According to the latest earnings overview, profits for the finance sector in the second quarter of 2023 are expected to increase by 10.3%. Revenues are expected to increase by 13.5%. Results from insurance, one of the industries in the financial sector, are expected to reflect better pricing and exposure growth, accelerated digitalization and improved interest rates. However, higher than expected cat losses likely weighed on profitability
With the help of the Zacks Stock Screener, we have identified five insurers, namely, Arch Capital Group Ltd. ACGL, Assurant Inc.. AIZ, American Equity Investment Life Holding Company ALE, aon AON and Afla Incorporated AFL, which are on course to surpass the Zacks consensus estimate in second-quarter earnings. These stocks have the ideal combination of two ingredients – a positive ESP on earnings and a #1 (Strong Buy), #2 (Buy), #3 (Hold) Zacks ranking – to exceed expectations. You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.
Factors that could impact Q2 results
Insurers are likely to achieve better investment results. They benefit from an improved pricing environment. The second quarter saw a 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, coupled with an improving rate environment, should have contributed to net investment income. Net investment income is an important component of insurer sales.
Life insurers have redesigned their products, focusing on protection products. Rising awareness and demand for protective products likely boosted sales. Life insurers continue to roll out investment products that offer bundled guaranteed retirement income, life insurance and healthcare coverage to cater to customers preferring policies with “living” benefits over those with death benefits.
The second quarter of 2023 bore the brunt of the June storms. JP Morgan estimates insured losses in the second quarter at around $10 billion, according to a report in Reinsurance News. Nonetheless, improved pricing, reinsurance agreements, portfolio repositioning, reinsurance hedges, favorable reserve development and prudent underwriting should lead to improved underwriting results.
Players continue to invest in digitization, which, in turn, has likely reduced costs and increased margins. Building on a strong capital position, insurers have engaged in strategic buyouts and mergers, built on a niche, expanded globally, diversified their portfolio and deployed capital to increase dividends and pay special dividends. Share buybacks are expected to have provided an additional benefit to bottom line.
Potential outperformers in Q2
Arch Capital Group offers insurance, reinsurance and mortgage insurance worldwide. Second quarter premiums are expected to have benefited from growth across most lines of business, primarily driven by rate increases, new business opportunities and gains in existing accounts in the Insurance and Reinsurance segments. ACGL should have benefited from better pricing and increased exposure, which likely contributed to underwriting profitability
Zacks’ consensus estimate for ACGL’s second-quarter earnings is pegged at $1.65, suggesting a 23.1% increase from the figure released a year ago. ACGL has a +1.57% Earnings ESP and a #3 Zacks Rank. You can see the full list of today’s Zacks #1 Rank stocks here.
Arch Capital Group Ltd. Price and Surprise EPS
Arch Capital Group Ltd. price-eps-surprise | Submission Arch Capital Group Ltd.
Assuring is a global provider of risk management solutions to the housing and lifestyle markets. The Global Lifestyle segment should have benefited from the growth of the mobile protection program in North America, higher revenues from Connected Living and strong prior period sales in Global Automotive. Higher net investment income, after customer profit sharing, favorable loss experience in some domestic ancillary products and expansion across distribution channels should have helped Global Automotive.
Zacks’ consensus estimate for AIZ’s second-quarter earnings is pegged at $2.60, suggesting an 11.9% decline from the figure released a year ago. AIZ has a +0.52% win ESP and a #3 Zacks rank.
Assurant, Inc. Awards and EPS Surprise
Assurant, Inc. price-eps-surprise | Assurant, Inc. Quote
Investing in US stocks is a leader in the development and sale of fixed index and fixed rate annuity products. Expanding into new verticals, the increasing popularity of index products in the marketplace, and an improving interest rate environment conducive to investment allocation should support quarterly results. However, increased spending likely weighed on margins.
Zacks’ consensus estimate for AEL’s second-quarter earnings is pegged at $1.67, suggesting a 70.4% increase from the figure released a year ago. AEL has a +1.70% Earnings ESP and a #1 Zacks Rank.
US holding company Equity Investment Life price and EPS surprise
American Equity Investment Life Holding Company price-eps-surprise | Quote from the American company Equity Investment Life Holding
aon offers risk management, insurance and reinsurance brokerage and human resource consulting services. Its commercial risk solutions have likely benefited from strong business generation and retention. Improved offerings, platforms, and tools, and growing customer focus on employee health, engagement, and wellbeing have likely supported health and benefits, as well as human capital. Improved alternative investment returns likely contributed to net investment income.
Zacks’ consensus estimate for second-quarter earnings is pegged at $2.82, indicating a 7.2% increase from the figure released a year ago. AON has a +2.56% win ESP and a #3 Zacks rank.
Aon plc Price and surprise EPS
Aon plc price-eps-surprise | Quote Aon plc
Aflac offers complementary health and life insurance products. Aflac’s revenues are expected to have benefited from sales growth within its US segment. Multiple cost control efforts likely contributed to the margin.
The Zacks consensus estimate for AFL Q2 earnings is pegged at $1.42, implying a 2.7% year-over-year decline. It has a +1.41% earnings ESP and a #3 Zacks rank.
Aflac Incorporated Award and EPS Surprise
Aflac Incorporated price-eps-surprise | Quote from Aflac Incorporated
Zacks Reveals ChatGPT’s “Sleeper” Stock
A little-known company is at the heart of a particularly brilliant Artificial Intelligence sector. By 2030, the AI industry is expected to have an Internet- and iPhone-scale economic impact of $15.7 trillion.
As a service to readers, Zacks provides a bonus report that names and explains this explosive growth stock and 4 other “must buys”. And more.
Download ChatGPT Stock Report for Free Now >>
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
Aflac Incorporated (AFL): Free Stock Analysis Report
Assurant, Inc. (AIZ): Free Inventory Analysis Report
Aon plc (AON): Free Stock Analysis Report
American Equity Investment Life Holding Company (AEL): Free Share Analysis Report
Arch Capital Group Ltd. (ACGL): Free Inventory Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.