Insurance Stock Q3 Earnings on Oct 29: MMC, WLTW and More
Insurance industry players are likely to have benefited from improved pricing, strong retention, new business, solid retention, favorable renewals, 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.
The third quarter of a year generally bears the brunt of catastrophes as the hurricane season typically starts in June and lasts through November during a year, gathering strength in August and September. Thus, the third-quarter performance of industry players is likely to have been affected by losses stemming from hurricanes Laura, Isaias, Hanna and Sally, wildfires in California and Oregon, and Midwest United States Derecho windstorm. Nonetheless, better pricing, reinsurance arrangements, portfolio repositioning and prudent underwriting practice are likely to have limited the downside.
Frequent natural disasters are likely to have accelerated the policy renewal rate and kept the momentum of increased pricing alive in the third quarter. Most of the commercial insurance lines are likely to have witnessed rate increase in the quarter.
A higher invested asset base might have somewhat limited the adverse impact of sustained low rates for insures. Nonetheless, the impacts of the pandemic are expected to weigh on the results. Given the slowdown in economic growth due to the pandemic, contributions from employers and employees are likely to have declined.
Nonetheless, the adoption of technologies is expected to have aided smooth functionality amid coronavirus-induced challenges and saved costs.
Let’s take a sneak peek into how the following insurers are poised prior to their third-quarter earnings reports on Oct 29.
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.
Marsh McLennan Companies’ MMC Risk and Insurance Services segment is expected to report favorable results for the to-be-reported quarter. Guy Carpenter is expected to have continued gaining from solid retention, robust demand driving new business and a tailwind from the current pricing environment. The Consulting segment is however likely to have witnessed muted performances in the third quarter. Mercer and Oliver Wyman suffered a massive adverse impact on their career business because of the lockdown. Although the company took several growth-oriented initiatives, we think that an elevated expense level might have persistently weighed on its margins. (read more: Marsh & McLennan to Report Q3 Earnings: What to Expect)
The Zacks Consensus Estimate for earnings per share of 74 cents indicates 3.9% decline from the year-ago quarter reported figure. The company has an Earnings ESP of +3.50% and a Zacks Rank 3, indicating a likely earnings beat.
The company surpassed estimates in the last four reported quarters, with the average surprise being 8.34%. This is depicted in the chart below:
Marsh McLennan Companies, Inc. Price and EPS Surprise
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Willis Towers Watson’s WLTW revenues in the third quarter are likely to have been aided by higher commissions, net new business, solid retention, favorable renewals, increased consulting and brokerage services and favorable rates. However, the company anticipates COVID-19 pandemic to negatively impact revenues and operating results. Expenses are likely to have risen due to higher salaries and benefits, other operating expenses, depreciation, transaction and integration expenses. (read more: What's in the Cards for Willis Towers in Q3 Earnings?)
The Zacks Consensus Estimate for earnings per share of $1.28 for the third quarter indicates a decrease of 2.29% year over year. The combination of its Zacks Rank #3 and Earnings ESP of +3.81% indicates a likely earnings beat.
The company’s earnings outpaced estimates in the last four reported quarters, with the average positive surprise being 4.82%. The same is depicted in the chart below:
Willis Towers Watson Public Limited Company Price and EPS Surprise
The Hartford Financial Services Group’s HIG Personal Lines segment likely has suffered due to lower earned premiums. The company is expected to have witnessed a significant decline in new business in the middle and large commercial market. The company’s top line might have been adversely impacted by decreased audit premiums and negative exposure endorsements. The commercial lines business is likely to have persistently suffered lower underwriting gains. (read more: What's in Store for Hartford Financial Q3 Results?)
The Zacks Consensus Estimate for earnings per share of 88 cents indicates a decrease of 41.3% from the year-ago reported figure. It has Earnings ESP of -4.97% and a Zacks Rank #4 .
The company’s earnings outpaced estimates in three of the last four reported quarters, with the average being 6.63%. The same is depicted in the chart below:
The Hartford Financial Services Group, Inc. Price and EPS Surprise
Arthur J. Gallagher’s AJG third-quarter results are likely to have benefited from strong new business generation, solid retentions and enhanced value-added services for carrier partners. Fees and commissions in the to-be-reported quarter are likely to have benefited from new business generation and higher premium rates across most geography. The company expects savings in the range of $65 million to $70 million and improvement in EBITDAC. Lower interest income from U.S. operations due to decreases in interest income earned on client held funds are likely to have hurt net investment income. (read more: What Awaits Arthur J. Gallagher This Earnings Season?)
The Zacks Consensus Estimate for earnings per share of 90 cents for the third quarter indicates an increase of 12.5% year over year. It has an Earnings ESP of -2.78% and a Zacks Rank #2.
The company’s earnings outpaced estimates in the last four reported quarters, with the average positive surprise being 11.10%. The same is depicted in the chart below:
Arthur J. Gallagher Co. Price and EPS Surprise
Everest Re Group’s RE premiums are likely to have benefited from its global presence, product diversification, strong renewal retention and better pricing. The company estimates pre-tax net catastrophe losses of $300 million, net of reinsurance and reinstatement premiums, stemming from hurricanes Laura, Isaias and Sally, wildfires in California and Oregon, and other events including the Midwest United States Derecho windstorm. Nonetheless, despite huge losses, the company expects strength and diversification of its business to help it post net income in the to-be- reported quarter. (read more: Everest Re Group to Report Q3: What's in the Cards?)
The Zacks Consensus Estimate for earnings per share of $2.81 for the third quarter indicates an increase of 17.1% year over year. The combination of its Earnings ESP of 0.00% and a Zacks Rank #3 and makes surprise prediction difficult.
The company’s earnings outpaced estimates in the last four reported quarters, with the average positive surprise being 28.95%. The same is depicted in the chart below:
Everest Re Group, Ltd. Price and EPS Surprise
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The Hartford Financial Services Group, Inc. (HIG): Free Stock Analysis Report
Marsh McLennan Companies, Inc. (MMC): Free Stock Analysis Report
Everest Re Group, Ltd. (RE): Free Stock Analysis Report
Arthur J. Gallagher Co. (AJG): Free Stock Analysis Report
Willis Towers Watson Public Limited Company (WLTW): 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.