Insurance ETFs in Focus on String of Q3 Earnings and Revenue Beats - ETF News And Commentary

Though financials have been the weakest contributor to the overall Q3 earnings growth after autos, growth rates and beat ratios are well above Q2 earnings. Total earnings for 88.6% of the sector's total market capitalization are up 1.6% on 5.1% revenue growth with beat ratios of 67.1% and 63.3%, respectively.

In particular, earnings from the insurance industry have been encouraging with most of the firms beating our estimates on both the revenue and the earnings front. The first earnings beat for MetLife (

) in 2014 has spread confidence and bullishness in the entire industry. Other industry primes like Aflac Inc. (

), American International (

), Travelers (

), Chubb Corp (

) and Allstate (

) have also reported improved earnings (read:

).

Though Prudential Financial (

) topped our estimates on the top line, it slightly disappointed investors by missing our earnings estimates.

, the U.S. life insurer behemoth, strongly outpaced the Zacks Consensus Estimate by 22 cents for the first time this year and was 26 cents higher than the year-ago quarter. Meanwhile, revenues rose 7% year over year to $17.92 billion and beat the Zacks Consensus Estimate of $17.49 billion. On the other hand,

, the second-largest U.S. life insurer, missed our earnings estimates by 21 cents and deteriorated 23.9% from a year ago. However, revenues climbed 9.1% to $11.8 billion and were well above the Zacks Consensus Estimate of $11.0 billion.

, the seller of supplement health insurance, topped our earnings estimate by 8 cents and improved 2.7% from the year-ago earnings. Though revenues slid 2.5% year over year $5.74 billion, it marginally outpaced our estimate of $5.72 billion. The largest commercial insurer in the U.S. and Canada,

reported strong earnings of $1.21, which breezed past the Zacks Consensus Estimate of $1.08 and improved from the year-ago earnings of 96 cents. Revenues climbed 4.5% year over year to $16.65 billion, but easily crushed our estimate of $9.77 billion. With this, both Aflac and American International kept its earnings streak alive for four quarters in a row with an average trailing four-quarter beat of 4.25% and 15.73%, respectively.

One of the largest property and casualty insurers and an industry bellwether,

, posted impressive earnings of $2.61 per share, outperforming the Zacks Consensus Estimate by 41 cents and growing 11% from the year-ago earnings. Revenues were also strong at $6.9 billion, up 7% from the year-ago quarter and above the Zacks Consensus Estimate of $6.5 billion (read:

).

Earnings at another property and casualty insurer –

– also beat our estimate by 11.3% and improved 5% from the year-ago earnings. Revenues of $3.45 billion also topped the Zacks Consensus Estimate of $3.37 billion. On the other hand, earnings of personal property and casualty insurer,

outpaced the Zacks Consensus Estimate by 3 cents but fell 9.2% year over year. Revenues rose 5.6% year over year to $8.94 billion and were well ahead of our estimate of $7.72 billion.

Given the impressive Q3 earnings and the surging stock prices, insurance ETFs have been enjoying smooth trading over the past one month. Investors looking to gain exposure to this corner of the market segment in a diversified way may consider the following ETFs. Any of these could be an excellent choice given that the products have a favorable Zacks Rank of 3 or ‘Hold' rating with a Medium risk outlook (see:

).

This fund follows the S&P Insurance Select Industry Index and offers an equal weight exposure to 51 stocks, suggesting no concentration risk. None of the securities holds more than 2.27% of total assets. More than one-third of the portfolio is allocated to the property and casualty insurance sector while life & health insurance accounts for another one-fourth share.

The ETF has managed $327.4 million in its asset base and trades in a moderate average daily volume of 78,000 shares. The product has an expense ratio of 0.35% and has gained about 6.7% over the past one month.

With AUM of $126.7 million, this product tracks the Dow Jones U.S. Select Insurance Index and charges 43 bps in annual fees. Volume is light, trading in about 18,000 shares per day. In total, the fund holds 66 securities in its basket with the largest allocation going to American International at 13.3%, closely followed by Metlife at 10.6%. Other firms hold less than 6.8% of assets.

Here again, property and casualty insurance takes the top spot, accounting for 47.8% of the asset base. Life insurance and full-time insurance take the remaining portion in the basket. The fund is up 7.3% over the trailing one month (read:

).

This fund tracks the KBW Insurance Index and holds 25 securities in its basket. Out of these, TRV takes the top spot at 9.4% while MET, AFL and PRU also belong to the top five holdings with a combined 19.6% share. CB and ALL occupy the eight and ninth positions with 4.4% of KBWI each.

The product has amassed about $6.8 million in AUM while volume is paltry. The ETF charges a low annual fee of 35 bps and has added 6.9% in the same period.

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