July 29 (Bloomberg) -- MetLife Inc., Hartford Financial Services Group Inc. and Principal Financial Group Inc. are among life insurers that may report stronger balance sheets on second- quarter gains in the value of holdings including corporate bonds.

Hartford’s book value per share, a measure of assets minus liabilities, probably jumped 30 percent to $31.29 from $24.15 in the first quarter, said Randy Binner, an analyst with FBR Capital Markets, in a note on July 8. Binner forecast Des Moines, Iowa-based Principal’s ratio to climb 65 percent to $15.93 while MetLife, the largest U.S. life insurer, may have had a 15 percent increase to $29.90.

Expected changes in life insurers’ book values will be the “largest swing we have seen over the last six quarters on a percentage basis,” Binner said.

Life insurers are recovering after the value of investments in stocks, bonds and commercial mortgages slumped last year. Corporate debt, which accounts for about 39 percent of carriers’ portfolios, rallied 11 percent in the three months ended June 30, Binner said.

While the overall market rallied, investments in CIT Group Inc., the 101-year-old lender that needed emergency funding to avoid bankruptcy, may hurt insurers’ balance sheets, said Jeffrey Schuman, an analyst with KBW Inc. in a note on July 16.

Aflac Inc., the world’s biggest seller of supplemental insurance, and Genworth Financial Inc. face the most risk, Schuman said. Aflac, which reports today, had about $240 million in CIT senior debt at the end of March while Richmond, Virginia- based Genworth, due to report the next day, had about $178 million, Schuman said.

Balance Sheet Issues

“Unless radically different from expectations, actual earnings results should continue to take a back seat to balance sheet issues,” said Steven Schwartz, an analyst at Raymond James & Associates Inc., in a note on July 20.

MetLife, based in New York, may report adjusted earnings per share, which excludes some investments, of 69 cents on July 30, compared with $1.30 in the year-earlier period, according to the average estimate of 16 analysts compiled by Bloomberg.

The New York-based insurer said July 14 it was combining its personal and business insurance units to “streamline its decision-making process and drive profitable growth.” The company plans to trim $400 million in annual expenses and has cut 1,000 jobs during the first quarter.

Earnings Estimates

Prudential Financial Inc., the second largest U.S. life insurer, may post $1.20 earnings per share, excluding some investments and results from policies the company sold before going public, on August 5, compared with $2.02 a share a year-earlier, according to analysts’ estimates.

Lincoln National Corp., which is set to post earnings today, is forecast to report income of 83 cents a share, down 49 cents from last year’s period. Hartford, based in the city of the same name in Connecticut, is expected to drop to $1.17 a share from $2.22 when it reports on July 30.

Aflac may have “some positive sales news due to new product introductions and increased sales momentum in the bank channel,” Schwartz said. The Columbus, Georgia-based insurer may report $1.14 per share, compared with $1.01 a year earlier.

Torchmark Corp., a seller of annuities and health insurance, posted a decline in profit to $114.1 million, or $1.38 a share, for the second quarter, compared with $133.7 million, or $1.47 a share, in the year-earlier period, on July 27. The McKinney, Texas-based insurer’s net operating income per share of $1.53 beat the analysts’ estimate of $1.50, according to Bloomberg.

Lower Expenses

The operating income was “primarily the result of better than expected annuity underwriting margins and lower expenses throughout various segments of the company,” Binner wrote in a note on July 28.

Revenue from Torchmark’s annuity business dropped 35 percent to 2.5 million. Sales of life insurance rose to $415 million during the three months ended June 30, from $406.5 million a year earlier.

Warren Buffett, chairman of Berkshire Hathaway Inc., said life insurers “took on an ungodly amount of risk” by offering retirement products guaranteeing minimum returns on equity-based investments, at a press conference in Omaha, Nebraska, on May 3.

The rise of the equity market during the second quarter is an “incremental positive for exposure of life insurers,” said Mark Finkelstein, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, in an interview.

Bailout Cash

Lincoln, based in Philadelphia, and Hartford both received bailout cash during the second quarter to withstand declines in financial markets. Lincoln sold $950 million of preferred shares to the U.S. under the Treasury’s Troubled Asset Relief Program on July 10. Including the TARP investment, Lincoln raised $2.1 billion in the last two months.

Hartford, which reports earnings today, said last month it would accept as much as $3.4 billion in TARP funds and sell $750 million of its shares. The insurer said it may use the capital to repurchase outstanding debt. Competitors MetLife and Prudential have shunned bailout aid.

MetLife has slipped 5.5 percent in New York Stock Exchange composite trading since the beginning of the year while Hartford fell 10 percent and Prudential leapt 41 percent.

To contact the reporter on this story: Tian Huang in New York at thuang57@bloomberg.net.

Last Updated: July 29, 2009 00:01 EDT