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Insurers Q3 Earnings Roster on Oct 31: ALL, AIG, ATH, THG

Insurers are expected to deliver better numbers though catastrophe loss could weigh on their earnings results for the third quarter.

The insurance industry has been reaping benefits from a gradual improvement in interest rates. An important component of insurers' revenues is net investment income. Going by the nature of their operations, insurers invest a big chunk of their premiums collected to be able to provide funds at the time of claims or upon maturity (in case of life insurance). Given the accelerated pace of rate hikes, insurers should gain from an increase in yields on their investment income.

Due to a benign catastrophe environment, insurers witnessed 19 back-to-back quarters of soft pricing market. However, following last year's destruction caused by a series of hurricanes, insurers started to raise prices from fourth-quarter 2017 onward. These in turn likely have aided improvement in premiums in the third quarter.

Per insurancenetnews, in the United States, the composite rate during the third quarter of 2018 increased 2.5%, matching the rate increase of the second quarter. However, the magnitude of price gains was uneven for different business lines. For instance, trucking and commercial auto saw rate hikes of more than 6%. General liability rates inched up in the range of 1-3%

Nonetheless, property and business interruption coverages slipped 1% sequentially. The rate decrease remained with workers' compensation as rates declined on average by 3% in the third quarter, in line with the second-quarter drop.

Though the third quarter of 2018 was not as devastating as the year-ago period, the phase still bore the brunt of Hurricane Florence weighing on the underwriting profitability and deteriorating combined ratios. Catastrophe modeler Risk Management Solutions expects cat loss between $15 million and $20 billion, stemming from Hurricane Florence.

A lower level of tax incidence, courtesy of the new tax rate effective first-quarter 2018, has been boosting the margins. This in turn, will not only aid margin expansion but also lead to dividend payouts owing to higher net profit available to shareholders.

Also, the insurance industry boasts an all-time high capital level, which continued to help it pursue strategic mergers and acquisitions.

Let's find out where the following insurers stand ahead of their third-quarter releases on Oct 31.

The Allstate CorporationALL is expected to witness an increase in insurance premium written in its property and casualty business plus higher revenues from its service business, partly offset by catastrophe loss.

The company is anticipated to incur $625 million loss in the third quarter due to weather-related events that occurred successively in July, August and September. (Read more: What's in the Cards for Allstate in Q3 Earnings? )

The Zacks Consensus Estimate for earnings of $2.17 per share in the yet-to-be-reported quarter reflects a 35.6% year-over-year surge. Allstate carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company's Earnings ESP of 0.00% makes surprise prediction difficult.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

The company boasts an attractive earnings surprise history, having surpassed estimates in each of the last four reported quarters with an average of 41.84%. This is depicted in the chart below:

The Allstate Corporation Price and EPS Surprise

The Allstate Corporation Price and EPS Surprise | The Allstate Corporation Quote

American International Group, Inc . AIG expects pre-tax catastrophe losses, net of reinsurance, resulting from multiple events in Japan and Asia to be approximately $900 million to $1 billion and pre-tax catastrophe losses, net of reinsurance, resulting from events in North America to be approximately $600 to $700 million, respectively. Restructuring efforts on cost reductions in General Insurance and at AIG headquarters should contribute approximately two points of decline in the combined ratio.

The Zacks Consensus Estimate of 21 cents earnings per share for the third quarter highlights a soaring increase of 117.2% year over year. AIG carries a Zacks Rank #4 (Sell), which decreases the predictive power of ESP. Moreover, the company's Earnings ESP of 0.00% complicates the stock's surprise prediction. (Read more: AIG to Report Q3 Earnings: Will Cat Loss be a Dampener? )

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

The company missed earnings estimates in each the last four reported quarters with an average of 25.45%. The same is depicted in the chart below:

American International Group, Inc. Price and EPS Surprise

American International Group, Inc. Price and EPS Surprise | American International Group, Inc. Quote

Athene Holding Ltd .'s ATH Zacks Consensus Estimate of $1.70 earnings per share during the third quarter represents a 44.1% year-over-year improvement. The company's Zacks Rank #1 and an Earnings ESP of +1.62% makes us confident of an earnings beat this to-be-reported quarter.

The company's earnings beat estimates in the last four reported quarters, the average being 15.03%. The same is depicted in the chart below:

Athene Holding Ltd. Price and EPS Surprise

Athene Holding Ltd. Price and EPS Surprise | Athene Holding Ltd. Quote

The Hanover Insurance Group, Inc .'s THG Zacks Consensus Estimate of $2.04 per share for third-quarter earnings depicts a skyrocketing 1,754.6% year-over-year rise. The company's Zacks Rank of 4 along with an Earnings ESP of 0.00% makes surprise prediction difficult.

The company's earnings exceeded estimates in the last four reported quarters with an average positive surprise of 38.01%. The same is depicted in the chart below:

The Hanover Insurance Group, Inc. Price and EPS Surprise

The Hanover Insurance Group, Inc. Price and EPS Surprise | The Hanover Insurance Group, Inc. Quote

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Athene Holding Ltd. (ATH): Free Stock Analysis Report

American International Group, Inc. (AIG): 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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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