Solid retention rates, continued rate increases, favorable renewals, an improving interest rate environment and significant accelerated digitalization are expected to have boosted insurance stocks’ June-quarter performance. Better pricing, exposure growth, diversified portfolio and organic business growth are expected to contribute to the upcoming results. Insurers yet to report their second-quarter results on Jul 30 are Arch Capital Group Ltd. (ACGL Quick QuoteACGL - Free Report) , Axis Capital Holdings Limited (AXS Quick QuoteAXS - Free Report) , NMI Holdings Inc (NMIH Quick QuoteNMIH - Free Report) , Unum Group (UNM Quick QuoteUNM - Free Report) and Voya Financial Inc. (VOYA Quick QuoteVOYA - Free Report) .

Potential Factors Driving Q2 Earnings Season

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 second-quarter 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 stemmed from 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 have improved second-quarter underwriting performance.

Life insurers continue to roll out investment products that provide bundled covers of guaranteed retirement income, life and healthcare to cater to customers preferring policies with ‘living’ benefits more than those with death benefits. A compelling product portfolio is expected to have aided sales of life insurers in the to-be-reported quarter.

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 30

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.

Arch Capital: Rate increases, new business opportunities and growth in existing accounts in the Insurance and Reinsurance segments are likely to have boosted premiums for Arch Capital in the to-be-reported quarter. Net investment income is expected to have benefited from higher interest rates, growth in invested assets and strong operating cash flows. Despite catastrophe losses, underwriting profitability is likely to have benefited from better pricing. (Read more: Is a Beat in Store for Arch Capital in Q2 Earnings?)

The Zacks Consensus Estimate for Arch Capital’s second-quarter 2024 earnings of $2.17 per share suggests an improvement of 13% from the prior-year quarter’s reported figure. ACGL has an Earnings ESP of +0.55% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arch Capital’s earnings surpassed estimates in each of the last four quarters, the average surprise being 28.41%. The same is depicted in the chart below:

Axis Capital Holdings: In the second quarter, the Insurance segment of Axis Capital might have gained from increased new business opportunities, rate increases on renewal and continued strong retentions. New business growth and increased rates across North America and Global Markets are likely to have driven the Reinsurance unit. Technology investments that pave the way for efficient operations are likely to have provided an impetus to its margins.

The Zacks Consensus Estimate for AXS’s second-quarter 2024 earnings is pegged at $2.52 per share, indicating an improvement of 13% from the prior-year quarter’s reported figure. Axis Capital has an Earnings ESP of +0.20% and a Zacks Rank of #3.

AXS’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 97.05%. The same is depicted in the chart below:

NMI Holdings:  The insurer’s growth in total mortgage origination volume, growth in the size of the total mortgage insurance market and strong housing market are likely to aid second-quarter results. NMI Holdings expects persistency to continue to improve and drive further increases in the embedded portfolio value. The high-performing primary insurance in-force, growth in monthly, and single premium policy production tied to the increased penetration of existing customer accounts and new customer account activations are likely to have aided the upside.

The Zacks Consensus Estimate for NMI Holdings’ second-quarter earnings per share of $1.04 per share indicates a 9.4% increase from the year-ago quarter reported figure. The company has an Earnings ESP of +0.24% and a Zacks Rank #3.  

NMIH delivered an earnings surprise in each of the last four quarters, the average being 8.60%. This is depicted in the chart below:

Unum Group: The insurer’s premiums in the to-be-reported quarter are likely to have benefited from solid persistency in the in-force business, better pricing and improved sales in most business segments. An improving rate environment is likely to have supported higher net investment income. The Unum U.S. and Colonial Life segments are likely to have been driven by favorable benefits experience in group product lines, disciplined sales trends, strong persistency in group lines and growth of new product lines. Expenses are likely to have increased because of higher commissions, interest and debt expenses, amortization of deferred acquisition costs and compensation expenses. A continued share buyback is likely to have provided a boost to the bottom line. (Read more: Unum Group to Report Q2 Earnings: Here's What to Expect)

The Zacks Consensus Estimate for UNM’s bottom line is pegged at $2.02, indicating a drop of 1.9% from the year-ago quarter’s reported figure. The company has an Earnings ESP of -1.04% and a Zacks Rank #3.

UNM’s earnings surpassed estimates in three of the last four quarters while missing in one, the average being 3.76%. This is depicted in the chart below:

Voya Financial: Higher-growth, higher-return and capital-light businesses boasting a solid presence are likely to aid second-quarter results. Cost savings, expansion of the distribution network and achievement of efficiencies through automation are likely to have aided the upside.

Higher fee income from business growth, favorable equity markets and net investment spread experience are likely to aid second-quarter results. Higher investment capital returns owing to overall market performance and higher fee revenues are likely to have aided the upside.

The Zacks Consensus Estimate for Voya Financial's second-quarter earnings per share of $2.19 indicates a decrease of 5.1% from the year-ago reported figure. Voya Financial has an Earnings ESP of -0.41% and a Zacks Rank #3.

The bottom line surpassed estimates in three of the last four quarters while missing in one, the average being, the average surprise being 7.94%. The same is depicted in the chart below:

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