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5 P&C Insurers Poised to Beat Estimates This Earnings Season

Tanuka De
·4 min read

Per the latest Earnings Outlook, the Finance sector’s earnings are expected to decrease 4.8% while revenues are estimated to decline 2.4%. The Insurance industry is likely to report earnings growth for the fourth quarter.

Integral to the insurance industry, the Property and Casualty (P&C) insurers are likely to have benefited from better pricing, exposure growth, prudent underwriting, solid products and service portfolio and increased adoption of technologies. However, catastrophe losses and lower interest rate might have weighed on P&C insurers.

Notably, since the third quarter of 2020, insurers have been witnessing a turnaround owing to reopening of the economy, which suffered heavily due to the pandemic.

P&C insurers also had to deal with the impact of hurricanes Delta and Zeta, and Tropical Storm Eta in the fourth quarter apart from other non-named windstorms.  In a report on Aug 5, 2020, Colorado State University had stated that ‘2020 hurricane activity will be about 190% of the average season’.  United Insurance Holdings UIHC estimates fourth-quarter 2020 catastrophe loss between $85 million and $100 million before income taxes or between $67 million and $79 million after tax, net of expected reinsurance recoveries.  Per Munich RE, global losses from natural disasters were $210 billion in 2020. Of these about $82 billion were insured.

Frequent natural disasters accelerated the policy renewal rate and kept the pricing momentum alive even in the fourth quarter. Most of the commercial insurance lines are likely to have witnessed rate increase in the to-be-reported quarter. Per Willis Towers Watson’s Commercial Lines Insurance Pricing Survey, 23 U.S. commercial insurance lines are expected to witness price rise while five might see either increases, decreases or flat renewals. Moreover, reinsurance covers, favorable reserve development and sturdy capital level are expected to have provided additional support.

A near-zero interest rate environment might have weighed on investment income of the insurers. Investment income is an important component of insurer’s top line. The Fed rate has remained unchanged at 0-0.25% and there are no indication of raises until 2023.

Nonetheless, adoption of technologies is expected to have led to smooth functionality amid coronavirus-induced challenges and saves costs, thus aiding margins.

The P&C insurance industry gained 7.7% in the fourth quarter, compared with the S&P 500 Index’s rise of 11.7% and the Finance sector’s increase of 18.1%.

Potential Q4 Outperformers

With the help of the Zacks Stock Screener, we have identified a few stocks poised to outshine the Zacks Consensus Estimate in fourth-quarter earnings.  These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a favorable Zacks Rank — to surpass expectations. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

The Allstate Corporation ALL is the third-largest P&C insurer and the largest publicly-held personal lines carrier in the United States.

Earnings ESP: +10.05%

Zacks Rank #2 (Buy)

W.R. Berkley Corporation WRB boasts being one of the nation’s largest commercial lines property casualty insurance providers.

Earnings ESP: +6.75%

Zacks Rank #2

The Progressive Corporation PGR provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services primarily in the United States.

Earnings ESP: +0.15%

Zacks Rank #3 (Hold)

The Travelers Companies TRV provides a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States and select international markets.

Earnings ESP: +1.80%

Zacks Rank #3

Arch Capital Group ACGL offers insurance, reinsurance and mortgage insurance across the world.

Earnings ESP: +3.13%

Zacks Rank #3

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The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
 
W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
The Allstate Corporation (ALL) : Free Stock Analysis Report
 
The Progressive Corporation (PGR) : Free Stock Analysis Report
 
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
 
United Insurance Holdings Corp. (UIHC) : Free Stock Analysis Report
 
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