A majority of the largest publicly traded life insurers in the U.S. are expected to see earnings improve year over year in the third quarter, but slide sequentially, as the sector continues to grapple with the effects of COVID-19 and changing inflation and interest rate environments.
Only two of the 15 largest life insurers are expected to see EPS rise on a sequential basis, according to an S&P Global Market Intelligence analysis of sell-side analyst estimates. Year-over-year increases, however, are anticipated for 10 of those companies.
The revenues picture is a bit more mixed as four of the life insurance companies are projected to log sequential increases, while eight are forecast to record year-over-year gains.
While interest rates have increased to some degree lately, they still remain below long-term historical averages, CFRA analyst Cathy Seifert said, making asset and liability management challenging for the sector. CFRA's fundamental outlook on the life and health insurance space is neutral.
Piper Sandler analyst John Barnidge in an interview said he anticipates mortality experience to be sequentially worse, while alternative investment income remains a tailwind for the sector. Expectations for risk transfers and mortality expectations in life and benefits businesses will be a common theme discussed during third-quarter calls, he added.
Andrew Sullivan, executive vice president and head of U.S. businesses at Prudential Financial Inc., during a second-quarter call said mortality impacts from COVID-19 persisted in the group insurance and life business during the period. While that impact is expected to continue for some time, Sullivan said the effects had started to diminish somewhat as the third quarter began.
Prudential Financial is projected to see sequential and year-over-year declines in EPS in the third quarter, but revenue increases over those same time periods.