P&C Insurers to Post Q3 Earnings on Nov 1: SIGI, AXS & More
Solid retention rates, continued rate increases, an improving interest rate environment and accelerated digitalization in the third quarter are likely to have benefited property and casualty insurance industry players such as Selective Insurance Group, Inc. SIGI, Axis Capital Holdings Limited AXS, NMI Holdings Inc NMIH and American Financial Group, Inc. AFG. These companies are set to report their third-quarter 2023 earnings on Nov 1. However, an active catastrophe level is likely to have weighed on their performance.
Improved 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 led to better pricing in the third quarter. Per a report by MarketScout, the composite rate for all United States lines of commercial insurance business moderated except for business owners policies, which was more than 5% in the to-be-reported quarter. Per a report by MarketScout, the composite rate for personal lines across the United States was 4% in the to-be-reported quarter.
Gallagher Re estimates total economic losses to be $290 billion. Per the Gallagher Re report, 2023 is set to become the sixth year since 2017 to exceed $100 billion in annual insured losses. Per Aon, global insured losses from natural disasters reached $88 billion by the end of the third quarter of 2023. Nonetheless, better pricing, reinsurance arrangements, portfolio repositioning, reinsurance covers, favorable reserve development and prudent underwriting are likely to drive an improvement in underwriting results.
With four rate hikes already in 2023, investment income is likely to have improved, as insurers are beneficiaries of a rising rate environment. The Fed had raised its key interest rate by 0.25% and reached a target range of 5.25% to 5.5%, which marked the highest level in 22 years. An improving rate environment is a boon for insurers, especially long-tail insurers. Also, investment income is an essential component of insurers’ top line.
A bigger 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 in the third quarter.
Courtesy of their solid capital position, insurers pursued strategic mergers and acquisitions, which are likely to have diversified their portfolios, sharpened their competitive edge and expanded their geographic footprint in the third quarter. They also enhanced shareholders' value via share buybacks and dividend increases.
The insurance industry’s increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation expedite business operations. Insurers continue to invest heavily in technology to improve basis points, scale and efficiencies. These investments are likely to have curbed costs and aided the margins of insurers in the third quarter.
Insurance Providers Reporting on Nov 1
Against the backdrop discussed above, let’s find out how the following four companies are placed ahead of their September-quarter earnings release tomorrow.
Per our proprietary model, the combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Selective Insurance: New business generation and exposure growth are likely to have aided Selective Insurance’s third-quarter performance. The Zacks Consensus Estimate for net premiums earned suggests 16.3% year-over-year growth. Also, the consensus mark for net investment income earned predicts a 12.5% increase from the year-ago period. The consensus mark for loss and loss expense ratio is pegged at 62%, estimating an improvement of 200 basis points.
The Zacks Consensus Estimate for third-quarter earnings and revenues stands at $1.66 per share and $1.07 billion, respectively, indicating increases of 67.6% and 16.1% year over year. As far as earnings surprises are concerned, SIGI’s bottom line met the Zacks Consensus Estimate in two of the last four quarters and missed on the other two occasions, the average negative surprise being 5.7%. 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
Things are not looking up for Selective Insurance this time around as it has an Earnings ESP of -3.32% and carries a Zacks Rank #3.
Axis Capital Holdings: In the third quarter, the Insurance segment of Axis Capital might have gained from increased new business opportunities, rate increases on renewal and continued strong retentions. New business growth and increased rates across North America and Global Markets are likely to have benefited the Reinsurance unit. Technology investments that pave the way for efficient operations are likely to have provided an impetus to its margins.
The Zacks Consensus Estimate for AXS’s third-quarter 2023 earnings is pegged at $1.86 per share, which implies an improvement of 6100% from the prior-year quarter’s reported figure. The consensus mark for revenues stands at $1.44 billion, suggesting 33.1% growth from the year-ago quarter’s reported figure.
Axis Capital has an Earnings ESP of -4.17% and a Zacks Rank of #3.
AXS’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 9.75%. The same 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
NMI Holdings: The insurer’s broad resiliency of the housing market, growth in total mortgage origination volume and increasing size of the U.S. mortgage insurance market are likely to aid third-quarter results. NMI Holdings expects persistency to continue to improve and drive further increases in the embedded portfolio value. The growth of insurance-in-force, increased monthly policy production and higher single premium policy cancellations are likely to have aided the upside.
The Zacks Consensus Estimate for NMI Holdings’ third-quarter earnings per share of 94 cents indicates a 4.4% increase from the year-ago quarter reported figure. The consensus mark for revenues is pegged at $145.30 million, suggesting an 11.2% increase from the year-ago quarter’s reading. The company has an Earnings ESP of +2.67% and a Zacks Rank #4 (Sell).
NMIH delivered an earnings surprise in each of the last four quarters, the average being 5.32%. This is depicted in the chart below:
NMI Holdings Inc Price and EPS Surprise
NMI Holdings Inc price-eps-surprise | NMI Holdings Inc Quote
American Financial: Its third-quarter results are likely to benefit from strong performance across Property and transportation, Specialty casualty, Specialty financial and other specialty businesses as well as increasing renewal rate in the entire P&C group. Exposure to cat loss and rising expenses are likely to have weighed on profitability.
The Zacks Consensus Estimate for AFG’s bottom-line is pegged at $2.47, indicating a 10.2% improvement from the prior-year quarter’s reported figure. The consensus mark for revenues is pegged at $1.95 billion, suggesting a 0.06% increase from the year-ago quarter’s reading. The company has an Earnings ESP of +0.41% and a Zacks Rank #3.
AFG’s earnings beat estimates in three of the last four reported quarters and missed in one. This is depicted in the chart below:
American Financial Group, Inc. Price and EPS Surprise
American Financial Group, Inc. price-eps-surprise | American Financial Group, Inc. Quote
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Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
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Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
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