NEW YORK (
) -- 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
, which missed Wall Street profit expectations by 76%, according to
, 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
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
all topped Wall Street expectations for the quarter by varying degrees.
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
. 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
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
says the companies he believes will do well in the third and fourth quarters are
Reinsurance Group of America
, Aflac, and
American Equity Investment Life
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
In the health care insurance sector, the results were generally positive, according to
analyst David Toung, although the impact of upcoming regulatory changes remains a concern.
Within the health care group, he expects that
should be the least affected by the changes in 2011 because both have diverse businesses.
Toung thinks names like
"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
, 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