Per the latest Earnings Preview, the Finance sector’s third-quarter 2024 earnings are expected to improve 10%. Revenues are estimated to rise 5.9%. Results of Insurance, one of the Finance sector industries, are likely to reflect better pricing and exposure growth, accelerated digitalization and a favorable interest rate. However, cat losses are likely to have weighed on profitability.
With the help of the Zacks Stock Screener, we have identified five insurers, namely, Berkshire Hathaway (BRK.B), MetLife Inc. MET, Lincoln National Corporation LNC, Willis Towers Watson plc WTW and Aflac Inc. AFL, which are poised to outperform the Zacks Consensus Estimate in third-quarter earnings. These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy), #3 (Hold) — to surpass expectations. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Factors Likely to Impact Q3 Results
Underwriting results, reflecting the performance of insurers, are likely to benefit from better pricing, increased exposure, solid retention, new business growth, portfolio repositioning, proper segmentation, reinsurance covers and favorable reserve development.
Non-life insurers, by the nature of their business, are exposed to catastrophe losses. Thus, their profitability is vulnerable to catastrophe losses. The third quarter faced the wrath of catastrophe activities but the effects were not devastating on the profitability of insurers. S&P Global noted that losses stemming from Hurricane Helene could be a drag on profits and weigh on the combined ratio, though insurers will not incur losses. Gallagher Re estimates economic losses from Hurricane Helene to be more than $35 billion while insured losses to be more than $12 billion.
Higher catastrophe losses continue to provide impetus to policy renewal rates. However, global commercial pricing declined in the to-be-reported quarter, the first time in seven years that pricing witnessed an increase. This was largely attributable to heightened competition among insurers in the global property market, per the Global Insurance Market Index released by Marsh. Nonetheless, the United States witnessed a 3% increase in pricing.
Given increased travel worldwide, auto premiums are likely to have increased. However, the loss ratio is likely to have been hampered, given the increased severity per claim due to higher vehicle repair and medical costs.
A stronger mortgage market is likely to have favored mortgage insurance premiums. A low unemployment rate is likely to have aided commercial insurance and group insurance.
Life insurers’ continuous focus on protection products likely is likely to have aided solid sales, given a rise in demand for protection products. Life insurers continue to roll out investment products that provide bundled covers of guaranteed retirement income, life and healthcare to cater to customers preferring policies with “living” benefits more than those with death benefits.
Given a larger investment asset base and positive returns from alternative investments, investment income is expected to have improved.
Continued investment in technological advancements is likely to have driven margin expansion. Share buybacks are expected to have provided an additional upside to the bottom line.
Potential Q3 Outperformers
Berkshire Hathaway is one of the largest property and casualty insurance companies with numerous diverse business activities. The insurance business is likely to have benefited from improved pricing, solid retention, higher average premiums per auto policy, increased exposure and favorable reserve development. Continued insurance business growth is expected to have increased float. Lower freight rail transportation revenues, utility and energy operating revenues, service revenues and other income are likely to have weighed on Railroad, Utilities and Energy operating revenues. Higher customer demand for products and services in many businesses is likely to have favored manufacturing, service and retailing businesses. Share buybacks in the to-be-reported quarter are anticipated to have provided a boost to the bottom line.
The Zacks Consensus Estimate for Berkshire Hathway’s third-quarter earnings is pegged at $4.81, suggesting a decrease of 3% from the year-ago reported figure. BRK.B has an Earnings ESP of +8.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Berkshire Hathaway Inc. Price and EPS Surprise
Berkshire Hathaway Inc. price-eps-surprise | Berkshire Hathaway Inc. Quote
MetLife is an insurance-based global financial services company providing protection and investment products to a range of individual and institutional customers. Solid performance at the Group Benefits, Asia and Latin America segments are expected to drive MET's quarterly results. Cost-cutting initiatives are likely to have provided some respite to MetLife’s margins.
The Zacks Consensus Estimate for MET’s third-quarter earnings is pegged at $2.16, suggesting an increase of 9.6% from the year-ago reported figure. MET has an Earnings ESP of +0.98% and a Zacks Rank #3.
MetLife, Inc. Price and EPS Surprise
MetLife, Inc. price-eps-surprise | MetLife, Inc. Quote
Lincoln National is a diversified life insurance and investment management company. Improving average life insurance in-force and margin expansion initiatives are likely to aid quarterly results. Sales growth, pricing discipline, new product introduction and enhancement of the existing ones, and a change in business mix are expected to have driven premium growth. Group Protection Business is likely to have benefited from increasing scale, broader distribution access and expanded capabilities.
The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.64, indicating an increase of 613% from the year-ago reported figure. LNC has an Earnings ESP of +2.15% and a Zacks Rank #3. The company expects third-quarter 2024 earnings per share to be $3.36.
Lincoln National Corporation Price and EPS Surprise
Lincoln National Corporation price-eps-surprise | Lincoln National Corporation Quote
Willis Towers is a leading global advisory, broking and solutions company. Third-quarter results are likely to benefit from geographic diversification, solid customer retention levels and growing new business. Both its Health, Wealth & Career as well as Risk & Broking segments are expected to have delivered solid results banking on operational efficiency. Share buybacks in the to-be-reported quarter are anticipated to have provided a boost to the bottom line.
The Zacks Consensus Estimate for third-quarter earnings is pegged at $2.68, indicating an increase of 19.4% from the year-ago reported figure. WTW has an Earnings ESP of +2.09% and a Zacks Rank #3.
Willis Towers Watson Public Limited Company Price and EPS Surprise
Willis Towers Watson Public Limited Company price-eps-surprise | Willis Towers Watson Public Limited Company Quote
Aflac provides supplemental health and life insurance products. Product innovations, product introductions, expansion of virtual sales channels, increased face-to-face interactions and agent recruitment are likely to drive results at the U.S. segment. Margins are likely to have benefited from cost-saving initiatives. Share buybacks in the to-be-reported quarter are anticipated to have provided a boost to the bottom line.
The Zacks Consensus Estimate for third-quarter earnings is pegged at $41.69, indicating a decrease of 8.2% from the year-ago reported figure. AFL has an Earnings ESP of +0.66% and a Zacks Rank #3.
Aflac Incorporated Price and EPS Surprise
Aflac Incorporated price-eps-surprise | Aflac Incorporated Quote
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Free: See Our Top Stock And 4 Runners UpLincoln National Corporation (LNC) : Free Stock Analysis Report
MetLife, Inc. (MET) : Free Stock Analysis Report
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
Aflac Incorporated (AFL) : Free Stock Analysis Report
Willis Towers Watson Public Limited Company (WTW) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
