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Insurance Stocks' Q2 Earnings on Aug 3: PRU, WLTW & More

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Insurance industry players are likely to have benefited from improved pricing, strong retention, new business, solid retention, favorable renewals, reinsurance agreements, compelling products and service portfolio and adoption of technologies to curb operational costs in the second quarter. A low-rate interest rate environment is likely to have remained a partial offset.

Last year’s second-quarter performance was badly hit by COVID-induced restrictions. With increased vaccinations, restrictions getting lifted, and optimistic economic outlook, this quarterly performance is likely to have benefited from easy comparisons. But there’s more than easy comparison that is likely to have driven better numbers in the soon-to-be-reported quarter.

Better pricing, reinsurance arrangements, portfolio repositioning and prudent underwriting practice are likely to drive improvement in underwriting results. A benign catastrophe environment is likely to have been an upside. Per a report published in ARTEMIS, analysts at RBC Capital Markets project 30-50% below average natural catastrophe losses or between $10 billion and $14 billion for the second quarter of 2021. Also, COVID-19 related losses, which is categorized as catastrophe losses, are estimated to have been much lower from year ago level.

Premiums are likely to have benefited from better pricing. Per Marsh, global commercial insurance prices in the second quarter of 2021 increased 15%, marking the 15th straight quarter of price increase. However, it also marked the third consecutive quarter of decline in the average rate of increase, attributable to slower rate rises in property insurance as well as in financial and professional lines. Per the report, property rates increased 12%, casualty pricing rose 6%, U.S. financial and professional lines pricing increased 34% while cyber insurance pricing rose 56%.

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

A higher invested asset base as well as increased investment in alternative assets might have somewhat limited the adverse impact of sustained low rates for insures. Investment income is a key component of an insurer’s top line.

Increased adoption of technologies like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation is expected to have expedited business operations and saved costs, thus aiding margins.

Let’s take a sneak peek into how the following insurers are poised prior to their second-quarter earnings reports on Aug 3.

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.

Prudential Financial’s (PRU - Free Report) higher assets under management, higher net investment spread, and lower expenses are likely to aid quarterly results. The company estimates net investment income to be reduced by $10 million while expenses and other items are expected to be approximately $500 million lower. While International Insurance segment benefited from business growth, more favorable underwriting, and higher earnings from Chilean pension joint venture, PGIM is likely to have benefited from higher asset management fees and other related revenues, higher commercial mortgage origination revenue, increase in service, distribution and other revenues. However, the Group Insurance business is likely to have remained affected by lower underwriting in group life and group disability businesses as well as less favorable impact from claim experience on long-term disability contracts. (read more: What's in Store for Prudential This Earnings Season?)

The Zacks Consensus Estimate for earnings per share of $3.04 indicates 64.3% increase from the year-ago quarter reported figure. The company has an Earnings ESP of -1.24% and a Zacks Rank 3.  Prudential estimates second-quarter earnings per share to be $2.97

The company surpassed estimates in the last four reported quarters, with the average surprise being 24.36%. This is depicted in the chart below:

Prudential Financial, Inc. Price and EPS Surprise

Prudential Financial, Inc. Price and EPS Surprise

Prudential Financial, Inc. price-eps-surprise | Prudential Financial, Inc. Quote

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Willis Towers Watson’s revenues in the second quarter are likely to have witnessed the impact of higher consulting and brokerage services, continued expansion of client portfolio for both local and global benefit management appointments, and favorable renewal factors. Expenses in the quarter to be reported are likely to have risen due to higher salaries and benefits, depreciation, transaction and integration expenses as well as other operating expenses and higher restructuring costs. (read more: What's in the Cards for Willis Towers in Q2 Earnings?)

The Zacks Consensus Estimate for earnings per share of $1.98 for the second quarter indicates an increase of 10% year over year. The company has an Earnings ESP of 0.00% and a Zacks Rank #3.

The company’s earnings outpaced estimates in the last four reported quarters, with the average surprise being 7.72%. The same is depicted in the chart below:

Assurant’s (AIZ - Free Report) revenues are likely to have been impacted by lower fees and other income coupled with reduced net investment income. The Global Lifestyle segment might have benefited from well-performing Global Automotive and Connected Living while Global Housing segment is likely to have benefited from increased premium rates, persistent growth in multifamily housing, well-performing lender-placed business and favorable non-cat losses across the specialty products. (read more: What to Expect From Assurant This Earnings Season?)

The Zacks Consensus Estimate for earnings per share of $2.49 indicates a decrease of 9.45% from the year-ago reported figure. It has an Earnings ESP of +2.01% and a Zacks Rank #3. The company’s earnings outpaced estimates in three of the last four reported quarters, missed in one, with the average being 21.71%. The same is depicted in the chart below:

Assurant, Inc. Price and EPS Surprise

Assurant, Inc. Price and EPS Surprise

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

Unum Group’s (UNM - Free Report) Unum U.S. segment is likely to have been affected by unfavorable benefits experience, particularly in life product lines, and lower sales in Unum US voluntary benefits product line. The downside is likely to have been offset by higher persistency. The company expects improved results in life insurance lines in the second quarter of 2021. The company expects Group Life earnings to improve approximately $60 million sequentially to nearly breakeven in the second quarter. (read more: Unum Group to Report Q2 Earnings: What's in Store?)

The Zacks Consensus Estimate for earnings per share of $1.13 for the second quarter indicates a decrease of 88.1% year over year. It has an Earnings ESP of +0.67% and a Zacks Rank #3.

The company’s earnings outpaced estimates in two of the last four reported quarters and missed in the other two, with the average negative surprise being 0.38%.


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