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Insurers Reporting Q3 Earnings on Oct 22: TRV, MTG, WRB

Zacks Equity Research

Insurance industry players are likely to have benefited from improved pricing, reinsurance agreements, compelling products and service portfolio and adoption of technologies to curb operational costs in the third quarter. However, catastrophe losses and lower interest rate might have acted as partial offsets.

Third-quarter performance of industry players is likely to have been affected by losses stemming from Hurricane Dorian, Typhoon Faxai and other weather-related events. Nonetheless, underwriting profitability might have improved on better pricing, reinsurance arrangements, portfolio repositioning and prudent underwriting practice.

While most of the commercial insurance lines witnessed rate increase in the third quarter of 2019, workers compensation continued to face downward pricing pressure.

Improved employment scenario along with rising wages is expected to have boosted policy sales, thus driving premiums higher.

The Federal Reserve cut interest rate by 25 basis points twice in the third quarter of 2019, citing muted inflation pressure and geopolitical tension. The rate now stands in the range of 1.75-2%. Nonetheless, higher invested asset base might have somewhat offset the impact of low rates for insures.

Increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation are likely to 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.

Let’s take a sneak peek into how the following insurers are poised prior to their third-quarter earnings reports on Oct 22.

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Travelers TRV is likely to have benefited from higher premiums and improved performances of personal lines of business. Investment income is likely to have improved owing to higher returns from fixed maturity investments as well as non-fixed income portfolio. Travelers estimates net investment income to increase by $10 million to $15 million per quarter. Improving productivity, efficiency gains and better operating leverage are likely to have helped the company lower its expense ratio. Given a not-so-active catastrophe environment, underwriting income and combined ratio are likely to have improved. Interest expenses are likely to have increased given high debt level.  (Read more: Travelers to Report Q3 Earnings: What's in the Cards?)

The Zacks Consensus Estimate for earnings per share of $2.38 indicates 6.3% from the year-ago quarter reported figure. The company’s has an Earnings ESP of +1.12% and a Zacks Rank 3, which indicates a likely beat.

The company surpassed estimates in three of the last four reported quarters, with the average surprise being 3.38%. This is depicted in the chart below:

The Travelers Companies, Inc. Price and EPS Surprise

The Travelers Companies, Inc. Price and EPS Surprise

The Travelers Companies, Inc. price-eps-surprise | The Travelers Companies, Inc. Quote

MGIC Investment Corporation MTG: The Zacks Consensus Estimate for earnings per share of 42 cents for the third quarter indicates a decrease of 12.5% year over year. The combination of its Zacks Rank #2 and Earnings ESP of 0.00% makes surprise prediction difficult.

The company’s earnings outpaced estimates in three of the last four reported quarters, with the average positive surprise being 5.71%. The same is depicted in the chart below:

MGIC Investment Corporation Price and EPS Surprise

MGIC Investment Corporation Price and EPS Surprise

MGIC Investment Corporation price-eps-surprise | MGIC Investment Corporation Quote

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

W.R. Berkley Corporation WRB: The Zacks Consensus Estimate for earnings per share of 66 cents indicates a decrease of 12% from the year-ago reported figure. It carries a Zacks Rank #3 and has an Earnings ESP of +0.90%, which indicates a likely beat.

The company’s earnings outpaced estimates in the last four reported quarters, with the average being 34.53%. The same is depicted in the chart below:

W.R. Berkley Corporation Price and EPS Surprise

W.R. Berkley Corporation Price and EPS Surprise

W.R. Berkley Corporation price-eps-surprise | W.R. Berkley Corporation Quote

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MGIC Investment Corporation (MTG) : Free Stock Analysis Report
 
The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
 
W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
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