Can These 3 Insurers Beat Estimates This Earnings Season?

Continued improved pricing, exposure growth, portfolio streamlining, solid retention, renewals, reinsurance agreements and accelerated digitalization are expected to have boosted insurance stocks’ March-quarter performance. However, interest rate cuts and continued inflationary pressures are likely to have weighed on the upside. Insurers yet to report their first-quarter results on May 1 are Arthur J. Gallagher & Co. AJG, Reinsurance Group of America, Incorporated RGA and American International Group, Inc. AIG.

The insurance space is housed within the broader Finance sector (one of the 16 broad Zacks sectors within the Zacks Industry classification). Per the latest Earnings Preview, the total earnings of finance companies for the first quarter are anticipated to rise 8.2% from the prior-year quarter’s figure. These companies’ revenues are anticipated to improve 3.3%.

Factors Likely to Shape Insurers’ Performance in Q1

Solid retention, exposure growth across business lines and improved pricing are likely to have boosted premiums. Per a recent analysis by MarketScout’s Market Barometer, the commercial insurance sector saw a composite rate increase of 3%. Per the report, the personal lines composite rate has increased 4.9% in the first quarter of 2025, up from 4% in the fourth quarter of 2024.

Auto premiums are likely to have improved, given increased travel across the world. A low unemployment rate is likely to have aided commercial insurance and group insurance.

The Fed reduced interest rates three times in 2024, and the chances of multiple rate cuts remain in 2025.  Life insurers, who benefit from higher rates by investing premiums to fulfill policyholder obligations, are expected to have faced pressure on investment returns due to lower interest rates in the to-be-reported quarter.

A larger investment asset base, strong cash flow from operating activities, higher bond yields, as well as an increase in interest income from fixed-maturity securities, are expected to have aided net investment income.

The aging U.S. population is expected to have maintained strong demand for life insurance and protection products, contributing to steady premium inflows. Additionally, the resurgence of commercial and industrial activity is likely to have fueled demand for workers' compensation insurance in the to-be-reported quarter.

The insurance industry’s increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation expedites business operations. Insurers continue to invest heavily in technology to improve basis points, scale and efficiencies. These investments are likely to have curbed costs and aided the margins of insurers in the first quarter.

A solid capital position is likely to have aided insurers in strategic mergers and acquisitions to sharpen their competitive edge, expand geographically and diversify their portfolio. Sustained wealth distribution to shareholders via dividend hikes, special dividends and share repurchases instill confidence in the insurers.

Let’s find out how the following insurers are placed before their first-quarter 2024 results on May 1.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Per our proprietary model, the combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Arthur J. Gallagher: AJG’s first-quarter results are likely to benefit from solid performance in both segments, aided by new business, solid retention and higher renewal premiums across its business lines. New business wins, outstanding retention and increases in customer business activity are expected to have favored the Risk management segment. Continued strong customer retention, higher new business generation and increasing renewal premiums, an improvement in interest income earned on own and fiduciary funds are expected to have benefited the Brokerage segment. However, total expenses are likely to have increased mainly because of higher compensation, reimbursements, interest and amortization. (Read more: Will Arthur J. Gallagher Pull Off a Surprise in Q1 Earnings?)

The Zacks Consensus Estimate for the bottom line is pegged at $3.57, indicating a 2.2% increase from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $3.75 billion, implying 16.4% growth from the year-ago quarter’s figure. The company has an Earnings ESP of +0.53% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AJG’s earnings beat estimates in three of the last four reported quarters and matched in one. The same is depicted in the chart below:

Arthur J. Gallagher & Co. Price and EPS Surprise

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

Reinsurance Group of America: RGA’s first-quarter results are expected to benefit from a solid performance in the Europe, Middle East and Africa and Canada segments. Rising premiums and net investment income are expected to have further buoyed the company’s results in the to-be-reported quarter. The strong U.S. and Latin American segments also bode well. Despite these tailwinds, rising costs and expenses are expected to have constrained profit expansion during the quarter.

The Zacks Consensus Estimate for RGA’s first-quarter 2025 earnings is pegged at $5.33 per share, indicating a 11.4% decline from the prior-year quarter’s figure. The consensus mark for revenues is $5.74 billion, implying a 7.2% decrease from the year-ago quarter’s figure. RGA has an Earnings ESP of +0.24% and a Zacks Rank of 3 at present.

RGA’s earnings surpassed estimates in three of the last four reported quarters while missing in one. The same is depicted in the chart below:

Reinsurance Group of America, Incorporated Price and EPS Surprise

Reinsurance Group of America, Incorporated price-eps-surprise | Reinsurance Group of America, Incorporated Quote

American International Group: The Zacks Consensus Estimate for first-quarter General Insurance net premiums earned indicates 1.3% year-over-year growth. However, North America and International units are expected to have witnessed year-over-year declines. The consensus estimate for adjusted pre-tax income from General Insurance predicts around a 27% decline from the year-ago quarter. The same from the Other Operations indicates a lower level of loss in the first quarter of 2025 from the year-ago period.

The consensus mark for net investment income predicts a 76.1% decline from the year-ago period. The negatives from divestments are expected to have been partially offset by new business production and robust retention. Lower general operating and other expenses are likely to have provided some impetus.

The Zacks Consensus Estimate for the to-be-reported quarter’s bottom line is pegged at $1.05 per share, indicating a decline of 40.6% year over year. The consensus mark for the top line is pegged at $6.79 billion, signaling a 45.5% decline from a year ago. AIG has an Earnings ESP of -1.70% and a Zacks Rank of 3 at present.

AIG’s earnings surpassed estimates in three of the last four reported quarters while missing in one. The same is depicted in the chart below:

American International Group, Inc. Price and EPS Surprise

American International Group, Inc. price-eps-surprise | American International Group, Inc. Quote

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This article originally published on Zacks Investment Research (zacks.com).

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