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7 Insurers Poised to Outperform Q3 Earnings Expectation

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Per the latest Earnings Preview, the Finance sector’s third-quarter earnings are expected to grow 42.2% while revenues are estimated to improve 9.9%. Insurance, one of the Finance sector industries, is likely to have benefited from improved pricing, exposure growth, prudent underwriting, compelling products and service portfolio, and increased adoption of technologies. The to-be-reported quarter’s performance is also likely to have benefited from easy year-over-year comparison. However, the still low-rate environment is likely to have been a dampener.

The third quarter of 2021 bore the brunt of Hurricane Ida and floods in Europe. Per a report published in ARTEMIS, Aon projects economic loss from floods in Europe to cost more than $10 billion. Everest Re Group estimates insured industry losses of about $28-30 billion from Hurricane Ida.

Nevertheless, insurers continued to witness improved pricing. Occurrences of natural disasters accelerated the policy renewal rate and aided better pricing even in the third quarter. Most of the commercial insurance lines are likely to have witnessed rate increases in the to-be-reported quarter. Reinsurance covers, favorable reserve development and solid capital level are likely to have aided underwriting profitability.

A still near-zero interest rate environment is likely to have weighed on investment income, which is an important component of an insurer’s top line. Nonetheless, a larger investment asset base is expected to have limited the downside. This apart, insurers have been directing their funds into alternative investments like private equity, hedge funds, and real estate, among others.    

Life insurers have been redesigning products by moving away from guaranteed savings products toward protection products of unit-linked savings products to weather a low-rate environment. Increasing demand for protection products is likely to have driven sales.

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.

Banking on solid capital position, insurers pursued strategic mergers and acquisitions to sharpen their competitive edge, expand geographically, and diversify their portfolio to have a compelling product offering.

The insurance industry lost 3.4% in the third quarter compared with the Finance sector’s decrease of 0.6%.In contrast, the S&P 500 Index rose 0.6% in the said time frame.

Zacks Investment ResearchImage Source: Zacks Investment Research

Potential Q3 Outperformers

With the help of the Zacks Stock Screener, we have identified a few stocks poised to outshine the Zacks Consensus Estimate in third-quarter earnings. These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy), #3 (Hold) — to surpass expectations. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

W.R. Berkley Corporation (WRB - Free Report) boasts one of the nation’s largest commercial lines property casualty insurance providers.

Earnings ESP: +1.52%

Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Athene (ATH - Free Report) offers various insurance and reinsurance retirement products across the United States and Bermuda.

Earnings ESP: +1.71%

Zacks Rank #2

MetLife Inc (MET - Free Report) is an insurance-based global financial services company, providing protection and investment products to a range of individual and institutional customers.

Earnings ESP: +1.20%

Zacks Rank #2

Primerica (PRI - Free Report) provides financial products to middle-income households in the United States and Canada.

Earnings ESP: +1.45%

Zacks Rank #2

Cigna Corporation (CI - Free Report) provides insurance and related products and services in the United States.

Earnings ESP: +2.19%

Zacks Rank #3

Arthur J. Gallagher & Co. (AJG - Free Report) provides insurance brokerage and consulting services and third-party claims settlement and administration services in the United States and internationally.

Earnings ESP: +0.55%

Zacks Rank #3

Aflac Incorporated (AFL - Free Report) is a general business holding company and oversees the operations of its subsidiaries by providing management services and making capital available.

Earnings ESP: +1.44%

Zacks Rank #2