Insurance Stocks' Q3 Earnings on Oct 21: WRB, MMC, & FAF
Insurers' third-quarter results are likely to benefit from improved pricing, strong retention, and new business, partially offset by a lower interest rate and an active cat season.
Insurance industry players are likely to have benefited from improved pricing, strong retention, new business, exposure growth, solid retention, favorable renewals, reinsurance agreements, compelling products and service portfolio and adoption of technologies in the third quarter. A low-rate interest rate environment and an active catastrophe season are likely to have remained partial offsets.
Better pricing, reinsurance arrangements, portfolio repositioning and prudent underwriting practice are likely to drive improvement in underwriting results. The third quarter of 2021 bore the brunt of Hurricane Ida and floods in Europe. Per a report published in ARTEMIS, Aon projects economic loss from floods in Europe to cost more than $10 billion. Everest Re Group estimates insured industry losses of about $28-30 billion from Hurricane Ida.
Premiums are likely to have benefited from improved pricing. Occurrences of natural disasters accelerated the policy renewal rate and aided better pricing even in the third quarter. Most of the commercial insurance lines are likely to have witnessed rate increases in the to-be-reported quarter. Reinsurance covers, favorable reserve development and solid capital level are thus likely to have aided underwriting profitability.
A higher invested asset base as well as increased investment in alternative assets like private equity, hedge funds, and real estate, among others are likely to have aided net investment income though a still low rate is likely to have been a dampener.
Increased adoption of technologies like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation is expected to have expedited business operations and saved costs, thus aiding margins.
Banking on solid capital position, insurers pursued strategic mergers and acquisitions to sharpen their competitive edge, expand geographically, and diversify their portfolio to have a compelling product offering.
Let’s take a sneak peek into how the following insurers are poised prior to their third-quarter earnings reports on Oct 21.
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.
W. R. Berkley Corporation’s WRB gross premiums written in the to-be-reported quarter are likely to have benefited from solid performance across professional liability, commercial auto, other liability and short-tail lines in the Insurance segment as well as an increase in property reinsurance, monoline excess and casualty reinsurance in the Reinsurance & Monoline Excess segments. Loss cost trends are likely to have been impacted by COVID-related claims in certain lines of business as well as other effects of COVID-19 associated with economic conditions, inflation, and social-distancing and work-from-home rules (read more: What's in the Cards for W. R. Berkley in Q3 Earnings?)
The Zacks Consensus Estimate for earnings per share of 94 cents indicates 44.6% increase from the year-ago quarter reported figure. The company has an Earnings ESP of 0.00% and a Zacks Rank 3.
The company surpassed estimates in the last four reported quarters, with the average surprise being 16.51%. This is depicted in the chart below:
W.R. Berkley Corporation Price and EPS Surprise
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Marsh & McLennan Companies MMC is likely to have continued gaining from high revenues owing to its Risk and Insurance Services segment. However, the Consulting segment might have offset the performance to some extent. Expenses are likely to have remained elevated in the to-be-reported quarter due to higher compensation and benefits, which might have squeezed margins to some extent (read more: What's in the Cards for Marsh & McLennan Q3 Earnings?)
The Zacks Consensus Estimate for earnings per share of 99 cents for the third quarter indicates an increase of 20.7% year over year. The company has an Earnings ESP of -0.68% and a Zacks Rank #2 (Buy).
The company’s earnings outpaced estimates in the last four reported quarters, with the average surprise being 13.88%. The same is depicted in the chart below:
Marsh & McLennan Companies, Inc. Price and EPS Surprise
The Zacks Consensus Estimate for First American Financial Corporation’s FAF earnings per share of $1.66 indicates an increase of 26.7% from the year-ago reported figure. It has an Earnings ESP of 0.00% and a Zacks Rank #3. The company’s earnings outpaced estimates in three of the last four reported quarters, missed in one, with the average being 21.07%. The same is depicted in the chart below:
First American Financial Corporation Price and EPS Surprise
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W.R. Berkley Corporation (WRB): Free Stock Analysis Report
Marsh & McLennan Companies, Inc. (MMC): Free Stock Analysis Report
First American Financial Corporation (FAF): Free Stock Analysis Report
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