Tuesday, March 12, 2013

US Big Insurance Corps 2012 Annual Earnings Up 37.9% and EPS Up a Higher 42.6%

I found 12 US Big Insurance Corps filing with the SEC which generated Non-GAAP Operating After-tax Net Income of over $1 bil each in either annual 2012 or annual 2011.

Non-GAAP Operating After-tax Net Income of Insurance Corps is before Net Realized Gains and Losses on their huge amounts of Investments.

How did these 12 Big Insurance Corps do?  Fantastic, even with their large catastrophe losses in the 4Q 2012 related to Hurricane Sandy.  On the very positive side, they had substantially lower catastrophe losses in the first nine months of 2012 as compared with the first nine months of 2011.

The Total Non-GAAP Operating After-tax Net Income of these 12 US Big Insurance Corps was $31.8 bil in annual 2012, up a very robust 37.9% over 2011.

The huge winner here was AIG, which US taxpayers should be very happy about.  And yes, the US Government got much more than the monstrous amount it invested in AIG to keep it afloat after the financial meltdown hit in 2008.

And on an Earnings Per Share basis, the total growth was an even more very robust 42.6%, which was a company-earnings-weighted 4.7% higher than the 37.9% total earnings growth.

So, what's with this substantial add-on 4.7% earnings growth on an EPS basis?

Well, EPS and EPS growth are what drive common stock prices.

Thus, it's the massive common stock buyback programs that nearly all of these US Big Insurance Corps have.  The US Fed has facilitated this with its extremely low interest rates, which makes these common stock buyback programs incredibly lucrative for all large US Corps, and the Big Insurance Corps have clearly taken this common stock buyback strategy to a completely different level.   

But the problem with these massive stock buyback programs is that they only benefit the very wealthy and they further expand the huge wealth gap between the very wealthy and everyone else, including small businesses, who are not able to take economic advantage of it.

And these massive common stock buyback programs have been one of the major reasons for the US stock market advancing so high as compared what has been happening with the US general economy and with US real GDP growth.

Why?  Well, by increasing annual earnings growth by an add-on 4.7% each year, thus increasing the long-term annual EPS growth basis by the same 4.7%, the intrinsic value of the common stock goes up dramatically, thus causing an artificially high stock market bubble.  The US stock market is not increasing so dramatically because the US economy is growing at the same pace.  Instead, the US stock market is growing so dramatically because of the artificially high EPS growth, caused by the massive common stock buybacks, which have been fueled by US Fed action on interest rates and by clear lack of US Congressional oversight.  And this artificially high US stock market only benefits economically the top 1%, leaving the remaining 99% even further behind.

And instead of legislating to more fairly deal with this, the US Congress just sits there and twittles its thumbs.  

Below here is the Non-GAAP Operating After-tax Net Income for both annual 2012 and 2011 for each of these 12 US Big Insurance Corps:





Non-GAAP Non-GAAP Operating Operating Non-GAAP Over

Annual Annual Net Net Operating Earnings

2012 2011 Income Income EPS Growth

Operating Operating Increase Increase Increase Positive

Net Net (Decrease) (Decrease) (Decrease) %
Company Income Income Amount % % Spread

mils of $s mils of $s mils of $s

Big Insurance

6,635 2,086 4,549 218.1% 238.8% 20.7%
5,686 4,677 1,009 21.6% 20.5% -1.1%
3,097 2,946 151 5.1% 5.3% 0.2%
Prudential Financial
2,958 2,845 113 4.0% 7.5% 3.5%
ACE Ltd 2,624 2,331 293 12.6% 11.8% -0.8%
2,441 1,390 1,051 75.6% 89.3% 13.7%
2,148 662 1,486 224.5% 243.3% 18.8%
1,420 1,491 (71) -4.8% 2.1% 6.9%
1,400 1,384 16 1.2% 3.7% 2.5%
Lincoln Financial
1,284 1,246 38 3.0% 13.5% 10.5%
Marsh & McLennan
1,188 973 215 22.1% 21.5% -0.6%
902 1,016 (114) -11.2% -6.9% 4.3%

Total of all 12
31,783 23,047 8,736 37.9% 42.6% 4.7%

* Progressive earnings numbers are  GAAP Net Income

Late Addition:

Hartford Financial Services   1,403 1,116 287 25.7% 28.6% 2.9%