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Insurance Stocks' Q1 Earnings Due on Apr 27: AJG, CINF & More

Better pricing, exposure growth, diversified portfolio, solid retention, favorable renewals, reinsurance agreements and accelerated digitalization in the first quarter are likely to have benefited insurance industry players such as Arthur J. Gallagher & Co. AJG, Cincinnati Financial Corporation CINF, The Hartford Financial Services Group HIG, Willis Towers Watson WTW and Kinsale Capital Group KNSL, which are due to report tomorrow. However, an active catastrophe level and inflationary pressure are likely to have weighed on their performance.

Improved pricing, solid retention and exposure growth across business lines are likely to have aided premium. An active catastrophe environment accelerated the policy renewal rate and aided in better pricing in the first quarter. Per a report by MarketScout, commercial property and casualty insurance rates in the United States increased more than 5% in the to-be-reported quarter.

The first quarter of 2023 bore the brunt of March storms.  Aon estimates insured losses in the first quarter to be $15 billion while economic losses are estimated to be $63 million. Nonetheless, better pricing, reinsurance arrangements, portfolio repositioning, reinsurance covers, favorable reserve development and prudent underwriting are likely to drive an improvement in underwriting results.

Increased travel across the world is likely to have induced higher auto premiums. A stronger mortgage market is likely to have favored mortgage insurance premiums. A low unemployment rate is likely to have aided commercial insurance and group insurance.

Insurers, being beneficiaries of an improving rate environment, are likely to witness improved investment results. The first quarter witnessed one rate hike by the Fed. A larger investment asset base, higher reinvestment rate and alternative investments in private equity, hedge funds and real estate among others are expected to have aided net investment income.

Accelerated digitalization is expected to have saved costs, thus aiding margins. A solid capital position aided insurers in strategic mergers and acquisitions to sharpen their competitive edge, build on a niche, expand geographically and diversify their portfolio, apart from enhancing shareholders value via share buybacks and raising dividends.

Let’s take a sneak peek into how the abovementioned insurers are poised prior to their first-quarter 2023 earnings on Apr 27.

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.

Arthur J. Gallagher & Co.’s first-quarter results are expected to reflect solid performance in both segments aided by new business, strong retention and renewal premium increases across its business lines. The employee benefit brokerage and consulting business is likely to have been aided by new business and strong retention. Revenues associated with acquisitions and organic revenue growth are likely to have favored commission and fee revenues. Total expenses are likely to have increased mainly because of higher compensation and operating cost, among others. (Read more: Arthur J. Gallagher to Report Q1 Earnings: What’s in the Cards?)

The Zacks Consensus Estimate for Arthur J. Gallagher’s first-quarter earnings per share of $3.00 indicates a 6.8% increase from the year-ago quarter reported figure. The company has an Earnings ESP of -0.48% and a Zacks Rank #4 (Sell).  

AJG’s earnings surpassed estimates in the last four reported quarters. This is depicted in the chart below:

Arthur J. Gallagher & Co. Price and EPS Surprise

Arthur J. Gallagher & Co. Price and EPS Surprise
Arthur J. Gallagher & Co. Price and EPS Surprise

Arthur J. Gallagher & Co. price-eps-surprise | Arthur J. Gallagher & Co. Quote

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Cincinnati Financial’s premiums are likely to have benefited from growth initiatives, increased exposure, better pricing, increased property casualty agency and new business written premiums, higher standard lines new business and higher premiums from Cincinnati Re. Exposure to catastrophe events stemming from March storms is likely to have weighed on underwriting profitability. CINF estimates first-quarter cat loss to amount to $235 million, of which $171 million will be due to March storms. The catastrophe loss will lower the combined ratio by 1280 basis points (bps) in the first quarter.  

The Zacks Consensus Estimate for the bottom line is pegged at 76 cents, indicating a 51.9% decrease from the year-ago quarter’s reported figure. The company has an Earnings ESP of -11.32% and a Zacks Rank #3. (Read more:  Will Cat Loss Weigh on Cincinnati Financial Q1 Earnings?)

