This earnings season, players in the insurance industry are likely to have gained from premium rate gains in most of the insurance lines such as commercial, property, personal, financial and professional.
Life insurers, in particular, are likely to have gained from modifications made to their product portfolio to adapt to low interest rates. Many insurers limited sales or removed products that used to offer guaranteed returns and shifted to protection products of unit-linked savings products, which pass investment risks on to policyholders. This change in sales mix is likely to have a mixed effect on overall life insurance sales.
Investment income, another major revenue driver, is likely to have seen a decline from the year-ago reported level due to low interest rates. The Federal Reserve slashed federal funds rates thrice last year. A reduction in interest rates puts pressure on investment rates and consequently investment yields. Nonetheless, a higher invested asset base might have somewhat offset the impact of low rates for insurers. Also, investment in alternative assets might have helped the overall return on investment portfolio.
Increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation may have expedited business operations and saved cost.
Also, a sturdy capital level is expected to have widened the scope for capital deployment to pursue growth initiatives as well as reward shareholders via dividend hikes, special dividends and share buybacks.
Nevertheless, catastrophes losses occurring from weather related events are likely to have adversely impacted the players’ underwriting income. We expect insurers to have witnessed a spike in loss ratio, which would further push up combined ratios, one of the most widely used ratios to gauge an insurer’s profitability. This year, however, catastrophe activities have been benign, thus providing relief to the players. Insurer, The Allstate Corporation ALL incurred loss of $295 million in the fourth quarter of 2019, lower than $963 million faced in the year-ago quarter.
Notably, the insurance industry forms part of the broader Finance sector. Per the latest Earnings Outlook, total earnings of the Zacks Finance sector are expected to be up 13.7% in the quarter under review. Moreover, revenues for the sector are likely to improve 10.5%.
Let’s take a sneak peek into how the following insurance stocks are placed ahead of their fourth-quarter earnings releases. According to the Zacks model, the combination of 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.
3 Upcoming Insurance Stock Earnings Releases
Assurant, Inc. AIZ is likely to have benefited from solid results at Global Lifestyle, Housing and Preneed business lines. Strong revenue contribution from its segments is expected to have boosted overall performance.
Global Lifestyle’s performance is likely to have been aided by higher penetration rates at the new point of lease billing. The company has accelerated investment to support growth in the mobile industry, reflecting initial program start up costs for new clients and its current client pipeline.
On the company's last earnings conference call, it declared that these investments would help it sustain double-digit earnings expansion and strong cash flows in the long term.
For the to-be-reported quarter, the Zacks Consensus Estimate for the company’s earnings is pegged at $2.41, indicating an upside of 213% from the year-ago quarter’s reported figure. (Read more: Assurant to Report Q4 Earnings: What to Expect)
The company has a Zacks Rank #3 and an Earnings ESP of 0.00%.
The company delivered positive earnings surprise in the last four reported quarters, the beat being 20.25%, on average.
Assurant, Inc. Price and EPS Surprise
Assurant, Inc. price-eps-surprise | Assurant, Inc. Quote
Arch Capital Group Ltd. ACGL, headquartered in Pembroke, Bermuda, offers insurance, reinsurance and mortgage insurance across the world. Its products include primary and excess casualty coverage, professional indemnity, workers compensation and umbrella liability, and employers liability insurance coverage to name a few.
The company has a Zacks Rank #3 and an Earnings ESP of -1.12%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The stock surpassed estimates in three of the last four reported quarters, the surprise being 10.22%, on average.
Arch Capital Group Ltd. Price and EPS Surprise
Arch Capital Group Ltd. price-eps-surprise | Arch Capital Group Ltd. Quote
CNO Financial Group, Inc. CNO is a holding company for a group of insurance companies operating throughout the United States, which develops, administers and markets supplemental health insurance, annuity, individual life insurance and other insurance products.
The company has a Zacks Rank #3 and an Earnings ESP of 0.00%.
The stock missed estimates in three of the last four reported quarters, with a negative surprise of 12.28%, on average.
CNO Financial Group, Inc. Price and EPS Surprise
CNO Financial Group, Inc. price-eps-surprise | CNO Financial Group, Inc. Quote
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