Insurer Results Were Mixed Bag

Earnings were generally in line for the insurers in the second quarter, but there were a few causes for concern about the second half.
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) -- Earnings were generally in line for the insurers in the second quarter, but there were a few causes for concern about the second half.

One of the warning flares that went up came from

Hartford Financial Services

(HIG) - Get Report

, which missed Wall Street profit expectations by 76%, according to

Thomson Reuters

, and substantially lowered its outlook for rest of the year, saying it now sees core earnings of $2.10 to $2.30 a share, down from a prior view of $2.70 to $3 a share.

The firm cited a number of factors, including an expectation for its property and casualty catastrophe ratio to rise to a range of 4.75% to 5.25% from its previous prediction of 3% to 3.5% in March, and a boost in estimated pre-tax underwriting losses to $206 million from $160 million at the end of the first quarter.

State Auto Financial Group

(STFC) - Get Report

also had a rough quarter. It reported storm losses of $57.5 million, and turned in a wider than anticipated loss for the June period. On Tuesday it said it's agreed to sell its non-standard auto insurance unit, saying the business is "no longer a good strategic fit."

On the positive side of the ledger, big names like


(AFL) - Get Report



(ALL) - Get Report



(MET) - Get Report

, and

Prudential Financial

(PRU) - Get Report

all topped Wall Street expectations for the quarter by varying degrees.

Ameriprise Financial

(AMP) - Get Report

was a standout performer, and its stock seen the benefit. The company's second-quarter profit more than doubled on a year-over-year basis to $259 million, or 98 cents a share, as its bottom line got a lift from its acquisition of Columbia Management, the long-term asset management business of

Bank of America

(BAC) - Get Report

. The stock has leapt nearly 16% since July 28, the day before the report was released.

Edward Shields of Sandler O'Neill gave the industry overall a mixed review on the quarter during a phone interview with


, while singling out Ameriprise for praise and offering

Genworth Financial

(GNW) - Get Report

as a name at the other end of the spectrum.

"Genworth was hurt by its U.S. mortgage insurance operation," Shields says, adding that pricing on term-life insurance products was another "major problem" for the company. Genworth missed Wall Street expectations by 15% in the second quarter, and its stock is off more than 18% since.

Of the majority of publicly traded insurance companies, Shields says: "Everyone else was in between."

Steven Schwartz of

Raymond James

says the companies he believes will do well in the third and fourth quarters are

Reinsurance Group of America

(RGA) - Get Report

, Aflac, and

American Equity Investment Life

(AEL) - Get Report


For problems in the sector, Schwartz flagged



, which fell short of Wall Street expectations in the second quarter as profits fell 24% year-over-year.

"The issue was that its interest rates were low and assets and liability mismatched," Schwartz told

The Street

about Symetra.

In the health care insurance sector, the results were generally positive, according to

Argus Research

analyst David Toung, although the impact of upcoming regulatory changes remains a concern.

Within the health care group, he expects that


(UNH) - Get Report


Cigna Corp.

(CI) - Get Report

should be the least affected by the changes in 2011 because both have diverse businesses.

Toung thinks names like








(HUM) - Get Report

could struggle.

"There is a lot of uncertainty about 2011 due to other mandates

that insurers will have to meet," Toung says. "Individual and small group businesses could be affected next year in terms of their ability to raise rates."

As a group, the insurers could be ripe for a pullback. Year-to-date, the

SPDR KBW Insurance ETF

(KIE) - Get Report

, which tracks the bigger names in the industry, is up about 11%, compared to a gain of just 2% for the

Dow Jones Industrial Average

. The question now is whether growth in the second half be enough to support further appreciation in the second half.


Written by Maria Woehr in New York