Insurance Stocks' Q4 Earnings Due on Jan 31: AFL, MET & More
Better pricing, exposure growth, diversified portfolio, solid retention, favorable renewals, reinsurance agreements and accelerated digitalization are likely to have benefited insurance industry players such as Aflac Incorporated AFL, MetLife Inc MET, AXIS Capital Holdings Limited AXS, Selective Insurance Group, Inc. SIGI and MGIC Investment Corporation MTG in the fourth quarter. All these companies are due to report tomorrow.
Solid retention, exposure growth across business lines and improved pricing are likely to have fueled premiums. Catastrophes continued to provide impetus to policy renewal rates and aided in better pricing in the fourth quarter. Per a report in Business Insurance, U.S. commercial insurance rates rose 5.6% on average in the fourth quarter.
Per reports in Reinsurance News, JP Morgan estimates insured losses in the fourth quarter in the range of $8-$10 billion, largely attributable to Hurricane Otis. Nonetheless, better pricing, reinsurance arrangements, portfolio repositioning, reinsurance covers, favorable reserve development and prudent underwriting are likely to drive an improvement in underwriting results.
Auto premiums are likely to have improved, given increased travel across the world. 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.
Insurers, being beneficiaries of an improving rate environment, are likely to witness improved investment results. A larger 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.
Accelerated digitalization is expected to have saved costs, thus aiding margins. A solid capital position aided insurers in strategic mergers and acquisitions to sharpen their competitive edge, build on a niche, expand geographically and diversify their portfolio. It also helped the industry players to enhance shareholders' value via share buybacks and raising dividends.
Let’s take a sneak peek into how the abovementioned insurers are poised prior to their fourth-quarter 2023 earnings on Jan 31.
According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Aflac’s Japan segment is likely to have benefited from higher sales fetched by its cancer insurance product. The U.S. business is expected to have gained from higher sales and strong persistency rates in the quarter under review, which are likely to have contributed to improved net premiums earned. Margins are likely to have received an impetus from lower benefits and claims, and a decline in acquisition and operating expenses. (Read more: Can Aflac's Q4 Earnings Beat on Strong US Business?)
The Zacks Consensus Estimate for AFL’s fourth-quarter earnings per share of $1.47 indicates a 14% increase from the year-ago quarter reported figure. The company has an Earnings ESP of +0.57% and a Zacks Rank #2 (Buy).
AFL’s earnings surpassed estimates in the last four reported quarters. This is depicted in the chart below:
Aflac Incorporated Price and EPS Surprise
Aflac Incorporated price-eps-surprise | Aflac Incorporated Quote
MetLife’s fourth-quarter results are likely to benefit from rising premiums from most of the businesses and investment income. Improving profits from the U.S., Asia and Latin American operations are expected to have positioned the company for significant growth from the year-ago period and a potential earnings beat. However, rising costs and expenses are likely to have partially offset the profit growth levels in the to-be-reported quarter. The Zacks Consensus Estimate for the bottom line is pegged at $1.95, indicating a 25.8% increase from the year-ago quarter’s reported figure. The company has an Earnings ESP of +1.54% and a Zacks Rank #3. (Read more: Will Rising Premiums Drive MetLife's Q4 Earnings?)
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MET’s earnings beat estimates in one of the last four reported quarters and missed in the other three. The same is depicted in the chart below:
MetLife, Inc. Price and EPS Surprise
MetLife, Inc. price-eps-surprise | MetLife, Inc. Quote
Axis Capital Holdings’ fourth-quarter results are likely to benefit from the repositioned portfolio and markets offering profitable growth, lower volatility, strong presence and better pricing. The Insurance segment is likely to have gained from favorable market conditions, increased business opportunities, rate increases on renewal and continued strong retentions.
The Reinsurance segment is expected to have benefited from an increase in accident and health, motor, catastrophe and credit and surety lines. However, rising expenses are expected to have weighed on margins.
The Zacks Consensus Estimate for AXS’s fourth-quarter bottom line is pegged at $1.25, indicating a 164.1% decrease from the year-ago quarter reported figure. The company has an Earnings ESP of 0.00% and a Zacks Rank #3.
AXS’s earnings surpassed estimates in the last four quarters. This is depicted in the chart below:
Axis Capital Holdings Limited Price and EPS Surprise
Axis Capital Holdings Limited price-eps-surprise | Axis Capital Holdings Limited Quote
Selective Insurance Group’s fourth-quarter results are likely to benefit from strong renewal, fuel price increases, exposure growth, favorable excess and surplus (E&S) lines marketplace conditions and higher income earned on fixed-income securities portfolio. However, increasing loss and loss expenses are likely to have weighed on margin expansion.
The Zacks Consensus Estimate for the bottom line is pegged at $1.92, indicating a 31.5% increase from the year-ago quarter reported figure. The company has an Earnings ESP of +0.42% and a Zacks Rank #4 (Sell).
SIGI’s earnings missed estimates in two of the last four quarters and matched estimates in the remaining two. This is depicted in the chart below:
Selective Insurance Group, Inc. Price and EPS Surprise
Selective Insurance Group, Inc. price-eps-surprise | Selective Insurance Group, Inc. Quote
MGIC Investment’s fourth-quarter results are likely to have benefited from solid insurance in force, a decline in loss and claims payments, lower delinquency and better housing market fundamentals. Favorable credit trends and refinances are likely to have driven an increase in new business written.
The Zacks Consensus Estimate for MTG’s bottom line is pegged at 57 cents, indicating a 10.9% decrease from the year-ago quarter reported figure. The company has an Earnings ESP of 0.00% and a Zacks Rank 2.
MTG’s earnings surpassed estimates in the last four quarters. This is depicted in the chart below:
MGIC Investment Corporation Price and EPS Surprise
MGIC Investment Corporation price-eps-surprise | MGIC Investment Corporation Quote
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
MGIC Investment Corporation (MTG) : Free Stock Analysis Report
MetLife, Inc. (MET) : Free Stock Analysis Report
Aflac Incorporated (AFL) : Free Stock Analysis Report
Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
