Insurance industry stocks in the second quarter are expected to have benefited from strong retention, accelerated digitalization, favorable renewals, interest rate hikes and reinsurance agreements. Furthermore, better pricing, exposure growth, diversified portfolio and organic business growth are likely to boost the June-quarter results. Insurers yet to report their second-quarter results on Jul 25 are Arthur J. Gallagher & Co. (AJG Quick QuoteAJG - Free Report) , Willis Towers Watson plc (WTW Quick QuoteWTW - Free Report) , Cincinnati Financial Corporation (CINF Quick QuoteCINF - Free Report) and Kinsale Capital Group (KNSL Quick QuoteKNSL - Free Report) .

Factors Likely to Drive Insurers’ Q2 Performance

Solid retention, exposure growth across business lines and improved pricing are likely to have fueled premiums. An active catastrophe environment accelerated the policy renewal rate and led to better pricing in the second quarter.  Per Market Scout’s Market Barometer, a composite of commercial property & casualty insurance rates improved to 4.36% in the second quarter from 3.9% in the first quarter.

Per reports in Reinsurance News, The Hanover estimates pre-tax catastrophe losses of $157.1 million for the second quarter of 2024. Per the report, the losses primarily stemmed from severe convective storm activity that affected the Personal Lines business.

The second quarter witnessed an active global natural catastrophe, resulting in nearly average financial costs for governments and the insurance industry. The above-average insured losses were attributed to a higher frequency of small- to mid-sized severe convective storm events in the United States. Nevertheless, better pricing, reinsurance arrangements, portfolio repositioning, reinsurance covers, favorable reserve development and prudent underwriting are likely to drive an improvement in second-quarter underwriting results.

Auto premiums are likely to have improved, given increased travel across the world. A low unemployment rate is likely to have aided commercial insurance and group insurance.

A larger investment asset base, a higher reinvestment rate given an improved rate environment as well as alternative investments are expected to have aided net investment income.

Courtesy of their solid capital position, insurers pursued strategic mergers and acquisitions, which are likely to have diversified their portfolios, sharpened their competitive edge and expanded their geographic footprint in the second quarter. Insurers also enhanced shareholders' value via share buybacks and dividend increases. 

The insurance industry’s increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation expedite business operations. Insurers continue to invest heavily in technology to improve basis points, scale and efficiencies. These investments are likely to have curbed costs and aided margins of insurers in the second quarter.   

Insurance Providers Reporting on Jul 25

Against the backdrop discussed above, let’s find out how the following four insurers are placed ahead of their June-quarter earnings release tomorrow.

Per our proprietary model, the combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Arthur J. Gallagher’s second-quarter results are likely to benefit from better performance in both segments, aided by new business, strong retention and increasing renewal premiums across its business lines. Revenues associated with acquisitions, the organic change in base commissions and fee revenues are likely to have favored commission and fee revenues. However, total expenses are likely to have increased mainly because of higher compensation, operating costs, interest expenses, amortization, reimbursements and depreciation. (Read more:  What's in Store for Arthur J. Gallagher in Q2 Earnings?)

The Zacks Consensus Estimate for the bottom line is pegged at $2.24, indicating a 17.8% increase from the year-ago quarter’s reported figure. The company has an Earnings ESP of +0.16% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AJG’s earnings beat estimates in the last four reported quarters. The same is depicted in the chart below:

Willis Tower’s revenues in the second quarter are likely to have benefited from the software sales and increased project revenues, higher levels of Retirement work in North America and Europe, as well as increased project work in Employee Experience and Work & Rewards across all the segments. Expenses in the second quarter are likely to have increased, attributable to higher salary expenses, higher benefit costs, increased marketing expenses and consulting and compensation costs related to the Transformation program. (Read more: Is a Beat in the Cards for Willis Towers in Q2 Earnings?)

The Zacks Consensus Estimate for WTW’s second-quarter earnings per share of $2.28 indicates an 11.2% increase from the year-ago quarter reported figure. The company has an Earnings ESP of +1.85% and a Zacks Rank #3.  

WTW’s earnings surpassed estimates in three of the last four reported quarters while missing one. This is depicted in the chart below:

Cincinnati Financial’s second-quarter premiums are likely to have benefited from improved exposure, increased property casualty agency and new business written premiums, higher standard lines new business, and higher premiums from Cincinnati Re. Premiums at Personal Lines are likely to have benefited from high-net-worth clients and an agent-centric model. Excess and Surplus lines premiums are likely to have benefited from increase in agency new business and renewal written premiums. Despite catastrophe losses that induce volatility in profits, underwriting results are likely to benefit from better pricing. (Read more: What's in Store for Cincinnati Financial in Q2 Earnings?)

The Zacks Consensus Estimate for the bottom line is pegged at 97 cents, indicating a decline of 19.8% from the year-ago quarter reported figure. The company has an Earnings ESP of -2.15% and a Zacks Rank #4 (Sell).

CINF’s earnings beat estimates in the last four reported quarters. This is depicted in the chart below:

Kinsale Capital’s second-quarter results are likely to benefit from premium growth, rate increases, favorable loss experience and lower net commissions, improved rate environment. Better performance at small property, entertainment and general casualty divisions, as well as in high-value homeowners and commercial auto, are likely to have favored premiums. Kinsale Capital’s technology-driven operations are likely to have a lowered expense ratio. (Read more: What's in Store for Kinsale Capital in Q2 Earnings?)

The Zacks Consensus Estimate for KNSL’s bottom line is pegged at $3.52, indicating a 22.2% decrease from the year-ago quarter reported figure. The company has an Earnings ESP of -0.78% and a Zacks Rank of 4.

KNSL’s earnings surpassed estimates in the last four quarters. This is depicted in the chart below:

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