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4 Insurers Set to Outshine Estimates This Earnings Season
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Per the latest Earnings Preview, the Finance sector’s second-quarter 2024 earnings are expected to improve 14.7%. Revenues are estimated to rise 7.2%. Results of Insurance, one of the Finance sector industries, are likely to reflect better pricing and exposure growth, accelerated digitalization and an improved interest rate. However, cat losses are likely to have weighed on profitability.
With the help of the Zacks Stock Screener, we have identified four insurers, namely, Arch Capital Group Ltd. (ACGL - Free Report) , The Allstate Corporation (ALL - Free Report) , Prudential Financial Inc. (PRU - Free Report) and Reinsurance Group of America Inc. (RGA - Free Report) , which are poised to outperform the Zacks Consensus Estimate in second-quarter earnings. These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy), #3 (Hold) — to surpass expectations. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors Likely to Impact Q2 Results
Underwriting results, reflecting the performance of insurers, are likely to benefit from better pricing, increased exposure, solid retention, new business growth, portfolio repositioning, proper segmentation, reinsurance covers and favorable reserve development.
Non-life insurers, by the nature of their business, are exposed to catastrophe losses. Thus, their profitability is vulnerable to catastrophe losses. The second quarter faced the wrath of severe convective storms, dragging underwriting performance and, in turn, weighing on the combined ratio. Per a report in S&P Global, “There were nine weather events in the second quarter that generated at least $1 billion in inflation-adjusted economic losses, according to NOAA's National Centers for Environmental Information.”
Higher catastrophe losses continue to provide impetus to policy renewal rates. However, global commercial pricing remained flat in the to-be-reported quarter, largely attributable to heightened competition among insurers in the global property market, per the Global Insurance Market Index released by Marsh.
Auto premiums are likely to have improved, given increased travel across the world. On the flip side, the loss ratio is likely to have been hampered, given the increased severity per claim due to higher vehicle repair and medical costs.
A stronger mortgage market is likely to have favored mortgage insurance premiums. A low unemployment rate is likely to have aided commercial insurance and group insurance.
Life insurers have been redesigning products, focusing on protection products. The quarter is likely to have witnessed solid sales, given a rise in demand for protection products. 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.
Investment income is expected to have improved, given a larger investment asset base, higher reinvestment rate and alternative investments in an improved rate environment.
Continued investment in technological advancements is likely to have saved costs and improved efficiency, in turn, leading to margin expansion. Share buybacks are expected to have provided an additional upside to the bottom line.
Potential Q2 Outperformers
Arch Capital Group offers insurance, reinsurance and mortgage insurance across the world. Its net investment income is likely to have benefited from higher interest rates, growth in invested assets and strong operating cash flows. Expenses are expected to have increased in the to-be-reported quarter, driven by higher losses and loss adjustment expenses. Despite catastrophe losses that induce volatility in profits, underwriting profitability is likely to have benefited from better pricing, rate increases and a balanced business mix. (Read more: Is a Beat in Store for Arch Capital in Q2 Earnings?).
The Zacks Consensus Estimate for ACGL’s second-quarter earnings is pegged at $2.17, suggesting an increase of 13% from the year-ago 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.
Allstate is the third-largest property-casualty insurer and the largest publicly-held personal lines carrier in the United States. Rate increases, product enhancements, changes in the business mix, and accretion from strategic acquisitions are likely to have benefited premiums in the to-be-reported quarter. Cost containment is likely to have driven expense ratio improvement. Catastrophe loss, as well as higher auto claims, is expected to have induced volatility in underwriting profitability, thus weighing on the combined ratio.
The Zacks Consensus Estimate for ALL’s second-quarter earnings is pegged at 33 cents, suggesting an increase of 107.5% from the year-ago reported figure. ALL has an Earnings ESP of +36.50% and a Zacks Rank #3.
Prudential is a financial services leader that offers an array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services. While its U.S. business is likely to have gained from higher spread income, international businesses are likely to have benefited from higher net investment spread results and higher earnings from joint ventures and other operating entities. Expenses are likely to have increased because of higher general and administrative expenses, amortization of deferred policy acquisition costs and interest credited to policyholders’ account balances. (Read more: Will Prudential Pull Off a Surprise in Q2 Earnings?).
The Zacks Consensus Estimate for second-quarter earnings is pegged at $3.43, indicating an increase of 16.7% from the year-ago reported figure. PRU has an Earnings ESP of +0.11% and a Zacks Rank #3. The company expects second-quarter 2024 earnings per share of $3.36.
Reinsurance Group is a leading global provider of traditional life and health reinsurance and financial solutions. Second-quarter results are likely to benefit from product-line expansion, continued strong demand, prudent underwriting and favorable group and individual life experiences. An increase in the average invested asset base and higher risk-free rates earned on new investments are likely to favor investment results. However, expenses are expected to have increased due to higher claims and other policy benefits, interest credited, operating costs and interest expense.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $4.94, indicating an increase of 12.3% from the year-ago reported figure. RGA has an Earnings ESP of +2.81% and a Zacks Rank #1.
Reinsurance Group of America, Incorporated Price and EPS Surprise
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4 Insurers Set to Outshine Estimates This Earnings Season
Per the latest Earnings Preview, the Finance sector’s second-quarter 2024 earnings are expected to improve 14.7%. Revenues are estimated to rise 7.2%. Results of Insurance, one of the Finance sector industries, are likely to reflect better pricing and exposure growth, accelerated digitalization and an improved interest rate. However, cat losses are likely to have weighed on profitability.
