Strong equity markets in Q4 should propel earnings for life insurers (set to start this week), writes Credit Suisse's Tom Gallagher, particularly those with variable annuity and asset management/retirement exposure. MetLife (MET -0.6%), Prudential (PRU -0.5%), and Lincoln National (LNC -1.1%), of course, have been busily trying to reduce exposure to variable annuities after nearly being brought down by them in the financial crisis.
Deutshce's Yaron Kinar also strikes a bullish note, welcoming the big declines so far this year as a buying opportunity.
Hartford (HIG -0.6%) is expected to post EPS of $0.90 vs. $0.54 a year earlier, and guidance should "be supportive" of his 2014 estimate of $3.62, says Gallagher, who rates the stock at Outperform.
Principal Financial (PFG -0.9%) is expected to report $0.93 vs. $0.82 a year ago. Kinar expects a slowdown in buybacks to $23M. He rates the shares a Hold.
Aflac (AFL +0.5%) is expected to post $1.39, down from $1.48 a year ago. Gallagher's numbers are higher, but he rates the shares only at Neutral.
Capital returns at Ameriprise (AMP -0.6%) are estimated at $475M in Q4 - $375M in buybacks and $100M dividend - says Gallagher, rating the stock at Neutral.
Prudential (PRU -0.5%) - rated at Outperform by Gallagher - should report $2.33 vs. $1.69 a year ago.
MetLife (MET -0.6%) - rated a Buy by Kinar - may disappoint in the headline number thanks to a boosted share count due to the conversion of $1B in equity units. Investors hope to hear some clarity on buybacks, but shouldn't hold their breath until the insurer gets more guidance from the Fed.
Gallagher rates AIG at Outperform though the insurer continues to suffer an underwriting loss - this creates opportunity, however, for a catalyst going forward from improvement in this trend.