Majority of US life insurers' Q3 2024 earnings projected to be lower QOQ

Third-quarter 2024 earnings projections for the US life insurance sector show that a majority of insurers are expected to book worse earnings results than the second quarter but should report improved earnings on a year-over-year basis.

Of the 15 publicly traded US life insurers for which analyst estimates are available, nine are expected to book decreases in third-quarter earnings on a sequential basis, according to analyst estimates compiled by S&P Global Market Intelligence.

The same group of insurers is also expected to perform better year over year, with 12 insurers projected to have higher earnings in the third quarter of 2024 than the prior-year period.

Jackson Financial Inc. has the highest projected third-quarter normalized earnings-per-share estimate at $4.67, followed by Brighthouse Financial Inc. at $4.50.

'Weakening trends'

In a note, UBS analyst Brian Meredith said that "weakening trends" in life insurers' operating environment is partly why earnings estimates for the third quarter have been pushed lower.

"Notably, we expect another quarter of headwinds for variable investment income, which will be below long-term guidance," Meredith said.

On the flipside however, Meredith said that he expects that the favorable equity market performance over the third quarter should result in a tailwind to fee income for life insurers.

Meredith also expects to continue to see asset management focused-companies underperform while group and individual annuity writers as well as group benefit providers are projected to see more favorable results.

Piper Sandler analyst John Barnidge expressed similar sentiments in a note, pointing out that spread-focused companies have been challenged "by concerns about spread income, sales and actuarial assumption reviews."

As far as individual life insurers go, Barnidge favors Aflac Inc., saying that he expects an "earnings beat" for the company, particularly because its new first sector product that had good sales in the second quarter was only operational as of June. Thus the "real build" should be evident in the third quarter, Barnidge said.

Aflac has substantial operations in Japan where insurance related to an individual's life and death is called "first sector" insurance, the sales of which are restricted solely to life insurance companies.

Going into the third quarter, Meredith said he is feeling favorable toward MetLife Inc. as the insurer is "best positioned" to benefit from the productive group benefits environment.

Meredith also said he will be keeping an ear out for updates surrounding the Federal Reserve's decision to cut interest rates in the quarter, as well as the potential impact of further expected rate cuts.

"Insurers with notable commercial real estate portfolios could benefit if we hear improved sentiment regarding the outlooks for those portfolios," Meredith said.

Revenue gains projected

A majority of life insurers are also projected to book improved revenue results in the third quarter. Of the 15 life insurers in this analysis, only two insurers are expected to record weaker revenue numbers year over year, with CNO Financial Group Inc. expecting to see no change. On a sequential basis, four companies are projected to post lower revenues, with Brighthouse anticipated to have no change.

Metlife is likely to report the highest third-quarter revenue among the 15 life insurers in the analysis, with the mean revenue estimate for the company at $18.37 billion.

CNO meanwhile, is expected to post the lowest revenue among the group. The mean third-quarter revenue estimate for CNO is $950 million.