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3 Insurance Brokers Poised to Beat Earnings Estimates in Q4

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The insurance brokerage industry is well-poised for growth owing to improved  pricing, constant mergers and acquisitions, demand for insurance products as well as further global expansion. Use of technology and prudent underwriting also bode well for the leading companies.

The coronavirus pandemic dampened the overall results of various industries and the insurance brokerage was no exception. However, we are glad to see things going back to normal and the companies bouncing back with full potential.

The industry is also defined by financial stability and fast-paced consolidations, which have so far allowed the leading insurance brokers to expand their businesses. While the surge in aging population is driving demand for retirement-benefit products, the swelling number of baby boomers and millennials is boosting the same for medical insurance, life insurance, accidental insurance and other forms of insurance.

The players are also adopting cutting-edge technology like AI, robotics and blockchain to provide better services to clients and simplify operations.
However in the last earnings call, management at the leading company Aon plc (AON - Free Report) had expressed concern that the company might face pressure on growth in the fourth quarter of 2020. A significant portion of the insurance broker’s more discretionary revenues falls in the December quarter, putting more pressure on organic growth profile.

The insurance brokerage space has been witnessing plenty of mergers and acquisitions over the past many years to restructure business profiles and decrease the number of players within its bounds. As a result, the overall industrial scenario underwent a sea change, letting go of the earlier fragmented space.  

Insurance brokers are consistently looking for ways to fight the evolving challenges and boost their company portfolios. Some of the most significant transactions in the industry include Marsh & McLennan Companies, Inc.’s (MMC - Free Report) 2019 purchase of Jardine Lloyd Thompson Group plc for a consideration of $5.6 billion, which helped expanding its capabilities.

Other insurance brokerage giants, such as Arthur J. Gallagher & Co. (AJG - Free Report) and Brown & Brown, Inc. (BRO - Free Report) also indulge in a host of buyout activities at a steady pace to enhance their footprint.  

On the whole, investors’ bullish sentiments make us believe that growth will sustain in this industry, which should boost prospects of the companies with strong business fundamentals.

The Zacks Insurance - Brokerage  industry has inched up 1.2% in the past year, underperforming the S&P Index’s rally of 17.6%.

Picking Winners

We selected some payment stocks that are well-positioned to beat on earnings in their upcoming releases.

Choosing stocks with an earnings beat potential might be a difficult task unless one knows the process of shortlisting. One way to do this is by choosing stocks that have the winning combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings ESP is our proprietary methodology for identifying stocks that have maximum chances (as high as 70%) of pulling off a positive surprise in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

3 Insurance Brokers With Earnings Prospects

Here are 3 insurance broker stocks that have the right combination of elements to deliver a positive earnings surprise in their upcoming announcements:

Aon is a leading worldwide provider of risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services. It currently has an Earnings ESP of +0.55% and a Zacks Rank #2.

Brown & Brown offers insurance products and services in the United States, London, Bermuda and the Cayman Islands. It has an Earnings ESP of +4.32% and is Zacks #3 Ranked at present.

Arthur J. Gallagher provides insurance brokerage and consulting services plus third-party claims settlement and administration services in the United States and internationally.

It has an Earnings ESP of +2.63% and a Zacks Rank #3.

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