AIG’s Stock Benefits from De-Risking of Balance Sheet
During the first quarter of 2015, AIG (AIG) took further actions to simplify its balance sheet and reduce risk.
KIE Crossed over Its Moving Averages on November 16, Trending Up
On November 23, shares of KIE closed at $72.38, above its 100-day, 50-day, and 20-day moving averages of $70.07, $70.06, and $71.73, respectively.
Background on ACE Limited
ACE is a leading international property and casualty insurer Headquartered in Zurich, Switzerland, ACE Limited offers commercial insurance products and service offerings such as risk management programs, loss control, and engineering and complex claims management. ACE Limited operates under five segments: North American Property and Casualty, North American Agriculture, Insurance–General Overseas, Global Reinsurance, and Life. North […]
AIG’s Commercial Insurance segment sees increased income
AIG’s top line dipped marginally in 4Q14 when compared to 4Q13, driven by disciplined sales and underwriting in casualty products in commercial P&C.
AIG improves its capital structure in 4Q14
AIG repurchased $6.5 billion of high coupon debt, replacing it with lower coupon debt to help AIG reduce its interest burden by ~$249 million per year.
AIG’s Commercial Insurance Business Improves in 1Q15
AIG (AIG) reported pre-tax operating income of $1.5 billion in 1Q15 for its commercial insurance business, as compared to $1.4 billion in 1Q14.
Progressive’s Commercial Lines Expand on Transport Sector in 3Q15
Progressive’s (PGR) Commercial Lines business revenues increased by 12.1% to $511 million in 3Q15, up from $456 million in 3Q14.
Gauging AIG’s stock performance and valuation
AIG’s shares appear to be currently undervalued despite the improvements in its operating and financial metrics.
Prudential Financial’s Valuations Rise, Still Trade at a Discount
Prudential Financial’s shares appear to be currently undervalued despite the improvements in its overall fundamentals.
Russia’s Plane Shot Down: Insurers Gain as Tensions Mount
Geopolitical tensions are mounting around the globe. Turkey shot down a Russian jet and Brussels remains on terrorism alert after the recent attacks in Paris.
Underwriting profit: First leg of the profit machine
An underwriting loss is not unusual for an insurance company. In a soft pricing environment, pricing of P&C products is low due to intense competition.
How cost structures and distribution channels impact profit
As customers use Internet-based aggregators to purchase insurance policies, insurers use online sales to interact directly with customers and reduce costs.
How investment income drives profit
The impact of interest rate movements is lower in the P&C segment, as their products can be repriced annually to keep in line with interest rate movements.
How key drivers impact insurance sales
For P&C insurers such as AIG and ACE, various mandatory requirements may drive sales of vehicle, workers’ compensation, and homeowners insurance.
Life insurance, P&C insurance, and reinsurance
P&C products have commoditized characteristics, resulting in sharp competition in the market and business cycles. AIG and ACE are key players in this space.
Making sense of an insurer’s liabilities
Policyholder liabilities, or policyholder reserves, represent the future claims that may arise for the pool of policies the insurer writes.
How valuation of insurance companies works
Financial market movements not only impact income from invested assets, but also the value of assets carried at fair value on an insurer’s balance sheet.
Why should you invest in insurance ETFs?
Insurance ETFs are poised to gain from industry growth. As interest rates improve, insurers should see better earnings due to higher investment returns.
Prudential Rewarded Shareholders with $930 Million in 3Q16
In 3Q16, the company returned $930.0 million to shareholders in the form of dividends and buybacks.
Prudential’s Valuations Are Weak on 2Q16 Operating Performance
Prudential’s stock has risen by 16% in the past six months, mainly due to expectations of improved fundamentals and higher investment and underwriting income.
Prudential Returns $700 Million in Payouts to Shareholders
Prudential Financial has been very consistent with dividend payouts to shareholders, which makes it a very strong prospect for long-term value investors.
