Insurance Stocks Q1 Earnings on May 2: AIZ, ALL, GNW, RNR
Zacks Equity Research
Updated
The Q1 earnings season is in full swing with 57.6% members of the elite S&P 500 Index reporting solid quarterly numbers so far.
According to the latest Earnings Preview, the performance of 288 index members that have already reported their financial numbers this quarter indicate that total earnings have increased 13.7% on 8.2% higher revenues. The beat ratio is impressive with 76.4% companies surpassing bottom-line expectations and 68.1% outperforming on the top-line front.
The highly diversified Finance sector (one of the 16 Zacks sectors) has delivered a strong performance so far. Financial performance of 76.6% companies from this sector that have revealed their quarterly results shows 7.8% earnings growth on 6.9% increase in revenues, both on a year-over-year basis. Although, the beat ratio of 69.4% for the bottom line is lower than the S&P 500 the beat ratio of 68.1% for the top line is on par with the S&P 500.
The insurance industry has witnessed core business growth, geographic expansion, strategic acquisitions and effective capital deployment via share repurchase in Q1. We believe that these factors are primarily responsible for the sector’s overall impressive performance.
Insurers are expected to witness improvement in underwriting results on the back of a benign catastrophe environment. However, impact of storms in Midwest and the South that occurred during Feb 28, and Mar 22, as well as cyclone Debbie in Australia are likely to weigh on underwriting results.
On the other hand interest rates, which have remained low over the last several years, witnessed two hikes recently (Dec 2016 and Mar 2017.) This likely have positively impacted the investment income, a major component if insurer’s top line. Also, higher rates should offer some respite to life insurers that suffered spread compression on products like fixed annuities and universal life due to persistently low rates.
Let’s find out how these four insurers might perform when they release their quarterly numbers on May 3.
Multi line insurer Assurant, Inc. AIZ, which is a premier provider of specialized insurance products in North America and other selected markets overseas, has an Earnings ESP of -1.33%. This is because the Most Accurate estimate is pegged at $1.49, while the Zacks Consensus Estimate stands at $1.51. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
The company carries a Zacks Rank #4 (Sell). Please note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Assurant is likely to report a decline in net operating income owing to the ongoing normalization of lender-placed insurance in Global Housing. Also, lower contributions from legacy businesses raises concerns. Moreover, it is expected to record lower net earned premiums. (Read more:Assurant (AIZ) Q1 Earnings: Disappointment in the Cards?)
Last quarter, Assurant beat the Zacks Consensus Estimate by 15%. With respect to the surprise trend, Assurant surpassed expectations in three of the last four quarters, with an average surprise of 5.09%.
Assurant, Inc. Price and EPS Surprise
Assurant, Inc. Price and EPS Surprise | Assurant, Inc. Quote
Life insurer Genworth Financial Inc. GNW offers various products in life insurance and lifestyle protection, long-term care insurance, annuities, asset management and mortgage insurance through financial intermediaries, advisors, independent distributors and sales specialists. It has an Earnings ESP of 0.00% as both theMost Accurate estimate and the Zacks Consensus Estimate stand at 22 cents per share. Although the stock carries a favorable Zacks Rank #3 (Hold), its Earnings ESP of 0.00% makes surprise prediction difficult.
Please note that our proven model shows that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 for an earnings beat.
Last quarter,Genworth Financial missed earnings estimates by 228.6%.With respect to surprise trend, the company surpassed expectations in two of the last four quarters with an average negative surprise of 161.3%.
Genworth Financial’s U.S. Mortgage Insurance is expected to deliver strong results on gradual improvement in the U.S. housing market, effective loss mitigation programs, growing private mortgage insurance market. However, performance in the U.S. Life Insurance Division is expected to have remained soft in the to be reported quarter. (Read more: Can Genworth (GNW) Spring a Surprise this Earnings Season?)
The AllState Corporation ALL is the second-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the U.S. It has an Earnings ESP of 0.00% as both theMost Accurate estimate and the Zacks Consensus Estimate stand at $1.04. The company has a Zacks Rank #4 (Sell).
Last quarter, the company beat estimates by 34.8%. With respect to the surprise trend, the company surpassed expectations in two of the last four quarters with an average beat of 2.37%.
We expect the company’s Q1 results to be adversely affected by cat losses. The company recently announced expected catastrophe loss of $516 million pre-tax or $335 million after-tax for the month of March. It also estimates $781 million pre-tax or $508 million after-tax for Q1. The company’s execution of Auto profit improvement plans over the last two years is expected to drive growth in its Property-Liability segment. Share buy backs in the to-be reported quarter should also add to the bottom line. (Read more: Will Allstate (ALL) Q1 Earnings Suffer on Catastrophe Loss?)
P&C insurer RenaissanceRe Holdings Ltd. RNR that provides property-catastrophe reinsurance to insurers and reinsurers globally has an Earnings ESP of 0.00% as both theMost Accurate estimate and the Zacks Consensus Estimate stand at $1.97. Although the stock carries a favorable Zacks Rank #3 (Hold), its Earnings ESP of 0.00% makes surprise prediction difficult.
In the last quarter, the company beat estimates by 105.6. With respect to the surprise trend, the company surpassed expectations in only one of the last four quarters with an average beat of 6.74%.
The company is expected to display growth on the back of strong premium income, thereby continuing the favorable trend. However, catastrophe losses might weigh on the bottom line in Q1.
RenaissanceRe Holdings Ltd. Price and EPS Surprise
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