5 Insurers Set to Outperform Estimates This Earnings Season
Per the latest Earnings Preview, the Finance sector’s second-quarter 2023 earnings are expected to increase 10.3%. Revenues are estimated to rise 13.5%. 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, higher-than-expected cat losses are likely to have weighed on profitability
With the help of the Zacks Stock Screener, we have identified five insurers, namely, Arch Capital Group Ltd. ACGL, Assurant Inc. AIZ, American Equity Investment Life Holding Company AEL, Aon AON and Aflac Incorporated AFL, which are poised to outshine 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
Insurers are likely to deliver improved investment results. They are beneficiaries of an improved rate environment. The second quarter witnessed one rate hike by the Fed. A larger investment asset base, higher reinvestment rate and alternative investments in private equity, hedge funds and real estate among others coupled with an improving rate environment are expected to have aided net investment income. Net investment income is an important component of insurers’ top line.
Life insurers have been redesigning products, focusing on protection products. Increasing awareness and demand for protection products are likely to have driven sales. 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.
The second quarter of 2023 bore the brunt of June storms. JP Morgan estimates insured losses in the second quarter to be about $10 billion as per a report published in Reinsurance News. Nonetheless, better pricing, reinsurance arrangements, portfolio repositioning, reinsurance covers, favorable reserve development and prudent underwriting are likely to drive an improvement in underwriting results.
The players continue to make investments in digitalization, which, in turn, is likely to have saved costs and driven margin expansion. Riding on the strength of a solid capital position, insurers engaged in strategic buyouts and mergers, built on a niche, expanded globally, diversified their portfolio and deployed capital to make dividend hikes and pay special dividends. 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. Premiums in the second quarter are expected to have benefited from growth in most lines of business, primarily related to rate increases, new business opportunities and gains in existing accounts in the Insurance and the Reinsurance segments. ACGL is expected to have gained from better pricing and increased exposure, which are likely to have aided underwriting profitability
The Zacks Consensus Estimate for ACGL’s second-quarter earnings is pegged at $1.65, suggesting an increase of 23.1% from the year-ago reported figure. ACGL has an Earnings ESP of +1.57% 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
Assurant is a global provider of risk management solutions in the housing and lifestyle markets. The Global Lifestyle segment is expected to have benefited from mobile protection program growth in North America, higher Connected Living earnings and strong prior period sales in Global Automotive. Higher net investment income, after client profit sharing, favorable loss experience in select domestic ancillary products and expansion across distribution channels are expected to have aided Global Automotive.
The Zacks Consensus Estimate for AIZ’s second-quarter earnings is pegged at $2.60, suggesting a decrease of 11.9% from the year-ago reported figure. AIZ has an Earnings ESP of +0.52% and a Zacks Rank #3.
Assurant, Inc. Price and EPS Surprise
Assurant, Inc. price-eps-surprise | Assurant, Inc. Quote
American Equity Investment is a leader in the development and sale of fixed index and fixed rate annuity products. Expansion into new verticals, the increasing popularity of index products in the market and an improving interest rate environment favoring investment spread are likely to aid quarterly results. However, increasing expenses are likely to have weighed on margins.
The Zacks Consensus Estimate for AEL’s second-quarter earnings is pegged at $1.67, suggesting an increase of 70.4% from the year-ago reported figure. AEL has an Earnings ESP of +1.70% and a Zacks Rank #1.
American Equity Investment Life Holding Company Price and EPS Surprise
American Equity Investment Life Holding Company price-eps-surprise | American Equity Investment Life Holding Company Quote
Aon offers risk management services, insurance and reinsurance brokerage and human resource consulting. Its Commercial Risk Solutions is likely to have benefited from strong business generation and retention. Enhancement in offerings, platforms and tools and clients’ increasing attention toward the health of employees, engagement and well-being are likely to have supported health and benefits, and the human capital business. Improved returns from alternative investments are likely to have aided net investment income.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.82, indicating an increase of 7.2% from the year-ago reported figure. AON has an Earnings ESP of +2.56% and a Zacks Rank #3.
Aon plc Price and EPS Surprise
Aon plc price-eps-surprise | Aon plc Quote
Aflac provides supplemental health and life insurance products. Revenues of Aflac are likely to have benefited from growing sales within its U.S. segment. Multiple cost-control efforts are likely to have aided margin.
The Zacks Consensus Estimate for AFL’s second-quarter earnings is pegged at $1.42, implying a decrease of 2.7% year over year. It has an Earnings ESP of +1.41% and a Zacks Rank #3.
Aflac Incorporated Price and EPS Surprise
Aflac Incorporated price-eps-surprise | Aflac Incorporated Quote
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