U.S. life insurance and annuity issuers are about to start releasing their earnings for the second quarter starting today.
The quarter started July 1, when the threat of possible imminent enforcement of some U.S. Department of Labor fiduciary rule provisions hovered over the industry, and it ended Sept. 30, as the DOL fiduciary rule threat had blown over.
Executives from most insurers with stock that trades on the New York Stock Exchange, or on Nasdaq, will be holding conference calls with securities analysts to discuss what happened during the quarter.
Ordinary members of the public can't ask questions during the conference calls, but they can listen in while the calls are in progress. An insurer that holds a conference call with analysts usually posts an audio recording of the call in the investor relations section of its website.
In some cases, company executives may be more talkative with the securities analysts than they would be during the question-and-answer period at an annual sales conference.
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The questions that analysts bring to the calls may reflect both what has happened in the previous quarter and what insurance company executives will be doing to try to keep investors happy in the future.
The analysts and executives often talk in terms of "tailwinds," or factors that helped a company's performance, and "headwinds," or facts that hurt.
Here's a look at five of the tailwinds and headwinds that might be on insurance company analysts' minds this quarter, based on a review of earnings season preview guides from analysts at Barclays, Keefe, Bruyette & Woods and Wells Fargo Securities L.L.C.
U.S. Department of Labor headquarters (Photo: Michael A. Scarcella/ALM)
1. Sales and marketing rules
The U.S. Department of Labor's move to put off enforcement of the new fiduciary retirement advice standards for at least 18 months is an obvious headwind, but the DOL move is already so baked in that analysts aren't talking that much about it. The analysts from Wells Fargo gave more attention to the possibility that the U.S. Securities and Exchange Commission will eventually come out with fiduciary rules of its own, in some other quarter.
Federal Reserve Chairman Janet Yellen (Photo: Jacquelyn Martin/AP)
2. Interest rates
Life and annuity issuers are heavy users of corporate bonds, and they also hold some bonds issued by the federal government, and a smattering of bonds issued by state and local governments.
Bond market yields have been strong, and interest rates are a little higher than they were a year ago. But insurers are still getting income from long-term investments made about 10 years ago. Rates probably won't be high enough to be a tailwind until the 10-year Treasury yields is about 3%, according to Wells Fargo analysts.
