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P&C Insurance Stocks' Q3 Earnings on Oct 26: RE, AXS & ACGL

Improved pricing, exposure growth, solid retention, favorable renewals, reinsurance agreements and accelerated digitalization in the third quarter are likely to have benefited property and casualty insurance industry players such as Everest Re Group Limited RE, AXIS Capital Holdings Limited AXS and Arch Capital Group Ltd. ACGL, which are due to report tomorrow. However, an active catastrophe level is likely to have weighed on the upside.

Better 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 aided in better pricing in the third quarter.

Improved pricing, reinsurance arrangements, portfolio repositioning, reinsurance covers, favorable reserve development and prudent underwriting are likely to drive an improvement in underwriting results. The third quarter of 2022 bore the brunt of Hurricane Ian. Swiss Re estimates claims stemming from Hurricane Ian claims in the range of $50 billion to $65 billion.

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 expected to come up with improved investment results. The third quarter itself saw two rate hikes. 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 to involve in strategic mergers and acquisitions to sharpen their competitive edge, build on a niche, expand geographically, and diversify their portfolio apart from engaging in share buybacks and raising dividends in the third quarter.

Let’s take a sneak peek into how the abovementioned insurers are poised prior to their third-quarter 2022 earnings on Oct 26.

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.

Everest Re’s premium growth is likely to have benefited from an increase in the reinsurance business and insurance business, a positive impact from the movement of foreign exchange rates and high renewal retention. Improved pricing and prudent underwriting are likely to have aided underwriting profitability and combined ratio. RE estimates third-quarter preliminary catastrophe loss of $730 million pre-tax, primarily due to Hurricane Ian and other global catastrophe events. The Reinsurance segment is estimated to absorb $500 million cat loss from Hurricane Ian and $120 million from all other catastrophe incidents. The Insurance segment is estimated to absorb $100 million cat loss from Hurricane Ian and $10 million loss from other catastrophe events. (Read more: What's in the Cards for Everest Re in Q3 Earnings?)

The Zacks Consensus Estimate for Everest Re’s third-quarter loss per share of $6.08 indicates a 353.7% decrease from the year-ago quarter reported figure. The company has an Earnings ESP of 0.00% and a Zacks Rank 4 (Sell).  

RE’s earnings surpassed estimates in two of the last four reported quarters while missing in the other two. This is depicted in the chart below:

Everest Re Group, Ltd. Price and EPS Surprise

Everest Re Group, Ltd. Price and EPS Surprise
Everest Re Group, Ltd. Price and EPS Surprise

Everest Re Group, Ltd. price-eps-surprise | Everest Re Group, Ltd. Quote

AXIS Capital’s third-quarter results are likely to benefit from price increase, repositioning of the portfolio and prudent underwriting. AXS estimates pre-tax net loss from catastrophes and other weather-related events of $186 million (including $160 million due to Hurricane Ian) to affect third-quarter results.  The Insurance segment is expected to absorb a loss of $100 million stemming from Hurricane Ian and $13 million from other weather-related events. The Reinsurance segment is expected to absorb loss of $60 million stemming from Hurricane Ian, $23 million due to June European Convective Storms, and $16 million from other weather-related events.

The Zacks Consensus Estimate for the bottom line is pegged at a loss per share of 95 cents against earnings of 1 cent reported in the year-ago quarter. The consensus estimate for revenues is pegged at $1.3 billion, indicating an increase of 1.1% year over year. The company has an Earnings ESP of 0.00% and a Zacks Rank 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AXIS Capital’s earnings outpaced estimates in the last four reported quarters. The same is depicted in the chart below:

Axis Capital Holdings Limited Price and EPS Surprise

Axis Capital Holdings Limited Price and EPS Surprise
Axis Capital Holdings Limited Price and EPS Surprise

Axis Capital Holdings Limited price-eps-surprise | Axis Capital Holdings Limited Quote

The Zacks Consensus Estimate for Arch Capital Group’s third-quarter earnings per share of 24 cents indicates a decrease of 67.6% from the year-ago reported figure. The consensus estimate for revenues is pegged at $2.6 billion, indicating an increase of 27.2% year over year.

Premiums are likely to have benefited from new business opportunities, rate increases, growth in existing accounts and growth in Australian single-premium mortgage insurance. ACGL estimates third-quarter catastrophe loss of $530-$560 million pre-tax. The loss is expected to primarily stem from Hurricane Ian as well as other catastrophes, including U.S. convective storms, Typhoon Nanmadol and the hailstorms in France in June. About 30% of this loss, net of reinsurance recoveries and reinstatement premiums, will be absorbed by the property and casualty Insurance segment and the remaining 70% will be absorbed by the Reinsurance segment.

Arch Capital has an Earnings ESP of 0.00% and a Zacks Rank #3.

ACGL’s earnings surpassed estimates in three of the last four quarters while missing in one. This is depicted in the chart below:

Arch Capital Group Ltd. Price and EPS Surprise

Arch Capital Group Ltd. Price and EPS Surprise
Arch Capital Group Ltd. Price and EPS Surprise

Arch Capital Group Ltd. price-eps-surprise | Arch Capital Group Ltd. Quote

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Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
 
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