and loss ratios within management’s target range.
“We achieved strong top-line growth in both the Individual Life Division and the Retirement Division —which posted a record $1 billion sales quarter,” Marra said in a news release.
The company’s board of directors approved a special dividend of 50 cents per share payable on Aug. 28.
Second quarter net realized losses were $28.6 million, compared with net gains of $25.3 million in the year-ago period.
Losses were due to alternative investments, higher amortization of tax credit investments, and interest expenses, the company said. In addition, the company booked losses on the sale of bonds compared to gain on the sale of bonds in the year-ago period.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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