Insurance industry stocks in the third quarter are expected to have benefited from continued improved pricing, exposure growth, portfolio streamlining, solid retention, renewals, reinsurance agreements and accelerated digitalization. Catastrophe losses and an increase in claims frequency are likely to have weighed on the upside. Some of the insurers to report their third-quarter results on Oct. 24 are Arthur J. Gallagher & Co. (AJG Quick QuoteAJG - Free Report) , The Hartford Financial Services Group, Inc. (HIG Quick QuoteHIG - Free Report) , Cincinnati Financial Corporation (CINF Quick QuoteCINF - Free Report) and Kinsale Capital Group (KNSL Quick QuoteKNSL - Free Report) .

Potential Factors Driving Q3 Earnings

Solid retention, exposure growth across business lines and improved pricing are likely to have fueled premiums. An active catastrophe environment is expected to have accelerated the policy renewal rate and led to better pricing in the third quarter of 2024. Per Market Scout’s Market Barometer, the commercial insurance sector saw a composite rate increase of 3.8%. Per the report, the personal lines composite rate has increased 6.75% in the third quarter of 2024, indicating a little moderation from the year-ago quarter's figures.

Per reports in Reinsurance News, CNA Financial Corporation estimates pretax net catastrophe losses of $143 million for third-quarter 2024. Per the report, around 75% of the catastrophe losses are associated with four larger events, which include $55 million from Hurricane Helene, while the remaining approximately $35 million of losses is scattered across several additional events in the third quarter.

Underwriting profit is likely to have benefited from better pricing, reinsurance arrangements, portfolio repositioning, reinsurance covers and favorable reserve development.

Auto premiums are likely to have improved, given increased travel across the world. A low unemployment rate is likely to have aided commercial insurance and group insurance.

A larger investment asset base, strong cash flow from operating activities, higher bond yields, as well as an increase in interest income from fixed-maturity securities are expected to have aided net investment income.

Accelerated digitization, robotic process automation, cognitive intelligence and blockchain should help insurers curb operational costs and aid margin expansion. This digital shift is expected to drive premium growth and boost efficiency. The increased use of data analytics and AI integration enables brokers to offer personalized services, boost operational efficiency, improve risk assessment and streamline operations. 

A solid capital position aided insurers in strategic mergers and acquisitions to sharpen their competitive edge, expand geographically and diversify their portfolio. Sustained wealth distribution to shareholders via dividend hikes, special dividends and share repurchases instill confidence in the insurers.

Let’s find out how the following insurers are placed before their third-quarter 2024 results on Oct. 24.

Per our proprietary model, the combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Arthur J. Gallagher’s third-quarter results are likely to benefit from solid performance in both segments, aided by new business, solid retention and higher renewal premiums across its business lines. The property and casualty brokerage operations are likely to have been aided by continued strong customer retention, higher new business generation and increasing renewal premiums. The risk management segment is likely to have been aided by outstanding retention, increases in customer business activity and higher new rising claims. However, total expenses are likely to have increased mainly because of higher compensation, reimbursements, interest and amortization. (Read more:  Here's What to Expect From Arthur J. Gallagher's Q3 Earnings)

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The Zacks Consensus Estimate for the bottom line is pegged at $2.26, indicating a 13% increase from the year-ago quarter’s reported figure. The company has an Earnings ESP of +0.01% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AJG’s earnings beat estimates in each of the last four reported quarters. The same is depicted in the chart below:

Hartford Financial’s top line is expected to have witnessed growth in the third quarter, driven by higher premiums across its Commercial Lines, Personal Lines, and Group Benefits segments in the third quarter. While consistent rate hikes, new business expansion, strong retention and solid submission volumes are expected to have benefited the Commercial Lines business, the Personal Lines business is likely to have gained from strategic rate increases and renewal written price improvements in the third quarter. (Read more: Will Strong Commercial Lines Aid Hartford Financial's Q3 Earnings?)

The Zacks Consensus Estimate for HIG’s third-quarter bottom line is pegged at $2.49, indicating an 8.7% increase from the year-ago quarter’s reported figure. The company has an Earnings ESP of +2.27% and a Zacks Rank #3.

HIG’s earnings surpassed estimates in three of the last four reported quarters while missing in one. This is depicted in the chart below:  

Cincinnati Financial’s third-quarter premiums are likely to have benefited from improved exposure, better pricing, increased property casualty agency and new business written premiums, higher standard lines new business and higher premiums from Cincinnati Re. Premiums at Personal Lines are likely to have benefited from rate increases, a higher level of insured exposures and other factors, such as higher policy retention rates and changes in policy deductibles or mix of business. Improved agency renewal and new business written premiums are likely to have aided Excess and Surplus lines premiums. Better pricing and increased exposure are likely to have aided underwriting profitability. (Read more: Is a Beat in the Cards for Cincinnati Financial in Q3 Earnings?)

The Zacks Consensus Estimate for the bottom line is pegged at $1.46, indicating a 12% decrease from the year-ago quarter’s reported figure. The company has an Earnings ESP of +10.72% and a Zacks Rank #3.

CINF’s earnings beat estimates in each of the last four quarters. This is depicted in the chart below:

Kinsale Capital’s third-quarter results are likely to benefit from its strategy of prudent underwriting, combined with technology-driven low costs and a focus on the E&S market. The company’s strong presence across the E&S market in the United States and high retention rates stemming from contract renewals are likely to have favored premiums. KNSL’s proprietary technology platform, which is expected to provide it with a competitive edge over other industry players and scalability in business, is likely to have lowered expense ratio.  

The Zacks Consensus Estimate for KNSL’s bottom line is pegged at $3.70, indicating an 11.7% increase from the year-ago quarter’s reported figure. The company has an Earnings ESP of -1.50% and a Zacks Rank of 3.

KNSL’s earnings surpassed estimates in each of the last four quarters. This is depicted in the chart below: