Back to top

Image: Bigstock

Insurers Reporting Q2 Earnings on Jul 31: PRU, MET, WLTW, LNC

Read MoreHide Full Article

Insurance industry players’ second-quarter results are likely to benefit from a benign catastrophe environment, improved pricing, reinsurance agreements, compelling products and service portfolio and adoption of technologies to curb operational costs. A sturdy capital level supporting strategic mergers and acquisitions should also act as catalysts. Improved employment scenario along with rising wages is expected to boost policy sales, thus driving premiums higher.

After hiking rates on an accelerated pace till last year, the Fed put rate hikes on hold this year. Insurers, who are major beneficiaries of a rising rate environment because of their sensitivity to interest rates, are still expected to exhibit improvement, given their broad invested asset base.

The second quarter of a year escapes the hurricane season that causes major damage and weighs on underwriting profits of insurers. Underwriting is expected to exhibit improvement on better pricing and prudent practice.

While most of the commercial insurance lines should witness rate increase, workers compensation and international liability are likely to face downward pricing pressure this time around.

Further, adoption of technologies like AI, robotic process automation, cognitive intelligence and blockchain should help insurers curb operational costs in the soon-to-be reported quarter.

Also, a sturdy capital level widens scope for capital deployment to fund growth initiatives as well as reward shareholders via dividend hikes, special dividends and share buyback.

Let’s take a sneak peek into how the following insurers are poised prior to their second-quarter earnings release on Jul 31.

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.

Prudential Financial’s (PRU - Free Report) results are likely to benefit from growth in asset-based businesses, improved margins in Group Insurance business, solid international operations and deeper reach in the pension risk transfer market. Revenues are likely to benefit from increase in recurring premium sales, expanded product offerings, broader distribution capabilities, investment income, policy charges as well as fee income. However, expenses are likely to increase attributable to higher policyholders’ benefits, amortization of deferred policy acquisition costs as well as general and administrative expenses and weigh on operating margin (Read more: Prudential to Report Q2 Earnings: What's in the Cards?)

The Zacks Consensus Estimate for earnings per share of $3.22 indicates an increase of 7% from the year-ago quarter reported figure. The company’s has an Earnings ESP of -1.01% and a Zacks Rank 2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The company surpassed estimates in only one of the last four reported quarters, with the average negative surprise being 5.42%. This is depicted in the chart below:

Prudential Financial, Inc. Price and EPS Surprise

MetLife’s (MET - Free Report) Group Benefits is expected to report strong underwriting results for both life and Non-Medical Health coverage. We expect low single-digit growth in property and casualty revenues. International business should benefit from higher contributions from Asia led by rise in Accident & Health (A&H) and foreign currency products in Japan, and greater A&H sales in India and Japan.  (Read more: MetLife to Report Q2 Earnings: What's in the Offing?)

The Zacks Consensus Estimate for EPS of $1.32 indicates an increase of 1.5% from the year-ago reported figure. It carries a Zacks Rank #4 and has an Earnings ESP of -0.54%.

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

The company’s earnings outpaced estimates in the last four reported quarters with the average being 9.80%. The same is depicted in the chart below:

MetLife, Inc. Price and EPS Surprise

Willis Towers Watson Public Limited Company’s (WLTW - Free Report) results are likely to benefit from higher organic commissions and fees, solid customer retention levels, growth in new business and strong exchange business.  Commissions and fees are expected to benefit from organic growth across segments and significant contribution from acquisitions as well as geographic diversification. (Read more: Willis Towers to Report Q2 Earnings: Will It Beat?

The Zacks Consensus Estimate for EPS of $1.76 indicates an increase of 3.5% from the year-ago quarter reported figure. It carries a Zacks Rank #2 and has an Earnings ESP of +0.28%.

The company’s earnings outpaced estimates in two of the last four reported quarters, with the average positive surprise being 4.73%. The same is depicted in the chart below:

Willis Towers Watson Public Limited Company Price and EPS Surprise

Lincoln National’s (LNC - Free Report) Annuities segment is expected to benefit from increase in sales. In Retirement Plan Services segment, total deposits should increase on the back of growth in both first-year sales and recurring deposits. Group Protection business is likely to see an increase in earnings from the acquisition of Liberty Mutual group benefits business We expect an improvement in expense ratio driven by the company’s efficiency programs, through process redesign and expansion of digital capabilities (Read more: Lincoln National to Post Q2 Earnings: What's in Store?)

The Zacks Consensus Estimate for EPS of $2.33 indicates an increase of 15.4% from the year-ago quarter reported figure. It has a Zacks Rank #3 and an Earnings ESP of +0.71%.

The company’s earnings outpaced estimates in three of the last four reported quarters, with the average positive surprise being 1.96%. The same is depicted in the chart below:

Lincoln National Corporation Price and EPS Surprise

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>