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Here's How Insurance ETFs Are Placed Post Q1 Earnings

The insurance sector is among the prime beneficiaries of higher rates for a longer period. This is because the sector players are able to earn higher returns on their investment portfolio of longer-duration bonds. However, these firms incur losses as the value of longer-duration bonds goes down with a rise in interest rates. Nevertheless, since insurance companies have long-term investment horizons, they can hold investments until maturity, and hence, no actual losses are realized.

Additionally, decent earnings reports have helped the sector to survive the market rout seen last month. SPDR S&P Insurance ETF KIE and iShares U.S. Insurance ETF IAK are down about just 0.6% each over the past month, while Invesco KBW Property & Casualty Insurance ETF KBWP is relatively flat.

Insurance Earnings in Focus

The U.S. life insurance behemoth MetLife MET matched earnings estimates but missed revenue estimates. MetLife reported earnings of $1.83 per share, which were on par with the Zacks Consensus Estimate and improved 20.4% from the year-ago quarter. Revenues climbed 5.5% year over year to $17 billion and were below the consensus estimate of $17.69 billion. The second-largest U.S. life insurer Prudential Financial PRU missed on earnings but beat estimates on revenues. Earnings per share of $3.12 lagged the Zacks Consensus Estimate of $3.16 but increased 15.5% from the year-ago earnings. Revenues grew 44.8% year over year to $21.70 billion and edged past the consensus mark of $14.78 billion.

Chubb Corp. CB, one of the leading property and casualty insurers, surpassed the Zacks Consensus Estimate for earnings per share by 12 cents and topped the revenue estimate by $433 million. Earnings per share improved 22.7% year over year. Another property and casualty insurer, Allstate ALL posted an earnings per share of $5.13, surpassing the Zacks Consensus Estimate of $4.11. The company had reported a loss of $1.30 per share in the year-ago quarter. Revenues grew 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, a seller of supplemental health insurance, trumped the Zacks Consensus Estimate by 8 cents and improved from the year-ago earnings of $1.55. Revenues grew 13.3% year over year to $5.4 billion and beat the consensus mark of $5.3 billion (see: all the Financial ETFs here).

Personal property and casualty insurer Travelers TRV posted earnings per share of $4.69, missing the Zacks Consensus Estimate by 6 cents but improving 14.1% from the year-ago earnings. Revenues grew 15.3% year over year to $11.2 billion and edged past the consensus mark of $11.9 billion.

ETFs in Focus

SPDR S&P Insurance ETF (KIE)

SPDR S&P Insurance ETF follows the S&P Insurance Select Industry Index, holding well-diversified 48 stocks in its basket. About 50% of the portfolio is allocated to property and casualty insurance, while life & health insurance and insurance brokers round off the next two spots with double-digit exposure. SPDR S&P Insurance ETF has managed $715.6 million in its asset base and charges 35 bps in annual fees. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares U.S. Insurance ETF (IAK)

With AUM of $638.7 million, iShares U.S. Insurance ETF offers exposure to U.S. companies that provide life, property and casualty, and full-line insurance. It tracks the Dow Jones U.S. Select Insurance Index and holds 54 securities in its basket with a double-digit concentration on the top two firms. Property & casualty insurance accounts for the largest share at 69.6%, while life & health insurance rounds off the next spot with double-digit exposure. iShares U.S. Insurance ETF charges 40 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

Invesco KBW Property & Casualty Insurance ETF (KBWP)

Invesco KBW Property & Casualty Insurance ETF provides exposure to 25 companies primarily engaged in U.S. property and casualty insurance activities. It follows the KBW Nasdaq Property & Casualty Index and is concentrated on the top five firms that make up about 8% share each. 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 Market-Beating Sector ETFs of Q1).

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The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report

Chubb Limited (CB) : Free Stock Analysis Report

MetLife, Inc. (MET) : Free Stock Analysis Report

Prudential Financial, Inc. (PRU) : Free Stock Analysis Report

Aflac Incorporated (AFL) : Free Stock Analysis Report

The Allstate Corporation (ALL) : Free Stock Analysis Report

iShares U.S. Insurance ETF (IAK): ETF Research Reports

SPDR S&P Insurance ETF (KIE): ETF Research Reports

Invesco KBW Property & Casualty Insurance ETF (KBWP): ETF Research Reports

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Zacks Investment Research