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5 Insurance Stocks to Buy Ahead of Q4 Earnings Results
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Wall Street kicked off the fourth-quarter 2022 earnings season last Friday. However, the season will gather pace this week. This reporting cycle will be important as market participants will closely monitor any sign of earnings, revenues or margin decline.
A large section of economists and financial experts are concerned that the U.S. economy may face at least a mild recession in 2023 with a higher interest rate regime and tighter monetary control adopted by the Fed.
Nevertheless, five insurers are likely to beat Q4 2022 earnings results. These are - Aflac Inc. (AFL - Free Report) , Reinsurance Group of America Inc. (RGA - Free Report) , Marsh & McLennan Companies Inc. (MMC - Free Report) , Unum Group (UNM - Free Report) and The Travelers Companies Inc. (TRV - Free Report) .
Insurance Sector Q4 2022
An improving interest rate environment benefits life insurers as their products and investments are rate sensitive. A favorable interest rate thus impacts life insurers' earnings, capital and reserves, liquidity, and competitiveness positively.
Insurance brokerage firms are continuously expanding globally, cross-selling products, increasing rates, tightening underwriting standards, and controlling expenses. Growth in the aging population is driving demand for retirement benefit products. The rising population of baby boomers and millennials as well as increasing awareness is boosting demand for medical insurance, life insurance, accidental insurance and other forms of insurance.
To maintain competitiveness in the industry, players are embracing technological change. The threat comes from new entrants, including technology companies like insurtechs, start-ups and others. Insurers are focused on using technology and innovation, including artificial intelligence, robotics and blockchain, to simplify and improve client experience, increase efficiencies, alter business models and bring about other disruptive changes in industries in which the existing players operate.
Accelerated digitization is also curbing costs, thus aiding margin expansion. It will also help in faster claims processing, thus improving operational performance and retention rate. While investments in technology increase business efficiency, the expenses associated with such investments increase operating costs. At the same time, insurers must shield themselves from falling prey to cyber threats.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the ast quarter.
Image Source: Zacks Investment Research
The Travelers Companies boasts a strong market presence in auto, homeowners’ insurance and commercial U.S. property-casualty insurance with solid inorganic growth. A high retention rate, increase in new business and positive renewal premium change bode well.
TRV’s commercial businesses should perform well owing to market stability. The Travelers Companies remains optimistic about the personal line of business, given growth at the profitable agency auto and homeowners business. TRV expects fixed income NII, including earnings from short-term securities, to be around $500 million after-tax in the fourth quarter.
The Travelers Companies has an Earnings ESP of +2.59%. It has an expected earnings growth rate of 11.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days.
TRV recorded earnings surprises in the last four reported quarters, with an average beat of 25.4%. The company is set to release earnings results on Jan 24, before the opening bell.
Marsh & McLennan Companies is well-poised to grow on the back of significant investments and acquisitions made within its operating units, the launch of new products and branching out into new businesses.
MMC’s increased stake in Marsh India will further buoy growth. Revenues have been increasing thanks to a wide geographic presence and strong client retention. The Risk and Insurance Services unit has been contributing to revenue growth too.
Marsh & McLennan Companies has an Earnings ESP of +5.67%. It has an expected earnings growth rate of 9.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last seven days.
MMC recorded earnings surprises in the last four reported quarters, with an average beat of 3.2%. The company is set to release earnings results on Jan 26, before the opening bell.
Unum Group’s conservative pricing and reservation practices have contributed to overall profitability. A sustained increase in premiums of UNM is fueled by high persistency levels in core business lines and strong sales volume along with solid benefits experience.
Continued rollout of dental products and geographic expansion have been paying off as acquired dental insurance businesses of UNM are growing in the United States and the U.K. We believe strong operating results have led to solid statutory earnings and capital, boosting financial flexibility.
Unum has an Earnings ESP of +0.80%. It has an expected earnings growth rate of 1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days.
Unum recorded earnings surprises in the last four reported quarters, with an average beat of 34.9%. The company is set to release earnings results on Jan 31, after the closing bell.
Aflac is poised to grow from the buyout of Argus Dental and Vision. Multiple product launches, the build-out of a virtual sales channel and a robust product pipeline will keep driving AFL’s sales. Its cost-saving efforts will aid the bottom line.
Sound capital management enables it to return shareholders’ funds via share buybacks and dividend payments. AFL has been raising its dividend for 40 consecutive years. Its strong solvency position is impressive.
Aflac has an Earnings ESP of +2.12%. It has an expected earnings growth rate of 3.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 30 days.
AFL recorded earnings surprises in the last four reported quarters, with an average beat of 4.8%. The company is set to release earnings results on Feb 1, after the closing bell.
Reinsurance Group of America steadily benefits from a mix of organic and transactional opportunities. RGA’s niche position in reinsurance markets and expansion of international footprint are positives. Individual mortality has matured and provides a base for stable earnings. Individual mortality has matured and provides a base for stable earnings.
Significant value embedded in in-force business should generate predictable long-term earnings. RGA is poised to benefit from improving life reinsurance pricing environment and higher investment income. A solid solvency position reflects its ability to make interest payments.
Reinsurance Group of America has an Earnings ESP of +1.59%. It has an expected earnings growth rate of 5.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 30 days.
RGA recorded earnings surprises in three out of the last four reported quarters, with an average beat of 49.7%. The company is set to release earnings results on Feb 2, after the closing bell.
