What happened
Several annuity and insurance stocks fell today after the companies reported earnings results for the first quarter of 2023.
Shares of the retirement and life insurance company Jackson Financial (JXN 3.70%) traded more than 17% lower as of 12:49 p.m. ET.
Meanwhile, ProAssurance Corporation (PRA 0.36%) fell about 23%, while Lincoln National Corporation (LNC 1.66%) slumped more than 5% after being down as much as 12% earlier this morning.
So what
Jackson Financial reported a diluted loss per share of $18.11 alongside negative $759 million in revenue. This number includes about $3.4 billion of net unrealized losses on equity investments and derivatives. However, adjusted earnings of $3.15 per diluted share still missed analyst estimates.
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Jackson's registered index-linked annuity (RILA) sales came in at $533 million for Q1, which was up $199 million year over year but lower versus the sequential quarter. During the period, the company returned $124 million of capital to shareholders through dividends and stock buybacks and plans to return a total of $450 million to $550 million this year.
ProAssurance, which specializes in providing insurance for healthcare professionals, reported a diluted loss per share of $0.11 on total revenue of $272.7 million, with both numbers missing analyst estimates.
Gross premiums of nearly $316 million in the quarter fell close to 6% year over year, while the company's combined ratio came in high at almost 114%. The combined ratio looks at an insurance firm's expenses and losses divided by written premiums and insurance companies ideally want this to be at least below 100%. ProAssurance's combined ratio is also way up from Q4 of 2022.
"The results for the quarter reflect our continued caution in assessing reserves in prior years; in our loss ratio selections for the current year; and in reserve increases on a handful of claims, some of which resulted from excess verdicts against our insureds in the quarter," ProAssurance President and CEO Ned Rand said in a statement.
Lincoln National, the parent company of Lincoln Financial Group, reported a diluted loss per share of $5.37 on total revenue of more than $3.8 billion. Both figures missed analyst estimates.
The loss was mainly driven by unrealized losses of $9.6 billion in the company's securities portfolio as a result of rising interest rates. Lincoln Financial's annuities division produced an operating profit of $274 million, its life insurance segment reported a $13 million loss, and the company's group protection division recorded a $71 million operating profit with a loss ratio of 75%.
Now what
Insurance and annuity firms can see volatility in their earnings, particularly because of the unrealized losses and gains in their securities and equities portfolios.
Of these three names, I like Jackson the best. It was disappointing to see RILA sales fall in the quarter, but the company remains on target for its capital return plans and is still well capitalized. I'd avoid ProAssurance for now until it can get the combined ratio under control because it is operating in a difficult space.
