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5 Insurers Poised for Outperformance This Earnings Season

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Per the latest Earnings Preview, the Finance sector’s second-quarter 2022 earnings are expected to decline 19.1% while revenues are estimated to improve 2.7%. Earnings of Insurance, one of the Finance sector industries, are estimated to drop 15.6% while revenues are expected to increase 3.2%. Better pricing and exposure growth are likely to have driven premiums, which in turn are expected to have aided insurers’ revenues.

With the help of the Zacks Stock Screener, we have identified five insurers namely, Cincinnati Financial Corporation (CINF - Free Report) , Argo Group (ARGO - Free Report) , Reinsurance Group of America Incorporated (RGA - Free Report) , American International Group (AIG - Free Report) and Prudential Financial Inc. (PRU - Free Report) , which are poised to outshine the Zacks Consensus Estimate in second-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.

Factors Likely to Impact Q2 Results

Insurers witnessed improved pricing in the second quarter of 2022, though the magnitude was lower. An active catastrophe environment accelerated the policy renewal rate and aided in better pricing. These, coupled with reinsurance programs, favorable reserve development and solid capital level are likely to have aided underwriting profitability.

The estimated insured losses in the United States from catastrophes in the second quarter could be more than $4 billion per analysts at Goldman Sachs, published in Reinsurance News.

The interest rate environment has started to improve.  The second quarter itself saw two rate hikes.  Insurers, being beneficiaries of an improving rate environment, are poised to benefit. A larger investment asset base and alternative investments in private equity, hedge funds, and real estate, among others, coupled with an improving rate environment, are expected to have aided net investment income, an important component of insurers’ top line.

Life insurers have been redesigning products by moving away from guaranteed savings products toward protection products of unit-linked savings products. Also, life insurers continue to roll out investment products that provide bundled covers of guaranteed retirement income, life and healthcare to cater to customers preferring policies with “living” benefits more than those with death benefits. Increasing demand for protection products is likely to have driven sales.

Accelerated digitalization ensured smooth functioning of the insurers and is also likely to have saved costs, in turn driving margin expansion.

Banking on operational efficiency resulting in a solid capital position, insurers continue to engage in strategic mergers and acquisitions to sharpen their competitive edge, build on a niche, expand globally, diversify their portfolio and deploy capital to enhance shareholder value. Share buybacks are expected to have provided an additional upside to the bottom line.

The insurance industry decreased 16.4% in the second quarter compared with the Finance sector’s and S&P 500 Index’s decrease of 16.8% each in the said time frame.

Potential Q2 Outperformers

Cincinnati Financial Corporation markets property and casualty insurance. Premium growth initiatives, price increases and a higher level of insured exposure are likely to favor the insurer’s quarterly results. Insurance losses and contract holders’ benefits, and higher underwriting, acquisition and insurance expenses are expected to have weighed on the performance.

The Zacks Consensus Estimate for Cincinnati Financial’s second-quarter earnings is pegged at $1.05, suggesting a decrease of 41.3% from the year-ago reported figure. CINF has an Earnings ESP of +2.86% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Argo Group is a U.S.-focused specialty insurer. Its highly profitable businesses, growth efforts, expense initiative program including lowering headcount, contract review and prioritization as well as investment in technology are likely to have aided second-quarter performance.

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.12, indicating a decline of 30% from the year-ago reported figure. ARGO has an Earnings ESP of +2.98% and a Zacks Rank #3.

Reinsurance Group of America is a leading global provider of traditional life and health reinsurance and financial solutions. Better pricing, expanding business in the pension risk transfer market, niche position in reinsurance markets, expansion of international footprint and higher investment income are likely to aid quarterly results.

The Zacks Consensus Estimate for RGA’s second-quarter earnings is pegged at $2.76, indicating a decrease of 31% from the year-ago reported figure. It has an Earnings ESP of +1.45% and a Zacks Rank #3.

American International Group is a leading global insurance organization. Improved retention, new business and a continued improvement in the insurance premium rate are likely to have aided the quarterly performance.

The Zacks Consensus Estimate for AIG’s second-quarter earnings is pegged at $1.21, implying a decrease of 20.4% from the year-ago reported figure. AIG has an Earnings ESP of +3.59% and a Zacks Rank #3.

Prudential Financial is a financial services leader, offering an array of financial products and services including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services. Its U.S. business is likely to have benefited from a higher net investment spread, while international businesses are likely to have gained from continued business growth, higher net investment spread, lower expenses, and higher earnings from joint venture investments. Higher expenses are likely to have weighed on the upside.

The Zacks Consensus Estimate for Prudential’s second-quarter earnings is pegged at $2.89, indicating a downside of 23.8% from the year-ago reported figure. PRU has an Earnings ESP of +1.04% and a Zacks Rank #3.

Prudential Financial, Inc. Price and EPS Surprise

Prudential Financial, Inc. Price and EPS Surprise

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

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