Image: Bigstock
5 Insurance Stocks to Buy Ahead of Q4 Earnings Results
Wall Street kicked off the fourth-quarter 2022 earnings season last Friday. However, the season will gather pace this week. This reporting cycle will be important as market participants will closely monitor any sign of earnings, revenues or margin decline.
A large section of economists and financial experts are concerned that the U.S. economy may face at least a mild recession in 2023 with a higher interest rate regime and tighter monetary control adopted by the Fed.
Nevertheless, five insurers are likely to beat Q4 2022 earnings results. These are - Aflac Inc. (AFL - Free Report) , Reinsurance Group of America Inc. (RGA - Free Report) , Marsh & McLennan Companies Inc. (MMC - Free Report) , Unum Group (UNM - Free Report) and The Travelers Companies Inc. (TRV - Free Report) .
Insurance Sector Q4 2022
An improving interest rate environment benefits life insurers as their products and investments are rate sensitive. A favorable interest rate thus impacts life insurers' earnings, capital and reserves, liquidity, and competitiveness positively.
Insurance brokerage firms are continuously expanding globally, cross-selling products, increasing rates, tightening underwriting standards, and controlling expenses. Growth in the aging population is driving demand for retirement benefit products. The rising population of baby boomers and millennials as well as increasing awareness is boosting demand for medical insurance, life insurance, accidental insurance and other forms of insurance.
To maintain competitiveness in the industry, players are embracing technological change. The threat comes from new entrants, including technology companies like insurtechs, start-ups and others. Insurers are focused on using technology and innovation, including artificial intelligence, robotics and blockchain, to simplify and improve client experience, increase efficiencies, alter business models and bring about other disruptive changes in industries in which the existing players operate.
Accelerated digitization is also curbing costs, thus aiding margin expansion. It will also help in faster claims processing, thus improving operational performance and retention rate. While investments in technology increase business efficiency, the expenses associated with such investments increase operating costs. At the same time, insurers must shield themselves from falling prey to cyber threats.
Our Top Picks
Five insurance companies are set to beat on fourth quarter earnings results. Each of these stocks carries a Zacks Rank #2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the ast quarter.
Image Source: Zacks Investment Research
The Travelers Companies boasts a strong market presence in auto, homeowners’ insurance and commercial U.S. property-casualty insurance with solid inorganic growth. A high retention rate, increase in new business and positive renewal premium change bode well.
TRV’s commercial businesses should perform well owing to market stability. The Travelers Companies remains optimistic about the personal line of business, given growth at the profitable agency auto and homeowners business. TRV expects fixed income NII, including earnings from short-term securities, to be around $500 million after-tax in the fourth quarter.
The Travelers Companies has an Earnings ESP of +2.59%. It has an expected earnings growth rate of 11.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days.
TRV recorded earnings surprises in the last four reported quarters, with an average beat of 25.4%. The company is set to release earnings results on Jan 24, before the opening bell.
Marsh & McLennan Companies is well-poised to grow on the back of significant investments and acquisitions made within its operating units, the launch of new products and branching out into new businesses.
MMC’s increased stake in Marsh India will further buoy growth. Revenues have been increasing thanks to a wide geographic presence and strong client retention. The Risk and Insurance Services unit has been contributing to revenue growth too.
Marsh & McLennan Companies has an Earnings ESP of +5.67%. It has an expected earnings growth rate of 9.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last seven days.
MMC recorded earnings surprises in the last four reported quarters, with an average beat of 3.2%. The company is set to release earnings results on Jan 26, before the opening bell.
Unum Group’s conservative pricing and reservation practices have contributed to overall profitability. A sustained increase in premiums of UNM is fueled by high persistency levels in core business lines and strong sales volume along with solid benefits experience.
Continued rollout of dental products and geographic expansion have been paying off as acquired dental insurance businesses of UNM are growing in the United States and the U.K. We believe strong operating results have led to solid statutory earnings and capital, boosting financial flexibility.
Unum has an Earnings ESP of +0.80%. It has an expected earnings growth rate of 1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days.
Unum recorded earnings surprises in the last four reported quarters, with an average beat of 34.9%. The company is set to release earnings results on Jan 31, after the closing bell.
Aflac is poised to grow from the buyout of Argus Dental and Vision. Multiple product launches, the build-out of a virtual sales channel and a robust product pipeline will keep driving AFL’s sales. Its cost-saving efforts will aid the bottom line.
Sound capital management enables it to return shareholders’ funds via share buybacks and dividend payments. AFL has been raising its dividend for 40 consecutive years. Its strong solvency position is impressive.
Aflac has an Earnings ESP of +2.12%. It has an expected earnings growth rate of 3.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 30 days.
AFL recorded earnings surprises in the last four reported quarters, with an average beat of 4.8%. The company is set to release earnings results on Feb 1, after the closing bell.
Reinsurance Group of America steadily benefits from a mix of organic and transactional opportunities. RGA’s niche position in reinsurance markets and expansion of international footprint are positives. Individual mortality has matured and provides a base for stable earnings. Individual mortality has matured and provides a base for stable earnings.
Significant value embedded in in-force business should generate predictable long-term earnings. RGA is poised to benefit from improving life reinsurance pricing environment and higher investment income. A solid solvency position reflects its ability to make interest payments.
Reinsurance Group of America has an Earnings ESP of +1.59%. It has an expected earnings growth rate of 5.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 30 days.
RGA recorded earnings surprises in three out of the last four reported quarters, with an average beat of 49.7%. The company is set to release earnings results on Feb 2, after the closing bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.