With the help of the Zacks Stock Screener, we have identified four insurers, namely, Arch Capital Group Ltd. (ACGL - Free Report) , The Allstate Corporation (ALL - Free Report) , Prudential Financial Inc. (PRU - Free Report) and Reinsurance Group of America Inc. (RGA - Free Report) , which are poised to outperform the Zacks Consensus Estimate in second-quarter earnings. These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy), #3 (Hold) — to surpass expectations. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors Likely to Impact Q2 Results
Underwriting results, reflecting the performance of insurers, are likely to benefit from better pricing, increased exposure, solid retention, new business growth, portfolio repositioning, proper segmentation, reinsurance covers and favorable reserve development.
Non-life insurers, by the nature of their business, are exposed to catastrophe losses. Thus, their profitability is vulnerable to catastrophe losses. The second quarter faced the wrath of severe convective storms, dragging underwriting performance and, in turn, weighing on the combined ratio. Per a report in S&P Global, “There were nine weather events in the second quarter that generated at least $1 billion in inflation-adjusted economic losses, according to NOAA's National Centers for Environmental Information.”
Higher catastrophe losses continue to provide impetus to policy renewal rates. However, global commercial pricing remained flat in the to-be-reported quarter, largely attributable to heightened competition among insurers in the global property market, per the Global Insurance Market Index released by Marsh.
Auto premiums are likely to have improved, given increased travel across the world. On the flip side, the loss ratio is likely to have been hampered, given the increased severity per claim due to higher vehicle repair and medical costs.
A stronger mortgage market is likely to have favored mortgage insurance premiums. A low unemployment rate is likely to have aided commercial insurance and group insurance.
Life insurers have been redesigning products, focusing on protection products. The quarter is likely to have witnessed solid sales, given a rise in demand for protection products. 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.
Investment income is expected to have improved, given a larger investment asset base, higher reinvestment rate and alternative investments in an improved rate environment.
Continued investment in technological advancements is likely to have saved costs and improved efficiency, in turn, leading to margin expansion. Share buybacks are expected to have provided an additional upside to the bottom line.
Potential Q2 Outperformers
Arch Capital Group offers insurance, reinsurance and mortgage insurance across the world. Its net investment income is likely to have benefited from higher interest rates, growth in invested assets and strong operating cash flows. Expenses are expected to have increased in the to-be-reported quarter, driven by higher losses and loss adjustment expenses. Despite catastrophe losses that induce volatility in profits, underwriting profitability is likely to have benefited from better pricing, rate increases and a balanced business mix. (Read more: Is a Beat in Store for Arch Capital in Q2 Earnings?).
The Zacks Consensus Estimate for ACGL’s second-quarter earnings is pegged at $2.17, suggesting an increase of 13% from the year-ago 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 Group Ltd. Price and EPS Surprise
Arch Capital Group Ltd. price-eps-surprise | Arch Capital Group Ltd. Quote
Allstate is the third-largest property-casualty insurer and the largest publicly-held personal lines carrier in the United States. Rate increases, product enhancements, changes in the business mix, and accretion from strategic acquisitions are likely to have benefited premiums in the to-be-reported quarter. Cost containment is likely to have driven expense ratio improvement. Catastrophe loss, as well as higher auto claims, is expected to have induced volatility in underwriting profitability, thus weighing on the combined ratio.
The Zacks Consensus Estimate for ALL’s second-quarter earnings is pegged at 33 cents, suggesting an increase of 107.5% from the year-ago reported figure. ALL has an Earnings ESP of +36.50% and a Zacks Rank #3.
The Allstate Corporation Price and EPS Surprise
The Allstate Corporation price-eps-surprise | The Allstate Corporation Quote
Prudential is a financial services leader that offers an array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services. While its U.S. business is likely to have gained from higher spread income, international businesses are likely to have benefited from higher net investment spread results and higher earnings from joint ventures and other operating entities. Expenses are likely to have increased because of higher general and administrative expenses, amortization of deferred policy acquisition costs and interest credited to policyholders’ account balances. (Read more: Will Prudential Pull Off a Surprise in Q2 Earnings?).
The Zacks Consensus Estimate for second-quarter earnings is pegged at $3.43, indicating an increase of 16.7% from the year-ago reported figure. PRU has an Earnings ESP of +0.11% and a Zacks Rank #3. The company expects second-quarter 2024 earnings per share of $3.36.
Prudential Financial, Inc. Price and EPS Surprise
Prudential Financial, Inc. price-eps-surprise | Prudential Financial, Inc. Quote
Reinsurance Group is a leading global provider of traditional life and health reinsurance and financial solutions. Second-quarter results are likely to benefit from product-line expansion, continued strong demand, prudent underwriting and favorable group and individual life experiences. An increase in the average invested asset base and higher risk-free rates earned on new investments are likely to favor investment results. However, expenses are expected to have increased due to higher claims and other policy benefits, interest credited, operating costs and interest expense.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $4.94, indicating an increase of 12.3% from the year-ago reported figure. RGA has an Earnings ESP of +2.81% and a Zacks Rank #1.
Reinsurance Group of America, Incorporated Price and EPS Surprise
Reinsurance Group of America, Incorporated price-eps-surprise | Reinsurance Group of America, Incorporated Quote