I found 32 US Big Insurance Corps, with Pretax Earnings or Losses of more than $100 mil in either the 3Q 2011 or the 3Q 2010.
These 32 US Big Insurance Corps registered a Reported US Generally Accepted Accounting Principles (GAAP) Total Pretax Earnings in the 3Q 2011 of $16.7 bil, or up $4.0 bil, or 31% over the 3Q 2010.
But don't conclude that this is really good news. More on that later.
Below here are these 3Q 2011 Pretax Earnings (PTI), along with a comparison with the prior year’s quarter amounts.
...........................................................................Increase
...............................................PTI(L).......PTI(L)......(Decrease)
.................................................3Q.........3Q..................
...............................................2011......2010....Amount....%
.................................................(millions of dollars)
MetLife 5,306 385 4,921 1278%
AXA Financial 3,763 (609) 4,372 718%
AXA Equitable Life Ins 3,447 2,516 931 37%
Prudential Fincl 2,334 1,750 584 33%
AFLAC 1,105 1,055 50 5%
Assured Guaranty Ltd 1,056 152 904 595%
MBIA 745 (356) 1,101 309%
Sun Life Assurance US 470 (95) 565 595%
Chubb 366 784 (418) -53%
Travelers 332 1,371 (1,039) -76%
Unum Group 293 327 (34) -10%
AON 292 208 84 40%
Progressive 209 387 (178) -46%
Allstate 203 490 (287) -59%
Torchmark 199 208 (9) -4%
Marsh&McLennan 198 183 15 8%
Radian Group 190 165 25 15%
Reinsurance Group 172 197 (25) -13%
Arch Capital Grp Ltd 167 151 16 11%
Lincoln National 139 303 (164) -54%
Principal Financial 138 164 (26) -16%
ACE Ltd 134 835 (701) -84%
Cna Financial 124 (167) 291 174%
Transatlantic Hldgs 103 164 (61) -37%
WR Berkley 97 121 (24) -20%
XL Capital Group 66 126 (60) -48%
Everest Re Group Ltd 9 204 (195) -96%
ING Life Insurance (26) 127 (153) -120%
Hartford Fincl Svcs (104) 917 (1,021) -111%
MGIC Investment (191) (78) (113) -145%
Erie Indemnity (305) 405 (710) -175%
AIG (4,358) 306 (4,664) -1524%
Total all 32 16,673 12,696 3,977 31%
To make even a little bit of sense out of the above numbers, it is necessary to first break down these Insurance Corps by Insurance Sub-Sector.
Below here does this Insurance Sub-Sector breakdown for these 32 US Big Insurance Corps, and shows their 3Q 2011 Pretax Earnings (PTI), along with a comparison with the prior year’s quarter amounts.
...........................................................................Increase
...............................................PTI(L).......PTI(L)......(Decrease)
.................................................3Q.........3Q..................
...............................................2011......2010....Amount....%
.................................................(millions of dollars)
Life Insurance
MetLife 5,306 385 4,921 1278%
AXA Financial 3,763 (609) 4,372 718%
AXA Equitable Life Ins 3,447 2,516 931 37%
Prudential Fincl 2,334 1,750 584 33%
Sun Life Assurance US 470 (95) 565 595%
Torchmark 199 208 (9) -4%
Lincoln National 139 303 (164) -54%
ING Life Insurance (26) 127 (153) -120%
Total 8 15,632 4,585 11,047 241%
Fire&Casualty Insurance
Chubb 366 784 (418) -53%
Travelers 332 1,371 (1,039) -76%
Progressive 209 387 (178) -46%
Allstate 203 490 (287) -59%
Arch Capital Grp Ltd 167 151 16 11%
ACE Ltd 134 835 (701) -84%
Cna Financial 124 (167) 291 174%
Transatlantic Hldgs 103 164 (61) -37%
WR Berkley 97 121 (24) -20%
XL Capital Group 66 126 (60) -48%
Everest Re Group Ltd 9 204 (195) -96%
Hartford Fincl Svcs (104) 917 (1,021) -111%
Total 12 1,706 5,383 (3,677) -68%
Accident& Health Insurance
AFLAC 1,105 1,055 50 5%
Unum Group 293 327 (34) -10%
Reinsurance Group 172 197 (25) -13%
Principal Financial 138 164 (26) -16%
Total 4 1,708 1,743 (35) -2%
Surety Insurance
Assured Guaranty Ltd 1,056 152 904 595%
MBIA 745 (356) 1,101 309%
Radian Group 190 165 25 15%
MGIC Investment (191) (78) (113) -145%
Total 4 1,800 (117) 1,917 145%
Insurance Agents&Brokers
AON 292 208 84 40%
Marsh&McLennan 198 183 15 8%
Total 2 490 391 99 25%
Insurance Conglomerate
AIG (4,358) 306 (4,664) -1524%
Insurance Other
Erie Indemnity (305) 405 (710) -175%
Total all 32 16,673 12,696 3,977 31%
From the above chart, you can see that the 8 Life Insurance Corps registered a 3Q 2011 Reported GAAP Pretax Earnings increase of an off-the-charts $11.0 bil, which is nearly triple the $4.0 bil earnings increase for all 32 Big Insurance Corps combined.
