Insurance Stocks' Q4 Earnings on Feb 8: RE, LNC & More
Better pricing, exposure growth, solid retention, favorable renewals, reinsurance agreements and accelerated digitalization in the fourth quarter are likely to have benefited insurance industry players such as Everest Re Group Ltd. RE, Lincoln National Corporation LNC Sun Life Financial Inc. SLF and Radian Group Inc. RDN, which are due to report tomorrow. However, an active catastrophe level is likely to have weighed on their performance.
Premiums are likely to have benefited from continued improved pricing, strong retention and exposure growth across business lines. An active catastrophe environment accelerated the policy renewal rate and aided in better pricing in the fourth quarter.
The fourth quarter of 2022 bore the brunt of winter storm Elliot. Karen Clark & Company estimates industry losses from Elliot to be about $5.4 billion. Nonetheless, better pricing, reinsurance arrangements, portfolio repositioning, reinsurance covers, favorable reserve development and prudent underwriting are likely to drive an improvement in underwriting results.
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.
Insurers, being beneficiaries of an improving rate environment, are likely to witness improved investment results. The last year saw seven rate hikes, with the fourth quarter witnessing two hikes by the Fed. A larger investment asset base 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, apart from enhancing 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 2022 earnings on Feb 8.
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Everest Re’s fourth-quarter results are expected to reflect premium growth, driven by an increase in the reinsurance business and insurance business. Net investment income is likely to have been affected by a decline in limited partnership income. Higher-than-expected cat losses are likely to have weighed on underwriting profitability and thus combined ratio. Rate increase, exposure growth, prudent underwriting and traditional risk management capabilities are likely to have favored the combined ratio. (Read more: Will Everest Re Pull Off a Surprise in Q4 Earnings?)
The Zacks Consensus Estimate for Everest Re’s fourth-quarter earnings per share of $9.29 indicates a 1.9% increase from the year-ago quarter reported figure. The company has an Earnings ESP of +3.73% and a Zacks Rank #3.
RE’s earnings surpassed estimates in three of the last four reported quarters while missing in one. This is depicted in the chart below:
Everest Re Group, Ltd. Price and EPS Surprise
Everest Re Group, Ltd. price-eps-surprise | Everest Re Group, Ltd. Quote
Lincoln National’s top line is expected to have suffered a blow due to reduced fee income and net investment income, partly offset by growing insurance premiums in the fourth quarter. Only the Group Protection segment of Lincoln National is expected to provide an impetus to its quarterly results in the to-be-reported quarter. Drops in average account values and alternative investment income are expected to have dampened the performance of the Annuities as well as Retirement Plan Services segments.
The Zacks Consensus Estimate for the bottom line is pegged at $1.89, indicating a 21.2% increase from the year-ago quarter reported figure. The consensus estimate for revenues is pegged at $4.5 billion, indicating a decrease of 5.1% year over year. The company has an Earnings ESP of -0.84% and a Zacks Rank 5. (Read more: What's in the Cards for Lincoln National's Q4 Earnings?)
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lincoln National’s earnings missed estimates in the last four reported quarters. 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
Sun Life Financial’s fourth-quarter results are likely to benefit from compelling Asia business, growing global asset management business, favorable business mix, growth in mutual fund sales, Hong Kong pension business and business growth. Escalating expenses due to higher operating expenses, commissions and other expenses are likely to have been a dampener.
The Zacks Consensus Estimate for the bottom line is pegged at $1.16, indicating a 4.1% decrease from the year-ago quarter reported figure. The company has an Earnings ESP of +0.58% and a Zacks Rank 2.
SLF’s earnings surpassed estimates in three of the last four quarters, while missing in one. This is depicted in the chart below:
Sun Life Financial Inc. Price and EPS Surprise
Sun Life Financial Inc. price-eps-surprise | Sun Life Financial Inc. Quote
Radian Group’s primary insurance in force is likely to have benefited from continued high levels of the new mortgage insurance business, as well as an increase in persistency. The homegenius business segment should continue to benefit from strong-performing real estate services, asset management and valuation products and services despite minimal foreclosure and real estate-owned activities. Rising expenses, primarily owing to an increase in provision for loss, among others, are likely to have been a dampener.
The Zacks Consensus Estimate for the bottom line is pegged at 87 cents, indicating an 18.7% decrease from the year-ago quarter reported figure. The company has an Earnings ESP of 0.00% and a Zacks Rank 3.
RDN’s earnings surpassed estimates in the last four quarters. This is depicted in the chart below:
Radian Group Inc. Price and EPS Surprise
Radian Group Inc. price-eps-surprise | Radian Group Inc. Quote
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Lincoln National Corporation (LNC) : Free Stock Analysis Report
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