US life insurers experienced a relatively stable second quarter, showing higher year-over-year earnings and unveiling strategic updates for select companies, according to S&P Global Market Intelligence.
Most leading publicly traded US life insurers reported improved earnings, matching analysts’ predictions of a strong second quarter for the sector.
US life insurers are expected to report stronger earnings
Earnings projections for the sector lean positive, with 10 of the top 15 publicly traded US life insurers for which analyst estimates are available expected to book year-over-year increases in earnings for the third quarter. Of the 15 insurers, 9 are projected to see earnings increase sequentially.
Revenue estimates for the group also skew toward growth, with more than half of the insurers for which analyst estimates are available expected to report stronger revenue figures on a year-over-year basis.
MetLife showed notable growth, posting $912 mn in net income, or $1.28 per share, more than double the $370 mn, or 48 cents per share, from the same period last year. Adjusted earnings rose to $1.63 bn, up from $1.49 bn.
Prudential Financial Inc. also reported positive results, with after-tax adjusted operating income of $1.23 bn, or $3.39 per share, up from $1.14 bn, or $3.09 per share. Net income reached $1.20 bn, or $3.28 per share, compared to $511 mn, or $1.38 per share, in the previous year.
US Life Insurers Strategic Moves
Prudential signaled interest in expanding its international business through mergers and acquisitions. Andrew Sullivan, head of international businesses, emphasized openness to M&A, though organic growth remains a priority.
MetLife continues investing in technology, with CEO Michel Khalaf highlighting its use of artificial intelligence to drive revenue and efficiency. The company has allocated $1 bn for growth and technology investments, which Khalaf believes sets MetLife apart in the industry.
In 2024, the life insurance sector is facing challenges regarding a fiduciary rule proposed by the US Labor Department.
This rule intends to redefine what constitutes investment advice under the Employee Retirement Income Security Act, aiming to reduce what are termed as “junk fees” in retirement product investments.
Equitable Holdings earned $500 mn in the second quarter from annuity sales through its partnership with BlackRock, which integrates annuity options into 401(k) plans (see BlackRock`s Global Macroeconomic Outlook). CEO Mark Pearson views this partnership as a key growth opportunity and is exploring similar deals with other asset managers.
Globe Life addressed allegations of misconduct and ongoing government inquiries during its earnings call. Co-CEO J. Matthew Darden stated that neither the US SEC nor the Department of Justice has filed any claims against the company.
Commercial Real Estate Exposure
Insurers also faced questions about their exposure to commercial real estate, particularly in the office sector. Executives reiterated that their portfolios remain stable, downplaying concerns.
Although life insurers are expected to see some losses, particularly in the office portion of their commercial mortgage portfolios, those losses are not expected to be material and the group is largely projected to weather CRE deterioration due to the diversified and stable nature of their investment portfolios.
Shares of many large US life insurers underperformed leading indexes through the third quarter in contrast to some of their smaller peers.
Voya Financial and Equitable assured analysts that their commercial real estate holdings are manageable. Voya CEO Matt Toms described it as a “story of resilience” and noted that the market is approaching a “clearing level” for the troubled sector.
US Life insurers’ significant capital and short-term liquidity make them unlikely to be forced sellers of real estate assets at distressed valuations, any commercial real estate losses are expected to remain within ratings sensitivities.
Commercial real estate has been a hot topic for life insurers to address this year and has contributed to many of the large US life insurers experiencing a decline in stock value year to date through the third quarter.
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AUTHOR: Hailey Ross – insurance reporter with S&P Global Market Intelligence’s Global Insurance team