Prudential Saw a Fall in 2Q16 on Lower US Sales
Prudential Financial (PRU) reported its 2Q16 earnings results on August 3, 2016. It reported adjusted operating income per share of $1.84 in the quarter.
Prudential Remains Prudent on Returning Capital to Shareholders
Prudential Financial (PRU) has been very consistent with dividend payouts to shareholders, which makes the stock a very strong prospect for long-term value investors.
Is Prudential Financial on the Road to Recovery in 2016?
In 1Q16, Prudential’s revenues fell 4.4% year-over-year to $11.3 billion. On a constant dollar basis, the company saw a decline in its international insurance and US retirement solutions businesses.
How Prudential Has Boosted Shareholder Payout
Since 2010, Prudential Financial (PRU) has returned approximately $10 billion to shareholders in the form of dividends and buybacks.
Prudential’s US Individual Division to Benefit from Lower Charges
Prudential Financial’s (PRU) US Individual Life and Group Insurance division saw a fall in operating income on lower group insurance revenues.
How’s AIG Doing in Its Simplification Process?
In 2015, AIG continued its simplification process for its balance sheet. In 2016, AIG is expected to strengthen its balance sheet with higher operating cash flows.
AIG’s Commercial Insurance: Will It Post a Profit in 1Q16?
AIG reported a pre-tax operating loss of $2.1 billion for its commercial insurance business in 4Q15 compared to a pre-tax operating income of $1.2 billion in 4Q14.
Strong Dollar Continues to Impact Prudential Internationally
On a constant dollar basis, Prudential Financial’s (PRU) International Insurance segment reported a 7% rise in revenues in 4Q15.
Could Icahn and Citi Be Suggesting an AIG Sale?
As AIG continues to decline, there are suggestions as well as speculation of an AIG sale. These speculations, although they seem unlikely to happen, can push AIG’s stock prices.
The Rationale behind AIG’s Heavy Repurchases
In 4Q15, AIG repurchased 53 million shares for an aggregate purchase price of $3.2 billion. It made additional repurchases of $2.5 billion through the end of February 11, 2016.
KIE Trades above Its Moving Averages: How Does SPY Compare?
KIE is the most liquid insurance ETF available in the country and is also among the cheapest, with an expense ratio of 0.35%.
Prudential Financial Expected to See Higher Profits in 1Q16
Prudential Financial’s (PRU) stock has risen by 7% in the past month and has fallen by 13% in the past quarter.
AIG Expected to Post Improved Operating Performance in 1Q16
AIG is expected to report EPS of $1.08 compared to operating loss per share of $1.10 in the December quarter. The company is looking to exit its hedge funds and continue stock buybacks.
The Effect of an Interest Rate Reversal on Insurance Companies
Interest rates are a key performance driver for life insurance companies. They affect their margins, hedging costs, and product sales.
What AIG Is Suggesting as an Alternative to Icahn’s Proposal
American International Group (AIG) has announced that it will spend $500 million on restructuring initiatives for organizational simplification, operational efficiency, and business rationalization.
AIG Plans Hedge Fund Exits and Buybacks amid 4Q15 Losses
With an operating loss per share of $1.10, AIG missed Wall Street analysts’ loss per share estimates of $0.91.
Prudential’s Valuations Fall amid Weakening Economy and Industry
Prudential is trading at 7.2x compared to the industry’s 8.8x earnings multiple for the same period. The stock is currently trading at multiyear low valuations.
Prudential Financial Could Post Higher Earnings in 4Q15
Prudential Financial’s stock is currently trading at a price-to-earnings multiple of 9.9x as compared to the 12x–14x ratios of other major insurance players.
McGraw Hill Financial Surged 2.6% as Financial Services Rebounded
McGraw Hill Financial (MHFI) traded at $100, which was above its moving average values.
Strong Operating Performance, Lower Valuations Expand ACE
ACE stock returned ~15% to investors over the past three months. It focuses on serving retail and corporate clients in insurance and reinsurance products.
