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Insurance Stock Q3 Earnings Due on Nov 4: MET, ALL & More

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In the third quarter of 2020, insurance industry players are likely to have gained from better pricing, prudent underwriting, new business, strong retention, favourable renewals, exposure to growth reinsurance agreements, a compelling products and service portfolio and the increasing adoption of technology.

However, their results might be partly offset by cat losses, high expenses and a lower interest rate.

The September-quarter results generally bear the brunt of cat losses as the hurricane season typically starts in June and lasts through November during a year, gathering strength in August and September. The insurance industry players are likely to have witnessed the impact from hurricanes Laura, Isaias, Hanna and Sally, wildfires in California and Oregon, Midwest United States Derecho windstorm and the explosion in Beirut.

Nevertheless, the companies are expected to have gained traction from prudent underwriting practice, diversified operations and portfolio repositioning. Several business lines are likely to have met or exceeded the pre-COVID levels as economy is slowly stabilizing.

Frequent natural disasters are likely to have accelerated the policy renewal rate and kept the momentum of increased pricing alive in the third quarter.

It is needless to say that the COVID-19 pandemic might have weighed on the results to some extent. Given the slowdown in economic growth due to the pandemic, contributions from employers and employees are likely to have declined.

Nonetheless, the accelerated uptake of technology, such as analytics, telematics, cloud computing and robotic process automation, is expected to have expedited business operations and saved costs.  Moreover, technological adoption is likely to have aided in seamless underwriting and claims processing amid the coronavirus-induced challenges, which necessitated social distancing and remote working.

Let’s see how the following insurers are placed ahead of their third-quarter earnings releases on Nov 4.

The proven Zacks model predicts that a company needs the right combination of the 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. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MetLife, Inc. (MET - Free Report) is anticipated to register an increase in earnings but a decline in revenues from the respective year-ago reported figures when it reports third-quarter financial numbers. In the to-be-reported quarter, overall adjusted premiums, fees and other revenues, net of foreign currency fluctuations, are likely to have declined in its majority of segments, and most significantly, in the U.S. segment, largely due to the COVID-19 woes. (Read more: What's in Store for MetLife This Earnings Season?)

The Zacks Consensus Estimate for the company’s earnings is pegged at $1.65 per share, indicating 29.9% growth from the year-ago quarter’s reported figure. It has an Earnings ESP of 0.00% and a Zacks Rank of 3.

Over the last four quarters, the company’s earnings beat the consensus estimate twice (missed the mark in the remaining two quarters), the average beat being 6.73%. This is depicted in the chart below.

MetLife, Inc. Price and EPS Surprise

MetLife, Inc. Price and EPS Surprise

MetLife, Inc. price-eps-surprise | MetLife, Inc. Quote

The Allstate Corp. (ALL - Free Report) is likely to have borne pre-tax catastrophe losses of $990 million in the third quarter. These losses will cover weather-related events in July (Hurricane Hanna and two severe wind and hail events), August (Hurricane Laura and Hurricane Isaias) and September (11 wildfire events across California, Oregon and Washington plus nine other occurrences). Apart from this cat loss, expenses incurred for the company’s multi-year Transformative Growth Plan and low interest rates are likely to hurt the company's third-quarter earnings results. Allstate is also expected to have recognized a premium deficiency reserve for immediate annuities with life contingencies.

The Zacks Consensus Estimate for Allstate’s third-quarter earnings of $1.77 per share implies a 37.7% decrease from the prior-year quarter’s reported number. (Read More: Will Cat Losses and Expenses Mar Allstate Q3 Earnings?)

It has an Earnings ESP of 0.00% and a Zacks Rank of 3.

The company’s earnings outpaced estimates in all the last four quarters, the average being 25.24%. The same is depicted in the chart below:

The Allstate Corporation Price and EPS Surprise

The Allstate Corporation Price and EPS Surprise

The Allstate Corporation price-eps-surprise | The Allstate Corporation Quote

Lincoln National Corp.’s (LNC - Free Report) third-quarter earnings are likely to have suffered a weak performance by its Annuities segment. The company’s Group Protection segment is likely to reflect an elevated loss ratio in its upcoming quarterly results due to unfavorable mortality, primarily as a result of the COVID-19 adversity on its life business, higher incidence and lower claim resolutions.

The prevalent low interest rate environment is likely to have kept investment yields stressed. (Read more: What's in Store for Lincoln National's Earnings in Q3?)

The Zacks Consensus Estimate for this insurance and retirement business’ quarterly earnings stands at $2.16 per share, implying a decline of 2.7% from the year-ago quarter’s reported figure. It has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).

Over the last four quarters, the company’s earnings beat the consensus estimate only once (missed the mark in the remaining three periods), the average negative surprise being -9.94%. This is depicted in the chart below.

Sun Life Financial Inc. (SLF - Free Report) has an Earnings ESP of +4.65% and a Zacks Rank of 3. The Zacks Consensus Estimate for earnings per share of 86 cents for the third quarter indicates a decrease of 17.3% from the year-ago quarter’s reported figure. The company’s earnings outpaced estimates in all the trailing four quarters, the average being 11.58%. The same is depicted in the chart below:

Sun Life Financial Inc. Price and EPS Surprise

Sun Life Financial Inc. Price and EPS Surprise

Sun Life Financial Inc. price-eps-surprise | Sun Life Financial Inc. Quote

Fidelity National Financial, Inc. (FNF - Free Report) : The Zacks Consensus Estimate for third-quarter earnings per share of $1.25 indicates an increase of 13.6% from the year-ago quarter’s reported number. The combination of its Earnings ESP of 0.00% and a Zacks Rank #2 makes surprise prediction difficult.

The company’s earnings outpaced estimates in all the previous four quarters, with the average being 32.13%. The same is depicted in the chart below:

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