Insurance companies will begin reporting 2Q earnings towards the end of the month. The companies operated in a mixed macro environment, so results are expected to vary based on the company’s specific business profile.
For example, P&C companies continued to battle core inflation throughout the quarter. The inflation trend likely pushed up the cost of labor and materials to settle policyholder claim costs, which drives combined ratios up and earnings down.
Auto insurers are the exception to inflation and higher combined ratios. Despite higher costs for labor and replacement parts, companies such as PGR and ALL likely benefited from fewer claims to a greater degree than the other insurance sectors as persistently higher gas prices decreased miles driven and accident-related claims.
Life insurance companies, especially those earning fees from assets under management (e.g., PRU and MET) enjoyed a tailwind from strong equity markets. Those firms should see a bump in investment income driven by higher AUM-related fees and increased opportunities to realize investment gains.
Our Macro Tracker table below lists key economic data and the potential impact on insurance company earnings. The right-hand column identifies the specific, potential impacts on company earnings.
Inflation Data: Impact on Claims Costs (negative)
All four inflation measures continued to accelerate into 2Q, putting further pressure on input costs for construction, repair, and trade services (labor). For most insurance companies, the persistent inflation environment since last September should already be reflected in higher premiums (or lower margins) as costs have been rising steadily to settle claims across property, auto, and liability lines.
Upcoming 2Q calls may discuss assumptions used to establish reserves. If there are cases that expectations were set prior to the acceleration of inflation in Q1 2026 (and left unchanged), those assumptions may need to be revisited. Such adjustments may also require adjustments to reserves themselves.
Employment Data (NFP, Unemployment, Claims): Impacts Premiums (mixed)
The employment data for the last four weeks reflects dwindling additions to payrolls. While not negative like February, the lack of strength in the most recent data is not positive for group benefit lines The unemployment rate ticked down to 4.2%, which is a slight (and almost meaningless) drop from the prior three months. However, a figure under 5% remains strong and supports solid persistency and a stable disability claims environment.
Unemployment claims began to show a positive trend in June. For the last half of June and into July claims have dropped vs the end of May and the first half of June.
Market Performance Data: Impacts Investment Income (positive trend)
The S&P 500 maintained its solid YTD advance following a downturn earlier in the year. This downturn is reflected in the AUM data at the end of this report. Given the recent market rebound, it’s expected to see a 2Q bounce in both AUM and related fee income.
The upward market trend should provide a boost to earnings for life insurers and annuity writers through higher fees earned on higher AUM balances, for example, as well as stronger separate account values and opportunities to realize investment gains.
The objective of this section is to connect macro data highlighted in this report to companies and specific line items that may be prone to macro pressure and could impact earnings.
Current employment trends are a good example. Companies with a large percentage of group premiums to total premiums are exposed to the labor market macro trends highlighted in our report.
Below are the operations by LOB statutory statements for two large subsidiaries of Prudential and Principal. For both companies, group business represents a large percentage of total premiums. The schedules below can be accessed and downloaded from the FactSet workstation.
Softening employment data could impact group premiums written by Prudential and Principal, which include group life and group annuities. Figures to watch on 2Q conference calls with group products are earned premiums and persistency ratios.
Source: Company/Security - Operations by LOB - FactSet
Source: Company/Security - Operations by LOB - FactSet
The table directly below presents AUM roll forward data for PRU, EQH, and HIG from 2Q21 through 1Q26, individual company net change (as a percentage of beginning AUM), and S&P 500 quarterly price return. The pattern that emerges is both consistent and actionable: AUM balances follow S&P 500 returns.
Equitable (drop)
Company/Security - Assets Under Management - EQH-US - FactSet
Hartford (drop)
Company/Security - Assets Under Management - HIG-US
Prudential (drop)
Company/Security - Assets Under Management - FactSet
Principal
Company/Security - Operations by LOB - FactSet
Voya (drop)
Company/Security - Assets Under Management - FactSet
Manulife (drop)
Company/Security - Assets Under Management - FactSet
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