Insurance Stocks' Q4 Earnings on Feb 9: RE, AFG and More

The insurance industry players are likely to have benefited from improved pricing, exposure growth, solid retention, favorable renewals, reinsurance agreements, product redesign, and accelerated digitalization in the fourth quarter. Insurers Everest Re (NYSE:RE) Group Limited RE, American Financial Group (NYSE:AFG) AFG, Arch Capital Group (NASDAQ:ACGL) Ltd. ACGL, Manulife Financial (NYSE:MFC) Corporation MFC and Sun Life Financial (NYSE:SLF) Inc. SLF are likely to have benefited from these factors. A low-rate interest rate environment remained a partial offset.

Non-life premiums are likely to have benefited from improved pricing. Occurrences of natural disasters are likely to have prompted price rise in the fourth quarter also. Per Willis Towers Watson’s 2021 Insurance Marketplace Realities report, except for one, 29 lines should witness a price rise. Reinsurance covers, favorable reserve development and solid capital level are thus likely to have aided underwriting profitability.

Better pricing, reinsurance arrangements, portfolio repositioning and prudent underwriting practice are likely to drive an improvement in underwriting results. The fourth quarter of 2021 witnessed a benign cat environment though it bore the brunt of a tornado in Kentucky, a wildfire in Colorado and a few storms.

While increased travel across the world is likely to have induced higher auto premiums, a stronger mortgage market has favored mortgage insurance premiums. Economic growth and a low unemployment rate are likely to have aided commercial insurance and group insurance

Life insurance premiums are likely to have benefited from increasing demand for protection products, thus driving sales. 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.

A still near-zero interest rate environment is likely to have weighed on investment income and yield. Thus, a higher invested asset base, as well as increased investment in alternative assets, is likely to have limited the downside.

Blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation are expected to have expedited business operations and saved costs, thus aiding margins.

Banking on the solid capital position, insurers pursued strategic mergers and acquisitions to sharpen their competitive edge, build on a niche, 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 fourth-quarter earnings on Feb 9.

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.

Everest Re’s premium growth is likely to have benefited from improved economic conditions, exposure growth, new business opportunities, favorable double-digit rate environment and high renewal retention. Improved pricing and a not-so-active catastrophe environment are likely to have aided underwriting profitability. (Read more: What's in the Cards for Everest Re This Earnings Season?)

The Zacks Consensus Estimate for Everest Re’s earnings per share of $9.23 indicates a 924.1% increase from the year-ago quarter reported figure. The company has an Earnings ESP of 0.00% and a Zacks Rank 3.

RE surpassed estimates in two of the three reported quarters of 2021 while missing in one. This is depicted in the chart below:

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

The Zacks Consensus Estimate for American Financial Group’s earnings per share of $2.98 indicates a decrease of 3.4% from the year-ago reported figure. AFG expects 2021 core net operating earnings to be in the range of $8.40 to $9.20 per share.

An increase in average renewal pricing across the entire P&C Group is likely to have aided premium. AFG estimates overall Property and Casualty renewal rates in 2021 to be up 9% to 11% excluding workers' compensation.

AFG has an Earnings ESP of 0.00% and a Zacks Rank #3.

American Financial’s earnings outpaced estimates in all the three reported quarters of 2021.

The same is depicted in the chart below:

The Zacks Consensus Estimate for Arch Capital Group’s earnings per share of $1.02 per share indicates an increase of 82.1% from the year-ago reported figure. The consensus estimate for revenues is pegged at $2.3 billion, indicating an increase of 16.9% year over year. Premium is likely to have benefited from new business opportunities, rate increases, growth in existing accounts and growth in Australian single premium mortgage insurance.

Arch Capital has an Earnings ESP of +1.48% and a Zacks Rank #2.

ACGL’s earnings outpaced estimates in all the three reported quarters of 2021.

The same is depicted in the chart below:

The Zacks Consensus Estimate for Manulife Financial earnings per share of 64 cents per share indicates an increase of 12.3% from the year-ago reported figure. Solid Asia business, expanding wealth management business and cost reduction initiatives are likely to have aided fourth-quarter results.

Manulife Financial has an Earnings ESP of 0.00% and a Zacks Rank #3.

Manulife Financial’s earnings outpaced estimates in two of the three reported quarters of 2021 while missing in one.

The same is depicted in the chart below:

Manulife Financial Corp Price and EPS Surprise

The Zacks Consensus Estimate for Sun Life Financial earnings per share of $1.22 per share indicates an increase of almost 8% from the year-ago reported figure. Solid Asia presence, growth in voluntary benefits business, expanding global asset management business are likely to aid fourth-quarter results.

Sun Life Financial has an Earnings ESP of -1.78% and a Zacks Rank #3.

Sun Life Financial’s earnings outpaced estimates in all the three reported quarters of 2021.

The same is depicted in the chart below:

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Everest Re Group, Ltd. (RE): Free Stock Analysis Report

Manulife Financial Corp (MFC): Free Stock Analysis Report

American Financial Group, Inc. (AFG): Free Stock Analysis Report

Sun Life Financial Inc. (SLF): Free Stock Analysis Report

Arch Capital Group Ltd. (ACGL): Free Stock Analysis Report

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