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Insurance Stocks' Q3 Earnings Due on Oct 31: AFL, CINF & More

The insurance industry is likely to have benefited from prudent rate increases, robust retention, growing interest rates, reduced mortality claims and significant technology advancements in the third quarter of 2022. However, an active catastrophe environment is likely to have acted as a drag on the margins for insurers. Some of the insurance companies like Aflac Incorporated AFL, Cincinnati Financial Corporation CINF, CNA Financial Corporation CNA and CNO Financial Group, Inc. CNO are set to report their respective third-quarter 2022 earnings on Oct 31.

The insurance space is housed within the broader Finance sector (one of the 16 broad Zacks sectors within the Zacks Industry classification). The latest Earnings Preview indicates that the total earnings of finance companies for third-quarter 2022 are projected to decline 7.4% from the year-ago quarter’s reported figure, while revenues of these companies are expected to improve 3.8%.

Factors Likely to Decide the Fate of Insurance Stocks in Q3

Premiums, one of the most significant contributors to an insurer’s top line, are likely to have gained from an improved pricing environment, exposure growth and solid customer retention rates in the third quarter. Though an active catastrophe environment comes with its own share of worries, the same usually accelerates the policy renewal rate and prompts insurers to implement rate hikes for seamless claim payments.

Diversified portfolios, which minimize concentration risks, are also likely to have acted as catalysts for insurers’ third-quarter premiums.

Per the Marsh Global Insurance Market Index, insurance pricing across the United States improved 5% in the to-be-reported quarter. Property insurance pricing rose 8% in the third quarter, marking the 20th straight quarter of price increases in the business line.

An economy recovering from the ill effects of the COVID-19 pandemic is likely to have resumed commercial and industrial activities, which in turn, might have generated higher premiums in the to-be-reported quarter following solid demand for workers’ compensation insurance.

However, the underwriting results of insurers with exposure to property and casualty (P&C) line of business might have taken a hit from catastrophe losses stemming from Hurricane Ian. Swiss Re expects the deadly storm to produce a preliminary total insured market loss in the range of $50-$65 billion. Nevertheless, reinsurance covers and a favorable reserve development might have kept the insurers ready to counter catastrophe losses and shield their underwriting results.

An improving interest rate scenario is expected to have boosted investment yields in the third quarter of those insurers with exposure to rate-sensitive products. Lower mortality rates resulting from the receding effects of the pandemic are likely to have declined claim payments by life insurers. This, in turn, is expected to have driven their underwriting results and subsequently, improved the combined ratio in the to-be-reported quarter.

The insurance industry pursues significant technology investments in blockchain, AI and advanced analytics to ramp up claim payments and automate processes. These investments are likely to have saved costs and aided insurers’ margins in the third quarter.  

Let’s find out how the following insurers are placed before their third-quarter 2022 earnings on Oct 31.

The Zacks model suggests that a company needs to have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase 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.

You can see the complete list of today's Zacks #1 Rank stocks here.

Aflac: Aflac is likely to have gained on a strong U.S. segment, which in turn, is expected to have benefited from the Fed interest rate hikes in the third quarter. However, operations in its Japan segment are likely to have been affected by a lower interest rate environment. On a hopeful note, AFL’s expenses are likely to have declined in the to-be-reported quarter, thanks to its multiple cost-curbing efforts. This might have driven its margins. (Read more: Can Declining Premiums Affect Aflac's Q3 Earnings?)

The Zacks Consensus Estimate for Aflac’s third-quarter 2022 earnings per share of $1.22 indicates a decline of 20.3% from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $4.6 billion, suggesting an 11.7% fall from the year-ago quarter’s reported figure.

AFL has an Earnings ESP of -0.21% and a Zacks Rank #3.

Aflac’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 9.04%. The same is depicted in the chart below:

Aflac Incorporated Price and EPS Surprise

Aflac Incorporated Price and EPS Surprise
Aflac Incorporated Price and EPS Surprise

Aflac Incorporated price-eps-surprise | Aflac Incorporated Quote

Cincinnati Financial: In the third quarter, property casualty premiums of Cincinnati Financial are likely to have benefited from premium growth initiatives, increased property casualty agency new business written premiums, improved standard lines new business and higher premiums from Cincinnati Re. Net investment income is expected to have gained on better dividend income and interest income, and a solid cash flow from operating activities. CINF anticipates pretax catastrophe losses of roughly $252 million in the third quarter, among which $220 million is likely to have stemmed from Hurricane Ian. (Read more: What Awaits Cincinnati Financial in Q3 Earnings?)

The Zacks Consensus Estimate for CINF’s third-quarter 2022 earnings per share of 71 cents, indicating a 44.5% plunge from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $2.1 billion, suggesting 12.4% growth from the year-ago quarter’s reported figure.

Cincinnati Financial has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).

CINF’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 2.82%. The same is depicted in the chart below:

Cincinnati Financial Corporation Price and EPS Surprise

Cincinnati Financial Corporation Price and EPS Surprise
Cincinnati Financial Corporation Price and EPS Surprise

Cincinnati Financial Corporation price-eps-surprise | Cincinnati Financial Corporation Quote

CNA Financial: Results of the insurer are likely to have been driven by higher net earned premiums, attributable to rate increases, new business growth and solid retention rates in the third quarter. Portfolio repositioning might have boosted underwriting results of CNA Financial. However, its investment income is expected to have suffered a blow from limited partnership and common stock investments.

The Zacks Consensus Estimate for CNA’s third-quarter 2022 earnings per share of 61 cents indicates a 29.9% drop from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $2.6 billion, suggesting 2% growth from the year-ago quarter’s reported figure.

CNA Financial has an Earnings ESP of -37.19% and a Zacks Rank of 3.

CNA’s earnings outpaced estimates in two of the trailing four quarters and missed the same twice, the average beat being 10.54%. The same is depicted in the chart below:

CNA Financial Corporation Price and EPS Surprise

CNA Financial Corporation Price and EPS Surprise
CNA Financial Corporation Price and EPS Surprise

CNA Financial Corporation price-eps-surprise | CNA Financial Corporation Quote

CNO Financial: CNO Financial’s third-quarter results are expected to gain from declining expenses, courtesy of its cost-containment program. However, lower insurance policy income is likely to have caused a headwind to revenue growth in the to-be-reported quarter.

The Zacks Consensus Estimate for CNO’s third-quarter 2022 earnings per share of 48 cents, which indicates a 33.3% fall from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $899.7 million, suggesting a 7.1% decline from the prior-year quarter’s reading.

CNO Financial has an Earnings ESP of -0.35% and is Zacks #3 Ranked.

CNO’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average beat being 30.50%. The same is depicted in the chart below:

CNO Financial Group, Inc. Price and EPS Surprise

CNO Financial Group, Inc. Price and EPS Surprise
CNO Financial Group, Inc. Price and EPS Surprise

CNO Financial Group, Inc. price-eps-surprise | CNO Financial Group, Inc. Quote

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
 
Aflac Incorporated (AFL) : Free Stock Analysis Report
 
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
 
CNA Financial Corporation (CNA) : Free Stock Analysis Report
 
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