Multi Line Insurers Q3 Earnings On Oct 27: HIG, ORI, RDN

The Q3 earnings season is underway with 23.2% of the S&P 500 Index members having reported their quarterly results so far. According to our latest Earnings Preview report, the performance of the 116 index members (accounting for 30% of the index’s total market capitalization) that have already reported their financial numbers this quarter indicate that total earnings have improved 3.3% on 1.8% higher revenues. The beat ratio is strong with 80.2% companies surpassing bottom-line expectations and 62.9% outperforming on the top-line front.

The Finance sector (one of the 16 Zacks sectors) has started the Q3 earnings season on a strong note. In fact, the financial performance of 33.3% companies from this sector that have already reported their quarterly results indicates 7.9% earnings growth due to a 5.1% increase in revenues, on a year-over-year basis. Moreover, the beat ratios of 90% for the bottom line and 86.7% for the top line compare favorably with the S&P 500.

The Finance sector is highly diversified and includes several industries like insurance, banks and securities exchanges to name a few.

Amid a benign catastrophe environment in Q3, underwriting results improved. Lesser cat events favored capital gains and reserve release, pressurizing pricing. Better payroll and employment scenario should also benefit insurers. Insurers are poised to outperform in the quarter on the back of their core business, geographic expansion and strategic acquisitions. Companies that are skewed toward providing health benefits may gain from expansion of the Affordable Care Act, while improvement in the housing market should benefit mortgage insurers.

However, a soft interest rate environment continued to weigh on investment results. Nonetheless, spread compression on products like fixed annuities and universal life should improve.

With as many as 810 companies reporting their quarterly results this week (including 171 index members), let’s find out how these three multiline insurers might perform when they report their quarterly numbers on Oct 27.

The Hartford Financial Services Group, Inc (NYSE:HIG) is one of the major multi-line insurance and investment companies in the country, providing investment products, group life and group disability insurance, property and casualty insurance and mutual funds in the U.S. The company delivered a negative surprise of 59.74% in the last quarter. According to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) – to increase its odds of an earnings surprise. Though The Hartford has a Zacks Rank #3, an Earnings ESP of 0.00% makes prediction difficult. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

The Zacks Consensus Estimate for the quarter is pegged at 95 cents per share.

Strong performance by commercial lines and group benefits are likely to drive growth for the company. Strategies like an increase in the number of rate filings and aggressive non-rate actions should help in margin expansion. However, a persistently low interest rate along with Brexit-induced uncertainty might limit growth in net investment income. (Read more: The Hartford Q3 Earnings: Is a Surprise in Store?)

With respect to the surprise trend, The Hartford missed expectations in three of the last four quarters, with an average miss of 17.64%.

Radian Group Inc. (NYSE:RDN) is a credit enhancement company which supports homebuyers, mortgage lenders, loan servicers and investors with a suite of private mortgage insurance and related risk-management products and services. The company delivered a negative earnings surprise of 5.00% in the last quarter. The company has a Zacks Rank #2 and an Earnings ESP of +2.56%, which makes us confident of an earnings beat. You can see the complete list of today’s Zacks Rank #1 stocks here.

The Zacks Consensus Estimate for the quarter is pegged at 39 cents per share.

With respect to the surprise trend, Radian beat expectations in only one of the last four quarters but the average beat was 0.53%.

Old Republic International Corporation (NYSE:ORI) and its subsidiaries market, underwrite, and provide risk management services to a wide variety of coverage, mostly in the general and title insurance fields. The company delivered a positive earnings surprise of 2.86% in the last quarter. Though Old Republic has Zacks Rank #3, an Earnings ESP of 0.00% makes prediction difficult.

The Zacks Consensus Estimate for the quarter is pegged at 40 cents per share.

With respect to the surprise trend, Old Republic International beat expectations in three of the last four quarters with an average beat of 11.81%

OLD REP INTL Price and EPS Surprise

Keep an eye on our full earnings articles to see how these companies members finally fared.

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