ETFs
Here’s How Insurance ETFs Are Placed After Q1 Results – May 9, 2024
The insurance sector is one of the main beneficiaries of higher rates over a longer period. This is because industry players are able to achieve higher returns on their investment portfolio comprised of longer duration bonds. However, these companies suffer losses as the value of longer-duration bonds declines with rising interest rates. However, since insurance companies have long-term investment horizons, they can hold their investments until maturity and hence no real losses are realized.
Additionally, decent earnings reports helped the sector survive the market rout seen last month. SPDR S&P Insurance ETF (KIE – Free report) and iShares US Insurance ETF (IAK – Free report) are down about 0.6% each over the past month, while Invesco KBW Property & Casualty Insurance ETF (KBWP – Free report) is relatively flat.
Focus on insurance income
The American life insurance giant MetLife (ENCOUNTER – Free report) matched the revenue estimates but missed the revenue estimates. MetLife reported earnings of $1.83 per share, which was in line with the Zacks Consensus Estimate and improved 20.4% from the year-ago quarter. Revenue climbed 5.5% year over year to $17 billion and was below the consensus estimate of $17.69 billion. The second largest American life insurer Prudential Financial (PRU – Free report) missed profits but beat revenue estimates. Earnings per share of $3.12 fell short of the Zacks Consensus Estimate of $3.16, but increased 15.5% from last year’s earnings. Revenue rose 44.8% year over year to $21.70 billion and surpassed the consensus mark of $14.78 billion.
Chubb Corp.CB – Free report), a leading property and casualty insurer, topped the Zacks Consensus Estimate for earnings per share by 12 cents and beat the revenue estimate by $433 million. Earnings per share improved 22.7% year over year. Another property insurer, Allstate (ALL – Free report) posted earnings per share of $5.13, beating the Zacks Consensus Estimate of $4.11. The company reported a loss of $1.30 per share in the year-ago quarter. Revenue rose 12% year over year to $15.40 billion, well above the consensus mark of $15.29 billion.
Earnings per share of $1.66 reported by Aflac (AFL – Free report), a seller of supplemental health insurance, beat the Zacks Consensus Estimate by 8 cents and improved from year-ago earnings of $1.55. Revenue rose 13.3% year over year to $5.4 billion, surpassing the consensus mark of $5.3 billion (see: all financial ETFs here).
Travelers’ property and liability insurer Travelers (VRT – Free report) posted earnings per share of $4.69, missing the Zacks Consensus Estimate by 6 cents but improving 14.1% from year-ago earnings. Revenue rose 15.3% year over year to $11.2 billion and surpassed the consensus mark of $11.9 billion.
Focus on ETFs
SPDR S&P Insurance ETF (KIE – Free report)
The SPDR S&P Insurance ETF tracks the S&P Insurance Select Industry Index, holding 48 well-diversified stocks in its basket. Around 50% of the portfolio is devoted to property and casualty insurance, while personal insurance and insurance brokers round out the next two spots with double-digit exposure. SPDR S&P Insurance ETF managed $715.6 million of its asset base and charges 35 basis points in annual fees. It has a Zacks ETF Rank #3 (Hold) with a Medium Risk Outlook.
iShares US Insurance ETF (IAK – Free report)
With assets under management of $638.7 million, the iShares US Insurance ETF provides exposure to U.S. companies that offer life, property and casualty insurance. It tracks the Dow Jones US Select Insurance Index and holds 54 stocks in its basket with a double-digit concentration on the top two companies. Property and liability insurance represents the largest share with 69.6%, while life and health insurance completes second place with double-digit exposure. The iShares US Insurance ETF charges 40 basis points in annual fees and has a Zacks ETF Rank #3 with a Medium Risk Outlook.
Invesco KBW Property & Casualty Insurance ETF (KBWP – Free report)
The Invesco KBW Property & Casualty Insurance ETF provides exposure to 25 companies primarily engaged in property and casualty insurance activities in the United States. It tracks the KBW Nasdaq Property & Casualty Index and focuses on the top five companies that each represent about 8% of the shares. The Invesco KBW Property & Casualty Insurance ETF has managed $317.9 million in its asset base and has an expense ratio of 0.35%. KBWP has a Zacks ETF Rank #3 with a Medium Risk Outlook (read: 5 Sector ETFs That Beat the Market in the First Quarter).
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