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

CINF’s earnings beat estimates in two of the last four reported quarters and missed in the other two. The same is depicted in the chart below:

Cincinnati Financial Corporation Price and EPS Surprise

Cincinnati Financial Corporation Price and EPS Surprise
Cincinnati Financial Corporation Price and EPS Surprise

Cincinnati Financial Corporation price-eps-surprise | Cincinnati Financial Corporation Quote

The Hartford Financial’s first-quarter results are likely to benefit from prudent rate increases, broader exposure, increased new business generation and strong retention rates. HIG is likely to have continued witnessing strong sales in the to-be-reported quarter. The company is likely to have benefited from better-written premiums in the Commercial Lines segment. Personal Lines and Group Benefits. Margins are likely to have been affected by steep expenses despite its cost-curbing measures. Preliminary estimate for P&C current accident year CAT losses stands at $185 million prior tax, caused by winter storms and other incidents. (Read more: Will Rising Costs Dampen Hartford's Q1 Earnings Growth?)

The Zacks Consensus Estimate for HIG’s bottom line is pegged at $1.68, indicating a 1.2% increase from the year-ago quarter reported figure. The company has an Earnings ESP of 0.00% and a Zacks Rank #3.

HIG’s earnings surpassed estimates in the last four quarters. This is depicted in the chart below:

The Hartford Financial Services Group, Inc. Price and EPS Surprise

The Hartford Financial Services Group, Inc. Price and EPS Surprise
The Hartford Financial Services Group, Inc. Price and EPS Surprise

The Hartford Financial Services Group, Inc. price-eps-surprise | The Hartford Financial Services Group, Inc. Quote

Willis Towers Watson’s first-quarter revenues are likely to have benefited from improved performance at Wealth, Career, Health and Benefits Delivery & Outsourcing businesses. Expenses in the quarter to be reported are likely to have decreased because of lower depreciation and amortization. The downside is likely to have been partially offset by higher salaries and benefits, other operating expenses, restructuring costs and transaction and transformation costs. Continued share buybacks are anticipated to have provided an additional boost to the bottom line. (Read more: What's in the Cards for Willis Towers in Q1 Earnings?)

The Zacks Consensus Estimate for the bottom line is pegged at $2.81, indicating a 5.6% increase from the year-ago quarter reported figure. The company has an Earnings ESP of -1.93% and a Zacks Rank #3.

WTW’s earnings surpassed estimates in the last four quarters. This is depicted in the chart below:

Willis Towers Watson Public Limited Company Price and EPS Surprise

Willis Towers Watson Public Limited Company Price and EPS Surprise
Willis Towers Watson Public Limited Company Price and EPS Surprise

Willis Towers Watson Public Limited Company price-eps-surprise | Willis Towers Watson Public Limited Company Quote

Kinsale Capital’s first-quarter revenues are likely to have benefited from improved premiums. Strong presence across the E&S market of the United States and high retention rates arising from contract renewals are likely to have aided premiums. Growth in investment portfolio balance generated from the investment of strong operating cash flows and improving interest rate likely have aided investment income. Other positives include lower expense ratios due to technological upgrades and a favorable combined ratio due to solid underwriting.

The Zacks Consensus Estimate for KNSL’s bottom line is pegged at $2.24, indicating a 37.4% increase from the year-ago quarter reported figure. The company has an Earnings ESP of +1.07% and a Zacks Rank 2 (Buy).

KNSL’s earnings surpassed estimates in the last four quarters. This is depicted in the chart below:

Kinsale Capital Group, Inc. Price and EPS Surprise

Kinsale Capital Group, Inc. Price and EPS Surprise
Kinsale Capital Group, Inc. Price and EPS Surprise

Kinsale Capital Group, Inc. price-eps-surprise | Kinsale Capital Group, Inc. Quote

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The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report

Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report

Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report

Willis Towers Watson Public Limited Company (WTW) : Free Stock Analysis Report

Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report

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