Posted on May 03, 2012 by Sergio Ulloa
While stagnant growth forecasts, sovereign debt contagion issues, and political infighting continue to drag down many Western economies and industries, the first quarter of 2012 was relatively stable to many in the international insurance industry. Several notable insurance companies posted positive business developments in the face of adverse market developments over the past month. The following is a summary of some of the most recent earning statements put forward by some prominent insurers.
MetLife, the United States' largest life insurance group, posted net loss of US$174 million during the first quarter of 2012. This result was driven by a derivative net loss of US$1.3 billion for the quarter, which the company said was due in principal to rising interest rates and lower credit spreads experienced during the reporting period. Outside of these derivate losses, which impact the valuation of certain insurance liabilities but not the company's overall economic performance, MetLife's operations have remained on track in 2012. According to the financial statement, MetLife's operating earnings hit US$1.5 billion for the first three months of the year; an 11 percent rise on the US$1.3 billion in earnings recorded during the corresponding quarter in 2011. Operating revenues climbed by a further 7 percent to US$16.7 billion on gains made in the Asia Pacific and the Americas. The insurer also reported US$5.1 billion in net investment income, a 6 percent increase over the same quarter last year.
MetLife has attributed much of their quarterly insurance growth to their Alico acquisition and the positive impact it has had on the company's investment portfolio thus far. Chief Executive Steven Kandarian remarked in the company statement that "these results reflect top-line growth in all of MetLife's global regions, sound fundamentals and the core earnings power of our diversified businesses." Metlife had been looking to grow its international footprint
and expand it's distribution platform for a long time. In 2010 the New York-based insurer decided to purchase American Life Insurance Co. (Alico) from AIG for US$15.5 billion to achieve these goals. The purchase of Alico, which operates out of over 50 countries, has given MetLife access to new insurance markets in Asia, Europe, Latin America and the Middle East, and they been rewarded for this business decisions already as their international segment generates an increasing amount of earnings relative to their home US market.
Aflac is another American insurer finding success in more international insurance markets. The insurer posted a substantial 21.9 percent surge in revenues for the first quarter, which was driven primarily by the Japanese insurance market and a stronger yen to dollar exchange rate. Aflac's sales in Japan officially doubled to a record ¥52.4 billion (US$659 million) for the quarter, led by deals through banks and the introduction of a popular new supplemental medical coverage policy. As this occurred, the company also managed to post a 5.2 percent revenue growth in its home US market and further reduced it's exposure to European financial companies, reflected in the drop in investment loss to US$29 million from US$376 a year earlier.
Companies active in the US health insurance sector have also put forth their first quarter financial results. Aetna Inc reported earnings of US$477.4 million for the first three months of the year, which was a 15 percent drop on the US$560.2 million posted during the same period in 2011. While net income fell from US$586 million to US$511 million, revenues rose by 6 percent from US$8.3 billion to US$8.8 billion over last year. The company's statement revealed that healthcare revenues grew substantially over the yearly reporting period from US$7.71 at the start of 2011 to US$8.2 billion by the first quarter of 2012, owing to higher premiums earned from Medicare and Medicaid membership enrolment, improved underwriting margins, and the addition of Genworth's Medicare-supplement business, which was purchased by the health insurer last year. As this occurred however, the amount Aetna paid out in medical claims, its largest expense, rose by more than 9 percent to US$5.86 billion for the first quarter. The company's Chairman and CEO, Mark Bertolini, believes they can adjust to new market realities in lieu of any further Affordable Care Act developments, and continue to grow the customer base. "We're balancing growth and profitability, and are confident of our ability to increase membership over the course of this year to 18.2 million medical members."
Aetna's two largest competitors in the US health insurance market, WellPoint and UnitedHealth Group, have also announced their first-quarter results. In Wellpoint's, the insurer noted that net income fell by about 8 percent annually from US$926.6 million in 2011 to US$856.5 million the first three months of 2012, with sliding enrolment and a 5 percent rise in healthcare claims costs (to US$11.77 billion) cited for the drop in earnings. The health insurer has lost a reported 525,000 members, or 1.5 percent of its 33.7 million client base since March last year, and this was one of the reasons the firm decided to purchase California Medicare Advantage plan provider, CareMore, for US$800 million in June
. While the first quarter of 2012 has not started quite as brightly as WellPoint would've otherwise liked, their decision to purchase CareMore may have been vindicated by the fact that of the company's US$495.4 million surge in new revenue, US$266 was accounted for by the inclusion of their new California business. The demand for Medicare-supplement insurance, sometimes referred to as 'Medigap' plans, is only set to grow further as the burgeoning ranks of incoming US retirees expect similar healthcare benefits to those they have enjoyed throughout their career and many still have the clout to pay for them.
UnitedHealth was the lone US health insurance giant who finished the first quarter of 2012 in the black. America's largest health insurer finished the quarter ending March 31 2012 with revenues of US$27.3 billion, up US$1.7 billion, or 7 percent, on the US$25.4 billion reported for the same quarter in 2011. According to the company filing, UnitedHealth was able to buck the trend and grow their operations by increasing their enrolment by an additional 1.6 million customers over the past year, of which 1 million joined during the first quarter of 2012. The statement adds that this membership growth has been well balanced and diversified, with numbers split amongst the traditional commercial insurance markets and subsidized public and senior markets. As a result of this development, the company has already increased its earnings outlook for 2012 by about 3 percent, with membership expected to swell by additional 750,000 people, to settle between 1.7 million to 1.9 million new policyholders by 2013.
US-based health insurance companies were able to post greater-than-expected profits in 2011 because fewer Americans filed claims and used healthcare services as a result of the weak economy. As the fortunes of the average American citizen begin to improve they will begin to demand more of their respective insurer and this could make the market even more competitive and expensive. Expect more companies to cast their net further adrift and expand into international markets to further develop their business portfolio.
Insurance Companies Mentioned
MetLife is the largest life insurance company in the United States, with total assets of US$785 billion and over US$4.2 trillion of life insurance in force. Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.
AFLAC is the world's leading provider of supplemental medical insurance. Founded in 1955, the insurer has gone on to provide services to more than 50 million people through more than 70,000 agents worldwide. Aflac's total assets at year-end 2011 totaled more than $117 billion with annual revenues of more than $22.2 billion.
Aetna is a leading global diversified health care benefits company head-quartered in the U.S., serving approximately 35.8 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans.
WellPoint is the largest health benefits company in USA, with more than 33 million members in its affiliated health plans. As an independent licensee of the Blue Cross and Blue Shield Association, WellPoint serves members as the Blue Cross licensee for California; the Blue Cross and Blue Shield licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, and Wisconsin.
UnitedHealth Group is a leading health care company, serving more than 75 million people worldwide. UnitedHealth Group is a leader in the health benefits and services industry, the insurers six businesses offer exceptional service, broad capabilities and enduring value in creating a modern health care system.