4 Insurance Stocks Poised To Beat Earnings Estimates In Q4

The insurance industry’s impressive show in the first three quarters of 2019, backed by price gains across most of its business lines, new products and services, consolidation and robust capital position, is likely to have continued in the fourth quarter. Premium rate hikes in most of the insurance lines such as commercial, property, personal, financial and professional were the key catalysts for fourth-quarter revenues.

The Zacks Insurance industry in the past year rose by 14.4% compared with the broader finance sector’s growth of 12.2%. It, however, lagged the S&P 500 Index’s rise of 25.1%.

Factors Likely to Influence Insurers’ Q4 Results

A strong economy may have fueled demand for commercial insurance, which protects business owners and their employees. It includes protection from damage to property or injury to employees, referred to as public and employers' liability in insurance parlance.

Life insurers, in particular, are likely to have gained from modifications made to their product portfolio to adapt to low-interest rates. Many insurers limited sales or removed products that used to offer guaranteed returns and shifted to protection products of unit-linked savings products, which pass investment risks on to policyholders. This change in sales mix is likely to have a mixed effect on overall life insurance sales.

Investment income, another major revenue driver is likely to have seen a  decline from the year-ago reported level due to low-interest rates. The Federal Reserve slashed federal funds rates thrice last year. A reduction in interest rates put pressure on investment rates and consequently investment yields. Nonetheless, a higher invested asset base might have somewhat offset the impact of low rates for insures. Also, investment in alternative assets might have helped the overall return on investment portfolio.

Increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing, and robotic process automation may have expedited business operations and saved cost.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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