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7 Insurers Poised for Q2 Outperformance on Multiple Tailwinds

Tanuka De

The Finance sector is set to report second-quarter financial numbers from next week. Per the latest Earnings Preview, Finance is one of the seven Zacks sectors likely to deliver double-digit earnings growth. Earnings for the sector are expected to increase 3.2% on 6.3% higher revenues.

Integral to the Finance sector, insurers are expected to deliver better numbers. Insurance industry earnings are estimated to grow 2.7% on 10.4% higher revenues.

Insurers are likely to have benefited from a benign catastrophe environment, improved pricing, reinsurance agreements, compelling products and service portfolio, adoption of technologies to curb operational costs and deeper reach in the second quarter. Improved employment scenario along with rising wages is expected to boost policy sales driving premiums higher.

The insurance industry has gained 6.8% during the second quarter, outperforming the S&P 500 Index’s rise of 2.6% and the Finance sector’s increase of 2.4%.

The second quarter of a year does not bear the impact of the hurricane season that causes major damages and weighs on underwriting profitability of insurers. Underwriting profitability is expected to exhibit improvement on better pricing and underwriting practice. Per Willis Towers Watson plc’s Commercial Lines Insurance Pricing Survey, most of the commercial insurance lines should witness rate increase, except for workers compensation and international liability. Further, portfolio repositioning and reinsurance covers should help insurers withstand any deficits.

The Fed has not raised rates so far this year and kept it within its target range of 2.25% to 2.5%. Insurers, who are major beneficiaries of a rising rate environment because of their sensitivity to interest rates, are well poised amid uncertainties, given their strong fundamentals.

Adoption of technologies like artificial intelligence (AI), robotic process automation (RPA), cognitive intelligence (CI) or blockchain should help insurers curb operational costs.

Also, a sturdy capital level widens scope for capital deployment to pursue growth initiatives as well as reward shareholders via dividend hikes, special dividends and share buybacks.

Potential Q2 Outperformers

With the help of our Zacks Stock Screener, we have identified a few stocks poised to outshine the Zacks Consensus Estimate in the second-quarter reporting cycle.  These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a favorable Zacks Rank — and are likely to surpass expectations. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Also, these stocks have a solid earnings history.

Arch Capital Group Ltd. ACGL provides property, casualty, and mortgage insurance and reinsurance products worldwide.
Zacks Rank #2 (Buy)
Earnings ESP: +7.64%
Average four-quarter positive surprise: 14.83%

The Progressive Corporation PGR provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services primarily in the United States.
Zacks Rank #3 (Hold)
Earnings ESP: +1.04%
Average four-quarter positive surprise: 6.02%

Radian Group Inc. RDN engages in the mortgage and real estate services business in the United States.
Zacks Rank #2
Earnings ESP: +0.24%
Average four-quarter positive surprise: 10.28%

Health Insurance Innovations, Inc. HIIQ operates as a cloud-based technology platform and distributor of individual and family health insurance plans, and supplemental products in the United States.
Zacks Rank #1
Earnings ESP: +0.78%
Average four-quarter positive surprise: 5.47%

Chubb Limited CB provides insurance and reinsurance products worldwide.
Zacks Rank #3 (Hold)
Earnings ESP: +1.67%
Average four-quarter positive surprise: 3.00%

RenaissanceRe Holdings Ltd. RNR provides reinsurance and insurance products in the United States and internationally.
Zacks Rank #1
Earnings ESP: +30.48%
Average four-quarter positive surprise: 151.82%

W. R. Berkley Corporation WRB operates as a commercial lines writer in the United States and internationally.
Zacks Rank #3
Earnings ESP: +13.27%
Average four-quarter positive surprise: 32.07%

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Radian Group Inc. (RDN) : Free Stock Analysis Report
 
Health Insurance Innovations, Inc. (HIIQ) : Free Stock Analysis Report
 
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
 
RenaissanceRe Holdings Ltd. (RNR) : Free Stock Analysis Report
 
W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
The Progressive Corporation (PGR) : Free Stock Analysis Report
 
Chubb Limited (CB) : Free Stock Analysis Report
 
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