The insurance industry, which broadly houses life and property as well as casualty (PC) insurers, has suffered a setback from the COVID-19-fallout Life insurance industry has been particularly hit hard by the very low-interest rate levels, given their exposure to products that yield guaranteed minimum returns.

PC insurers are persistently witnessing low investment income, induced by soft investment yields and equity market declines. Notably, property and casualty insurers have wider exposure to equity investments than life insurers.  

Under the current economic circumstances, property and casualty insurers should have edge over life insurers. These companies have been riding on healthy toplines growth with business proliferations. Premium rates in Personal and Commercial lines of insurance have been increasing over the last several quarters, which are likely to have driven the metric in the to-be-reported quarter as well.

Also, veterans with long-time experience in the auto insurance business should be relatively better-placed. Precautionary measures to break the chain of the COVID-19 pandemic prompted Americans to stay home. This, in turn, lowered the frequency of driving and accidents eventually. It bodes well for players dealing in automobile insurance business in the form of lower claims outgo, attributable to a desirable decline in the road accident rate.

Many insurance companies including The Travelers, The Allstate, Chubb, Geico, The Hartford Insurance, Progressive Corp., Kemper Corp. et al are returning part of the premiums to their customers and extending other supportive offerings like no penalty fee for late premium payment, provision of other free services etc. Thus, auto insurers are likely to have gained traction from profitability in the first quarter owing to this trend.  

On the flip side, insurers are likely to have borne the brunt of COVID-19-related charges and high catastrophe losses. This in turn, might have elevated their claim costs and stressed margins.

Nevertheless, insurers, in general, are well-equipped with strong capital levels, which are expected to have been properly deployed for share buybacks, thereby adding an impetus to their earnings per share.

In the first quarter, the Zacks Life Insurance industry and the Property and Casualty Insurance industry were down 33.8% and 20.7%, respectively, compared with the Zacks S&P 500 composite's decline of 20.7%.

Selecting the Winners

This is the right time for you to pick some banking stocks that are well-positioned to beat on earnings in their upcoming releases.

Zeroing in on the stocks with earnings beat potential might be a daunting task unless one knows the art of shortlisting to pick the best bets. One way to do it is by choosing stocks with the ideal combination of the two key ingredients: a top Zacks Rank — Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — and a positive Earnings ESP.

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of beating estimates in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this perfect mix of elements, the odds of a positive earnings surprise are as high as 70%.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

4 Major Insurers

Here are four insurance stocks that are poised to deliver a positive surprise in their upcoming earnings releases:

The Allstate Corp. (ALL - Free Report) has an Earnings ESP of +2.18% and a Zacks Rank #2 (Buy). The stock's earnings surpassed estimates in each of the last four quarters, the average being 15.19%.

American International Group, Inc. (AFG - Free Report) has an Earnings ESP of +1.60% and a Zacks Rank #3, at present. The stock’s earnings beat estimates in three of the trailing four quarters, missing the same in one. The average positive surprise is 6.86%.

Kemper Corp. (KMPR - Free Report) has an Earnings ESP of +12.57% and a Zacks Rank of 2. The company’s earnings trumped estimates in each of previous four quarters, the average being 12.38%.

Assurant, Inc. (AIZ - Free Report) has an Earnings ESP of +4.28% and is Zacks #3 Ranked. Its earnings topped estimates in three of the preceding four quarters, lagging the same in one, the average beat being 1.75%.