The US life insurers are expected to reveal a worse-than-forecasted Q4, 2018 next week, which may terribly totter their massive investment portfolio, getting hurt by the tempestuous market sentiment.
The ongoing market mayhem had already predicted a nefariously nose-dived earning estimate in the fourth quarter of 2018 for major US life insurers including Lincoln National Corp., Ameriprise Financial Inc., and Prudential Financial Inc.
Citing statistics from I/B/E/S Refinitiv, analysts had downsized the Lincoln National Corp.’s mean earning per share estimate from $2.24 to $2.12, Prudential from $2.98 to $2.81 and Ameriprise from $3.85 to $3.66.
Referring to the restrained asset driven businesses, an analyst at John Barnidge, Sandler O’Neill said, “Even though these are annuity or retirement businesses, they are businesses that are driven by the assets they manage”.
In fact, the life insurers make their profit by investing premiums they accumulate for the coverage and expecting to earn more than they had to pay in claims. Apart from that, they also earn by investing lump sums consumers hand over during purchasing the annuities.
During the fourth quarter of 2018, the stock alongside, bond market had gone in to a skirmish, instead being squirrels. In recent years, the life insurers had amplified the risks substantially, as they had stepped aside from the safer investment like Treasury bond.
However, during the fourth quarter, the investors had sharply retreated from consumer stocks and investment-grade as well as corporate grade bonds lost their value, leaving the insurers vertically vulnerable.