Insurance Stocks to Post Q2 Earnings on Aug 2: LNC, MET & More
Solid retention rates, continued rate increases, an improving interest rate environment and significant accelerated digitalization are expected to boost insurance stocks’ June-quarter results. Product enhancements, changes in the business mix and reinsurance agreements are expected to contribute to the upcoming results. Insurers like Lincoln National Corporation LNC, MetLife, Inc. MET, American Financial Group, Inc. AFG, Radian Group Inc. RDN and MGIC Investment Corporation MTG are set to report their second-quarter earnings on Aug 2. However, an active catastrophe level is likely to have weighed on their performance.
Improved pricing, solid retention and exposure growth across business lines are likely to have aided premiums. An active catastrophe environment accelerated the policy renewal rate and led to better pricing in the first quarter. Per a report by MarketScout, the composite rate for the United States commercial property and casualty lines increased more than 5% in the to-be-reported quarter.
JP Morgan estimates insured losses from major natural catastrophes, driven by storms in the United States, to be less than $10 billion in the second quarter of 2023. Nonetheless, better pricing, reinsurance arrangements, portfolio repositioning, reinsurance covers, favorable reserve development and prudent underwriting are likely to drive an improvement in underwriting results.
With four rate hikes already in 2023, investment income is likely to have improved, as insurers are beneficiaries of a rising rate environment. The Fed had raised its key interest rate by 0.25% and reached a target range of 5.25% to 5.5%, which marked the highest level in 22 years.
A bigger investment asset base, higher reinvestment rate and alternative investments in private equity, hedge funds and real estate among others are expected to have aided net investment income in the second quarter.
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.
Increased travel across the world is likely to have induced higher auto premiums. 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 in the to-be-reported quarter.
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. They also enhanced shareholders' value via share buybacks and dividend increases.
The insurance industry frequently resorts to significant technology investments in blockchain, AI and advanced analytics, which are aimed to improve operational efficiency, enhance cybersecurity and upgrade policy administration. These investments are likely to have curbed costs and aided the margins of insurers in the second quarter.
Insurance Providers Reporting on Aug 2
Against the backdrop discussed above, let’s find out how the following five companies 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 see the complete list of today’s Zacks #1 Rank stocks here.
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Lincoln National: Its revenues are likely to have benefited from strong contribution by the Group Protection segment in the second quarter. The unit is expected to have been aided by expanding premiums resulting from increased sales, prudent price increases and solid persistency rates. The Annuities segment of LNC is likely to have received an impetus from improved net inflows as well as a higher fixed annuity and index variable annuity sales.
The quarterly results of Lincoln National are likely to be affected by feeble contributions from the Retirement Plan Services segment. The Life Insurance segment is likely to have suffered a blow due to a decline in term product sales and continued mortality claims in the to-be-reported quarter. Numerous cost-cutting initiatives are likely to have provided some respite to the margins of Lincoln National in the to-be-reported quarter. (Read more: Can Lower Costs Aid Lincoln National in Q2 Earnings?)
The Zacks Consensus Estimate for the bottom line is pegged at $1.92, indicating a 13.9% decline from the year-ago quarter reported figure. The consensus estimate for revenues is pegged at $4.6 billion, indicating a decrease of 0.8% year over year. The company has an Earnings ESP of +0.76% and a Zacks Rank 3.
Lincoln National’s earnings beat estimates in three of the last four reported quarters and missed in one. The same is depicted in the chart below:
Lincoln National Corporation Price and EPS Surprise
Lincoln National Corporation price-eps-surprise | Lincoln National Corporation Quote
MetLife: Reduced premiums, higher costs and weaker performance in the Retirement & Income Solutions business are likely to have affected MetLife’s second-quarter results. Rising costs and expenses are likely to have adversely impacted the company’s profit levels in the to-be-reported quarter. The company is expected to have witnessed lower profits from Retirement & Income Solutions and MetLife Holdings businesses in the second quarter. (Read more: Will Reduced Premiums Hurt MetLife's Q2 Earnings?)
The Zacks Consensus Estimate for MET’s second-quarter 2022 earnings is pegged at $1.85 per share, indicating a 7.5% decline from the prior-year quarter’s reported figure. The consensus mark for revenues is pegged at $17.13 billion, suggesting a 6.4% decline from the year-ago quarter’s reported figure.
MetLife has an Earnings ESP of 0.00% and a Zacks Rank #3. MET’s earnings beat estimates in two of the last four reported quarters and missed in the other two. The same is depicted in the chart below:
MetLife, Inc. Price and EPS Surprise
MetLife, Inc. price-eps-surprise | MetLife, Inc. Quote
American Financial Group: Its second-quarter results are likely to benefit from strong performance across Property and transportation, Specialty casualty, Specialty financial and other specialty businesses as well as increasing renewal rate in the entire P&C group. Exposure to cat loss and rising expenses are likely to have weighed on profitability.
The Zacks Consensus Estimate for AFG’s bottom line is pegged at $2.85, indicating flat year-over-year numbers. The consensus mark for revenues is pegged at $1.85 billion, suggesting a 16.3% increase from the year-ago quarter’s reading. The company has an Earnings ESP of -1.40% and a Zacks Rank #4 (Sell).
AFG’s earnings surpassed estimates in each of the last four quarters. This is depicted in the chart below:
American Financial Group, Inc. Price and EPS Surprise
American Financial Group, Inc. price-eps-surprise | American Financial Group, Inc. Quote
Radian Group: Higher net investment income and growth in monthly premium policy insurance in force are likely to aid Radian Group’s second-quarter results. Higher mortgage interest rates are expected to have helped RDN’s persistency. Lower claim payments are also likely to have boosted margins in the second quarter. However, the positives are expected to have been offset by lower premiums, rising expenses stemming from inflationary pressures and increased operating costs.
The Zacks Consensus Estimate for second-quarter earnings and revenues is pegged at 76 cents per share and $289.1 million, respectively, indicating declines of 44.1% and 4.1% from the respective year-earlier period’s readings. Radian Group has an Earnings ESP of 0.00% and is a Zacks #3 Ranked player.
RDN’s bottom line beat the Zacks Consensus Estimate in all the last four quarters, the average surprise being 38.7%. This is depicted in the chart below:
Radian Group Inc. Price and EPS Surprise
Radian Group Inc. price-eps-surprise | Radian Group Inc. Quote
MGIC Investment: The performance of this insurer is likely to have been driven by higher new business written and solid persistency rates leading to a rise in premiums in the second quarter. Claim payments are likely to have witnessed a downtrend in the to-be-reported quarter. However, escalating underwriting and other expenses are expected to have exerted pressure on the margins of MGIC Investment.
The Zacks Consensus Estimate for MTG’s second-quarter 2022 earnings is pegged at 55 cents per share, which hints at a 32.1% fall from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $294.3 million, suggesting a 1.1% decline from the prior-year quarter’s reported figure.
MGIC Investment has an Earnings ESP of 0.00% and a Zacks Rank of 4.
MTG’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 30.18%. The same is depicted in the chart below:
MGIC Investment Corporation Price and EPS Surprise
MGIC Investment Corporation price-eps-surprise | MGIC Investment Corporation Quote
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Lincoln National Corporation (LNC) : Free Stock Analysis Report
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