The insurance industry, which broadly houses life and property as well as casualty (PC) insurers, has suffered a setback from the COVID-19 fallout. However, since the third quarter of 2020, insurers have been witnessing a turnaround owing to reopening of the economy. The leading insurance companies recovered on the back of better pricing, wider exposure, prudent underwriting, a solid products and service portfolio and an increased adoption of technologies.
The year-over-year comparison will be favorable as the March quarter of 2020 was hit by the pandemic. Evidently, premium rates in Personal and Commercial lines of insurance are likely to have driven premiums in the to-be-reported quarter as well. Companies in the auto insurance space are expected to have witnessed a bounce back in usage as more people are stepping out leading to increased traveling spend.
On the flip side, insurers are likely to have borne the brunt of COVID-related charges and high catastrophe losses. This, in turn, might have elevated their claim costs and stressed margins.
Frequent natural disasters accelerated the policy renewal rate and aided better pricing even in the first quarter. Most commercial insurance lines are likely to have seen rate hikes in the to-be-reported quarter. Underwriting results are likely to reflect reinsurance covers, favorable reserve development and a strong capital level.
Some of the insurers having released results could manage to beat on first-quarter earnings owing to net favorable prior-year reserve development, a higher underlying underwriting gain, an improved combined ratio and better premiums. However, among those that are set to report first-quarter performances, RenaissanceRe Holdings Ltd. announced that it expects a net negative impact from the Winter Storm Uri, which was an extremely disastrous wind and ice storm that occurred in February 2021.
Other companies might also face the brunt stemming from Viola that struck in February as well as from other minor global events.
A low interest rate environment may have been a dampener for the insurance companies. In the latest FOMC meeting, the interest rate was retained at a near-zero level with indication of no raises until 2023.
Nonetheless, life insurers are consistently redesigning products by moving away from guaranteed savings products toward protection products of unit-linked savings products. Other factors, such as increased adoption of technologies like blockchain, AI, advanced analytics, telematics, cloud computing and robotic process automation are expected to have aided business amid coronavirus-induced challenges and saved costs, thus aiding margins.
The latest Earnings Preview indicates that the Finance sector’s earnings are expected to grow 90.8% while revenues are estimated to improve 5.5%.
In the first quarter, the Zacks Life Insurance industry and the Property and Casualty Insurance industry were up 7.2% and 7.9%, respectively, compared with the Zacks Finance sector’s rise of 10.1% and the Zacks S&P 500 composite's increase of 6.3%.
Our Top Choices
Here we pick some insurance stocks that are well-positioned to deliver a positive surprise in their upcoming releases. With the help of the Zacks Stock Screener, we identified a few stocks that are poised to beat on first-quarter earnings. These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a solid Zacks Rank — to surpass expectations. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zeroing in on four major insurers that are expected to deliver positive earnings growth.
The Allstate Corporation ALL is the third-largest P&C insurer and the largest publicly-held personal lines carrier in the United States.
Earnings ESP: +2.67%
Zacks Rank #3 (Hold) You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Palomar Holdings, Inc. PLMR is a growing company focused on the provision of catastrophe insurance for personal and commercial property.
Earnings ESP: +6.93 %
Zacks Rank of 3
NMI Holdings Inc NMIH offers private mortgage insurance in the United States.
Earnings ESP: +9.40%
Zacks Rank #2 (Buy)
Manulife Financial MFC is one of the three dominant life insurers within its domestic Canadian market and possesses rapidly-growing operations in the United States and several Asian countries.
Earnings ESP: +3.86%
Zacks Rank of 2
Sun Life Financial Inc. SLF is the third largest insurer in Canada. The company is well-diversified by geography and product, providing protection and wealth management products and services to individual and group customers worldwide.
Earnings ESP: +8.75%.
Zacks #2 Ranked
Voya Financial, Inc. VOYA operates as a retirement, investment and employee benefits company in the United States.
Earnings ESP: +1.77%.
Zacks #3 Ranked
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The Allstate Corporation (ALL): Free Stock Analysis Report
Manulife Financial Corp (MFC): Free Stock Analysis Report
Sun Life Financial Inc. (SLF): Free Stock Analysis Report
NMI Holdings Inc (NMIH): Free Stock Analysis Report
Voya Financial, Inc. (VOYA): Free Stock Analysis Report
Palomar Holdings, Inc. (PLMR): Free Stock Analysis Report
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