Better pricing, exposure growth, solid retention, favorable renewals, reinsurance agreements and accelerated digitization in the fourth quarter are likely to have benefited insurance industry players such as Chubb Limited CB, Unum Group UNM and RenaissanceRe Holdings Ltd RNRs due to report tomorrow. However, the level of active crash likely influenced their performance.
Premiums are likely to have benefited from continued improved pricing, strong retention and increased exposure across business lines. An active catastrophe environment accelerated policy renewal rates and helped drive better pricing in the fourth quarter.
The fourth quarter of 2022 bore the brunt of Winter Storm Elliot. Karen Clark & Company estimates the industry’s losses from Elliot at about $5.4 billion. Nevertheless, better pricing, reinsurance arrangements, portfolio repositioning, reinsurance coverages, favorable reserve development and prudent underwriting are likely to improve underwriting results.
Increased world travel has likely driven higher auto premiums. A stronger mortgage market is likely to favor mortgage insurance premiums. The low unemployment rate probably helped commercial insurance and group insurance.
Insurers, as beneficiaries of an improving interest rate environment, are likely to witness improved investment performance. Last year saw seven rate hikes, with the fourth quarter seeing two hikes by the Fed. A larger investment base of assets and alternative investments in private equity, hedge funds and real estate, among others, are expected to support net investment income.
Accelerated digitization is expected to save costs, thus helping margins. A strong capital position has helped strategic M&A insurers sharpen their competitive advantage, build a niche, expand geographically and diversify their portfolio, in addition to enhancing shareholder value through share buybacks and dividend increases.
Let’s take a look at how the aforementioned insurers are doing ahead of their Q4 2022 earnings on January 31.
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ChubFourth quarter premiums are expected to have benefited from strong premium retention, new business and renewal retention. The top line is likely to have benefited from improved premium income as well as higher investment income. Higher-than-expected cat losses likely weighed on the profitability of the signing and therefore the combined ratio. Costs are likely to have increased due to higher losses and loss costs. However, continued share buybacks are expected to provide an additional boost to the bottom line. (Read more: Will Chubb pull off a surprise this earnings season?)
The Zacks Consensus Estimate for Chubb’s Q4 earnings of $4.22 indicates an increase of 10.8% over the prior-year reported figure. The company has an Earnings ESP of +2.72% and a Zacks Rank #3.
CB’s earnings beat estimates in the last four reported quarters. This is depicted in the diagram below:
Chubb Limited Price and EPS Surprise
Chubb Limited price-eps-surprise | Chubb Limited Offer
UnumUnum’s US segment is likely to have benefited from a favorable experience with benefits across the group’s product lines and higher premium income. Favorable benefit experience, higher premium income, active block growth and higher sales are likely to favor Colonial Life’s performance. Growth in the force block and greater consistency are likely to benefit Unum International in the quarter ahead. Costs have probably increased. However, continued share buybacks are expected to provide an additional boost to the bottom line. (Read more: Unum Group to report Q4 earnings: What’s next?)
The Zacks Consensus Estimate for the bottom line was pegged at $1.46, indicating a 64% increase over the reported figure for the prior quarter. The consensus estimate for revenue was pegged at $3 billion, indicating an increase of 0.4% year-over-year. The company has an Earnings ESP of -0.06% and a Zacks Rank #2 (Buy).
You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Unum’s earnings beat estimates in the last four reported quarters. The same is depicted in the diagram below:
Unum Group Price and EPS Surprise
Unum Group price-eps-surprise | Group Quote Unum
Renaissance KingFourth quarter results are likely to benefit from higher premiums in both the Casualty and Specialty plus Property segments. Costs have probably increased. Higher-than-expected cat losses likely weighed on the profitability of the signing and therefore the combined ratio. However, continued share buybacks are expected to provide an additional boost to the bottom line.
The Zacks Consensus Estimate for earnings was pegged at $6.58, indicating an increase of 39.7% over the reported figure for the prior quarter. The consensus estimate for revenue was pegged at $1.8 billion, indicating an increase of 27.3% year-over-year. The company has an Earnings ESP of 0.00% and a Zacks Rank #2.
RNR’s earnings beat estimates in two of the past four quarters, while missing the other two. This is depicted in the diagram below:
RenaissanceRe Holdings Ltd. Price and EPS surprise
RenaissanceRe Holdings Ltd. price-eps-surprise | RenaissanceRe Holdings Ltd. Quote
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