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Insurance Stocks Q3 Earnings Due on Oct 25: CINF, AJG & More

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The third-quarter earnings season is picking up its pace with 84 S&P 500 companies (collectively accounting for 22.3% of the index’s total market capitalization) having already reported their quarterly numbers as of Oct 19.

Per the latest Earnings Preview, total earnings of these 84 participants increased 19.2% from the same period last year on 8.4% higher revenues with 82.1% beating EPS estimates and 61.9% surpassing revenue estimates. The S&P 500 companies are expected to witness bottom-line growth of 19.2% on 7.2% revenue rise.

By the end of this week, we expect to have a clear picture of this space as by then, 154 of index members are scheduled to release their financial figures.

Coming to projections for the Zacks Finance sector, which constitute finance stocks, total Q3 earnings are likely to surge 35.4% year over year on 3.2% higher revenues as of Oct 17.  For more details on quarterly releases, you can go through the Earnings Preview.

The insurance industry has been reaping benefits from a gradual improvement in interest rates (currently at 2-2.25%) and this in turn, will aid investment income, an important component of insurers’ revenues. Such an accelerated pace of rate hikes denotes strength in economy, which might prove beneficial for the industry when it comes to driving results for this industry players.

Also, the insurers have been witnessing a better pricing environment since the fourth quarter of 2017, which has led to a significant rise in premiums and the momentum will hopefully sustain as well. Additionally, a lower level of tax incidence (effective first-quarter 2018) has been contributing to the insurers’ bottom line. This will further not only support margin expansion but also hike dividend payouts owing to higher net profit available to shareholders.

With the insurance industry boasting an all-time high capital level, strategic mergers and buyouts (an important trend in the industry this year) have become easier to pursue and invest in. This apart, the insurers stand to benefit from a broader invested asset base and alternative assets.

The insurers displayed better-than-expected underwriting results during the first half of 2018 in absence of major catastrophic events. Even though the third quarter will bear the brunt of Hurricane Florence, it will still not be as devastating as the damages suffered last year. Although the aforementioned cat occurrence is likely to impact results in the soon-to-be-reported quarter, the insurers are still not wary of a huge dent in their underwriting performance.

Let’s find out how the following insurers are placed ahead of their third-quarter releases on Oct 25.

Cincinnati Financial Corporation CINF has likely witnessed premium growth in the to-be-reported quarter owing to several premium growth initiatives undertaken by the company, price increases as well as probable higher premiums across its business lines.

Lower tax incidence and consistent share repurchases have possibly supported this P&C insurer’s bottom line in the third quarter.

However, the company has provided preliminary loss estimates that might impact the insurer’s results. The insurer is projected to incur pre-tax catastrophe loss of about $120 million, bearing an effect of around 950-1000 basis points (bps) on the third-quarter combined ratio based on the predicted P&C earned premiums.

An Earnings ESP of 0.00% and a Zacks Rank 1 (Strong Buy) makes positive earnings surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. (read more: Will Cat Loss Ail Cincinnati Financial’s Q3 Earnings?)

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

Cincinnati Financial Corporation Price and EPS Surprise

Cincinnati Financial Corporation Price and EPS Surprise | Cincinnati Financial Corporation Quote

Arthur J. Gallagher & Co. AJG is likely to report top-line growth in the soon-to-be-reported quarter, mainly driven by organic sales as well as strategic mergers and acquisitions. Aided by strong growth across all divisions, organic growth at its Brokerage segment likely have improved.

However, the insurance broker will probably incur a noticeable increase in expenses, primarily due to higher compensation and operating expenses that can limit the operating margin expansion.

Arthur J. Gallagher has an Earnings ESP of -0.35% and a Zacks Rank #3, which leaves surprise prediction inconclusive. (read more: Arthur J. Gallagher Q3 Earnings: What’s in Store?)

Arthur J. Gallagher & Co. Price and EPS Surprise

Arthur J. Gallagher & Co. Price and EPS Surprise | Arthur J. Gallagher & Co. Quote

The Hartford Financial Services Group, Inc. HIG is estimated to retain its focus on investment strategy, disciplined pricing and book of business management strategy, which has probably boosted its earnings for the quarter to be reported. Hartford Financial is feared to have witnessed stable loss cost trends during the quarter under review.

The company’s Commercial Lines business is expected to contribute to the company’s top line. The performance might also be fueled by the Group Benefit and Mutual Funds segments.

However, akin to the previous few quarters, the company is likely to incur catastrophe loss because of its high exposure to the same.

Hartford Financial has an Earnings ESP of -1.10% and a Zacks Rank of 3, which makes surprise prediction difficult. (read more: Hartford Financial Q3 Earnings: What’s in the Cards?)

The Hartford Financial Services Group, Inc. Price and EPS Surprise


The Hartford Financial Services Group, Inc. Price and EPS Surprise | The Hartford Financial Services Group, Inc. Quote

In the first quarter, Marsh & McLennan Companies, Inc. MMC implemented changes with a goal to streamline the organization through reduced management layers and more common structures across regions and businesses. The actions taken will likely result in total restructuring charges and we expect a portion of the same to be incurred during the third quarter.

The company saw closure of several acquisitions in the second quarter, favoring its annualized revenues in turn. The benefits of these consolidations along with the older transactions should get reflected in the earnings this to-be reported quarter.

However, Mercer's Defined Benefit (DB) Consulting business should see a decline in earnings in the to-be reported quarter, mainly due to softness in project-related work across the United States as well as the United Kingdom and lower new business wins in the United Kingdom compared with last year’s records.

Marsh & McLennan has an Earnings ESP of -2.18% and a Zacks Rank of 4, which makes surprise prediction difficult. (read more: What’s in Store for Marsh & McLennan in Q3 Earnings?)

Marsh & McLennan Companies, Inc. Price and EPS Surprise

Marsh & McLennan Companies, Inc. Price and EPS Surprise | Marsh & McLennan Companies, Inc. Quote


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Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report
Marsh & McLennan Companies, Inc. (MMC) : Free Stock Analysis Report
The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
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