Rising Interest Rates, Banks, and Insurance Companies
Banking stocks are expected to benefit from higher interest rates, but not immediately. Also, rising interest rates would be countered by higher existing liquidity.
KIE Is Trending Upward after Crossing Its Moving Averages
On November 25, 2015, KIE closed at $72.23, above its 100-day, 50-day, and 20-day moving averages of $70.07, $70.06, and $71.73, respectively.
AIG’s Balance Sheet Stayed Strong with Moderate Leverage in 3Q15
AIG’s leverage was on the lower side of the target range, according to its management. AIG’s operating return on equity stood at 2.9% for 3Q15.
AIG’s Commercial Insurance Was Impacted by China’s Business
American International Group reported pre-tax operating income of $815 million for its commercial insurance business in 3Q15.
Prudential’s International Insurance Falls on Strong Dollar
Prudential Financial’s international insurance segment reported a fall in its adjusted operating income to $812 million, compared to $845 million in 3Q14.
Prudential Financial Sees Lower Underwriting and Benefits
Prudential Financial reported its 3Q15 earnings on November 4. It missed Wall Street analysts’ adjusted operating income estimates of $2.42 per share.
The Hartford Capital Appreciation Fund: What You Need to know
The top invested sectors of the Hartford Capital Appreciation – Class A fund are information technology, healthcare, and consumer discretionary.
ACE Life Segment Fell on Lower 3Q15 Accident and Health Business
ACE’s Life reinsurance business also fell, reflecting the run-off of the company’s variable annuity reinsurance business.
ACE Global Reinsurance Benefited from Lower Claims in 3Q15
ACE’s (ACE) Global Reinsurance segment reported a decline in net premiums written of 11.5% or 9.5% on a constant dollar basis.
How Progressive Commands Premium Valuations on Higher Margins
Progressive (PGR) reported 3Q15 earnings per share of $0.47, a 6% decrease over the third quarter of 2015.
Why Progressive’s Stock Price Rose on 3Q15 Earnings
Progressive (PGR) reported its third-quarter earnings on October 16. It reported net income of $278 million for the quarter, down 6%.
Prudential Financial’s 2Q15 Earnings Beat Estimates
Prudential Financial’s 2Q15 revenue rose by 12% year-over-year to $12.5 billion, exceeding consensus estimates of $11.2 billion. Its net income was $1.4 billion, up by 29% compared with 2Q14.
AIG’s Stock Benefits from De-Risking Its Balance Sheet
During 2Q15, AIG worked to simplify its balance sheet and reduce risk. Its exposure to super senior corporate debt and collateralized loan obligations was reduced to zero, compared with $2.5 billion as of December 31, 2014.
AIG’s Balance Sheet Remains Strong with Moderate Leverage
AIG’s leverage was on the lower side of the target range, and its operating return on equity stood at 9.3% for 2Q15. Normalized return on equity was at 6.7%.
AIG Rewards Shareholders through Dividends and Repurchases
AIG declared an increase of 124% in its quarterly dividend to $0.28 per share, translating into an annualized dividend yield of 1.80%.
AIG’s 2Q15 Earnings Top Estimates Driven by Investments
AIG reported its 2Q15 earnings on August 3. AIG posted earnings per share of $1.39, beating estimates of $1.22.
How ACE Shareholders Will Benefit from Chubb Acquisition
Accretion of earnings per share ACE (ACE) will benefit immediately from the transaction with Chubb (CB). The acquisition will be accretive to the company’s per-share earnings and book value per share. Accretion to EPS (earnings per share) will be in the double digits, and there will be accretion to ROE (return on equity) by the end of […]
ACE and Chubb Possess Complementary Strengths
ACE has substantial international operations, with a presence in 54 countries. In contrast, Chubb has a more US-centric model.