Obviously, there is something very misleading here. Thus, you need to analyze the reasons certain large Insurance Corps had such incredible earnings volatility.
Well, it takes you back again to Derivatives, which are playing such havoc on the US economy, as well as on job creation.
Here are the Derivative Gains (Losses), included in reported earnings, in just the 3Q 2011 for the 4 of these 8 Life Insurance Corps, which had large ones:
AXA Financial US.......................$6.6 bil Gain
MetLife......................................$4.2 bil Gain
AXA Eqitable Life Insurance US..$2.9 bil Gain
Sun Life Assurance US................$(.6) bil Loss
=Total Derivative Gain..............$13.1 bil Gain
Oh, that $11.0 bil Total Earnings Increase for the 8 Life Insurance Corps in the 3Q 2011 doesn't look so hot any more.
Also, Prudential Financial, another Life Insurance Corp, had a $2.5 bil Realized Investment Gain in the 3Q 2011.
And then 4 of the 8 Life Insurance Corps also fine-tuned dramatically in the current 3Q 2011 their Amortization of Deferred Policy Acquisition Costs Accounting, which is a separate line item in their Income Statements. I find the amounts of this accounting fine-tuning here just mind-boggling.
Regarding the above 12 Fire and Casualty Insurance Corps, many had their earnings hammered in the 3Q 2011 by both Hurricane Irene and Tropical Storm Lee.
Also in the Fire and Casualty Insurance Sub-Sector in the 3Q 2011, ACE Ltd had $.8 bil realized Investment Loss, Hartford Financial Services a $.6 bil realized Investment Gain, and Allstate a $.5 bil realized Investment Gain.
Further, Hartford Financial Services had $1.9 bil in Equity Securities Trading Losses in the 3Q 2011, along with some substantial fine-tuning of its Amortization of Deferred Policy Acquisition Costs.
In the troubled Surety Insurance Sub-sector, Assured Guaranty Ltd had a $1.2 bil Derivative Gain, and MBIA also had a $.7 bil Derivative Gain, both in just the 3Q 2011. Thus, the quality of Reported GAAP Total Pretax Earnings increase of $1.9 bil in the 3Q 2011 over the 3Q 2010 in the Surety Insurance Sub-sector is highly tarnished.
Also, Erie Indemnity recorded a $.4 bil realized Investment Loss in the 3Q 2011.
Now on to the really complex, troubled Insurance Conglomerate AIG. Well this one needs a lot more study, which I will do on a longer term, historical basis, when I get some more time. As a brief note for now, suffice it to say that there were 3 huge Asset Impairments recognized by AIG in the 3Q 2011, which totaled a massive $4.7 bil. You can't just keep Impairing Assets by substantial amounts, and expect the investment community to just ignore them, as one offs.
A key point with all of the above is that there is no way that more than a handful of these Big Insurance Corps should be recording such gigantic Derivative Gains and Losses, mostly Derivative Gains, in just one quarter's earnings. It's bad for the US economy, with the resultant loss in confidence in the entire Big Financial Industry, a key element to the Occupy Wall Street Movement. And just what kind of confidence does this give to the insurance policyholder?
There is either something wrong with US Generally Accepted Accounting Principles here, or with these Insurance Corps Derivative Policies and with their Amortization of Deferred Policy Acquisition Cost Policies.
The last thing we need now is a financial crisis in the Insurance Industry. I think it would be wise for the SEC, but also the US Congress, to take a closer look at just what went on here with both the huge Derivative Gain accounting and with all of these massive amounts of fine-tuning of Amortization of Deferred Policy Acquisition Costs by some of these Insurance Giants.
And since just 5 of the above Insurance Corps registered Total Derivative Gains of $15.6 bil in just the most recent 3Q 2011, the Feds should ask the question of just who suffered Derivative Losses of roughly the same amount in the 3Q 2011? Just what is with this wild speculation in Derivatives going on here? Let's at least hope that Fannie and Freddie weren't on the other losing side of this Derivative Russian Roulette.
Something clearly doesn't smell right here.
