Led by AIG, Rival Insurers Report Gains -- WSJ
November 03 2016 - 3:02AM
Dow Jones News
By Leslie Scism, Nicole Friedman and Tess Stynes
American International Group Inc. swung to a quarterly profit
but suffered a setback in its turnaround effort for its
property-casualty insurance unit, while four other big insurers
posted stronger-than-expected operating results for the third
quarter.
Analysts at Evercore ISI dubbed Wednesday as "Insurance Super
Day" with life insurers MetLife Inc., Prudential Financial Inc. and
Lincoln National Corp., along with car and home insurer Allstate
Corp. and AIG, reporting results after the closing bell.
The improved results at the three life insurers come despite a
tough environment for sales of many of their interest-rate-related
products. The property casualty insurers, meanwhile, reported
higher catastrophe losses from storms versus an unusually placid
hurricane season the prior year.
AIG's shares tumbled 3.4% after hours, while Allstate gained
4.1% and MetLife added 2.5%. The others were unchanged.
MetLife, in one of its last few quarters as the U.S.'s biggest
life insurer by assets, said its results were buoyed by a 6%
increase in net investment income to $5.2 billion. That gain was
driven by strong performance of private-equity holdings and the
sale of a real-estate joint venture interest. MetLife is spinning
off part of its U.S. retail life-insurance operations into a new
company as early as the first quarter.
Prudential, which is set to succeed MetLife as the biggest life
insurer, highlighted strength in its international business, along
with new business in its retirement and asset management
divisions.
Smaller peer Lincoln National Corp. said its operating earnings
for the quarter marked a record, citing expense and capital
management as factors. And Allstate reported higher
property-liability insurance premiums but a big increase in
catastrophe losses.
"There's been a lot of different storms," Allstate Chief
Executive Tom Wilson said in an interview. But he predicted the
company's losses due to Hurricane Matthew in October will likely be
below its competitors' as Allstate has a lower market share in
Florida.
At AIG, results fell below the expectation of Wall Street
analysts, though they did top the poor performance of the
year-earlier quarter, when the company took a restructuring
charge.
"There's volatility here and we expect it going forward, but
there is some underlying improvement toward AIG's previously
outlined strategic goals and we're encouraged to see that," said
Rob Haines, a senior insurance analyst with credit-research firm
CreditSights.
AIG posted operating income of $1.1 billion, or $1 a share, up
from $691 million, or 52 cents a share, the year before when
results fueled activism from billionaire investors Carl Icahn and
John Paulson. Mr. Paulson and a deputy to Mr. Icahn were added to
AIG's board in May. Analysts expected $1.21 a share in operating
earnings.
The latest results were hurt by a charge of $404 million, or 37
cents a share, to recognize losses in a portfolio of "structured
settlements" that the company has designated for sale as part of
its effort to streamline and return more capital to
shareholders.
AIG's setback was a $306 million strengthening of reserves for
policies sold to U.S. businesses in years past. The reserve boost
drove AIG's "loss ratio" -- which reflects the percentage of each
premium dollar that goes to pay claims and related expenses -- to
77.7%, up from 72.8% the year before. It comes on top of a $3.6
billion pretax strengthening in last year's fourth quarter, as AIG
sought then to get reserves in shape.
AIG highlighted that the quarter included several divestitures
and a reinsurance pact, mostly to better focus AIG, and
cost-cutting is running ahead of plan, with expenses down 12%.
As part of its turnaround, AIG is committed to returning at
least $25 billion to shareholders through buybacks and dividends in
2016 and 2017. It said it has returned $10.8 billion to
shareholders year-to-date through Nov. 2. AIG's board added $3
billion to its buyback plan.
Results By Company
-- At MetLife, operating earnings more than doubled to $1.4 billion, or
$1.28 a share, easily beating the $1.14 expected by analysts. Its net
results, however, included $683 million in mostly mark-to-market
derivative losses reflecting changes in interest rates, equity markets
and foreign currencies, along with a $223 million write-down tied to
Brighthouse Financial, the new name for its life-insurance operations.
-- Prudential's operating earnings, meanwhile, rose 7.3% to $1.19 billion,
or $2.66 a share, above Street expectations for $2.49.
-- Lincoln Financial's operating earnings rose 53% to $441 million, or $1.89
a share. Revenue decreased 5.1% to $3.53 billion. Analysts expected a
per-share operating profit of $1.62 and revenue of $3.44 billion.
Lincoln's board also approved a 16% increase in the company's quarterly
dividend.
-- At Allstate, operating earnings fell 22% to $474 million, or $1.26 a
share. Premiums written increased 2.1% to $8.31 billion. Analysts
expected a per-share operating profit of $1.25 and net premiums written
of $8.35 billion. Pretax net catastrophe losses increased 78% to $481
million, mostly from wind and hail storms.
Corrections & Amplifications: Prudential's operating
earnings rose to $1.19 billion. An earlier version of this article
misstated the figure. (Nov. 2, 2016)
Write to Leslie Scism at leslie.scism@wsj.com, Nicole Friedman
at nicole.friedman@wsj.com and Tess Stynes at
tess.stynes@wsj.com
(END) Dow Jones Newswires
November 03, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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