Parsing the Chubb–ACE MAE Clause, Part 2
Pretty much anything that has a material adverse effect on the company will be considered a MAE, but there are exceptions to that rule.
Background on Chubb
Chubb’s Property and Casualty Group consists of several domestic and international subsidiaries. It offers personal insurance, standard commercial insurance, and specialty commercial insurance.
What Is the Rationale for the ACE–Chubb Merger?
The biggest rationale for the ACE–Chubb merger is the potential for cost-cutting. By combining with Chubb, ACE Limited is creating a leading player in property and casualty insurance.
Basics of the ACE–Chubb Merger
ACE Limited is buying Chubb in a cash and stock merger worth ~$28 billion. The Chubb merger is expected to close in the first quarter of 2016.
ACE–Chubb: The US Insurance Industry’s Biggest-Ever Acquisition
The ACE–Chubb deal will create the second-largest listed property and casualty insurer, by market capitalization, in the US.
ACE to Acquire Chubb: The Strength of a Healthy Balance Sheet
With the acquisition of Chubb, ACE will be better positioned to compete with rivals including Warren Buffett’s Berkshire Hathaway and Allstate, among others.
Ace Merges with Chubb to Create Insurance Giant
Shares of Chubb Group (CB) surged by 26.12% on July 1 on news of an acquisition by global property giant Ace (ACE).
Insurance Stocks on Fire Last Wednesday
The Financial Sector Select SPDR ETF (XLF) was up 1.52% during the trading session ending on July 1, largely driven by insurance stocks, which rose 2.7%.
AIG Advances on Risk Reduction and Balance Sheet Simplification
As of June 2015, AIG’s stock has appreciated by about 12% over the past six months and by 11% over the last year.
February 2015 Catastrophe Losses
February 2015 catastrophe losses came about due to winter weather, floods, and storms.
A Closer Look at the Costliest Catastrophes
Hurricanes Sandy, Ike, and Andrew remain near the top of the list of the costliest catastrophes in terms of insured losses.
Making Sense of Economic and Insured Losses
Insured losses are the ones that impact the profitability of insurance companies.
How Catastrophes Impact a P&C Insurer’s Combined Ratio
The percentage points for catastrophe losses in the combined ratio have increased in recent years.
Catastrophe Losses and Profitability of P&C Insurers
Catastrophe losses are one of the key risks to P&C insurers because these losses negatively impact profitability and capital.
AIG’s commercial P&C business sees improved underwriting results
The combined ratio of AIG’s commercial P&C business improved in 4Q14, when compared with the 4Q13 ratio.
Personal Lines Rates Were Up 2% in February
The US personal lines businesses have seen improved profitability from the 2011 levels.
How Underwriting Cycles Impact the Top Line and the Bottom Line
The underwriting cycle moves between hard and soft market conditions, which have different sets of characteristics that determine the profitability of the insurance industry.
The Underwriting Profits of a Property and Casualty Insurer
The property and casualty insurance business is cyclical in nature. The underwriting cycle alternates between two phases: the hard market and the soft market.
Reserve strengthening impacted AIG’s earnings negatively in 4Q14
In 4Q14, AIG’s operating income after tax was impacted by a charge of more than $500 million for reserve strengthening and other estimate changes.
AIG delivers on its financial objectives
AIG’s financial objectives focus on profitability improvement, expense management, and balance sheet growth, achieving a sustainable ROE.
AIG’s net income down in 4Q14, insurance operations earnings flat
AIG reported a net income dip from $2.0 billion in 4Q13 to $655 million in 4Q14, due to an after-tax charge of ~$800 million for debt retirement activities.
MetLife’s emerging market strategy fostering growth
From 2011–2013, MetLife’s emerging market businesses saw 11% cumulative annual growth rate in operating earnings. EMEA’s growth rate was 16.1%.
MetLife is the largest player in Latin America
MetLife plans to grow its retail and group business in Latin America, capitalizing on the growing middle class, affluent class, and corporate needs.