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The second-quarter earnings season is the busiest now, with 217 members of the elite S&P 500 index having reported their financial numbers. Per the latest Earnings Outlook, the performance of these index participants indicates a 21.8% increase in total earnings on 8.8% higher revenues. The beat ratio is impressive, with 81.6% companies surpassing bottom-line expectations and 72.8% outperforming on the top-line front.
The Finance sector (one of the 16 Zacks sectors) is expected to deliver earnings growth in mid- 20s on nearly mid-single digit stronger revenues.
Integral to the Finance sector, the insurance industry is likely to witness better results this time around on the back of an improving rate environment, tax cuts and an overall favorable operating environment.
The insurance industry faced a catastrophe loss in the second quarter. Successive rain storms in the United States as well as Canada did cause damage but the loss was lower than the year-ago quarter. A Morgan Stanley analyst noted that the second-quarter cat loss estimate is equivalent to about half of what insurers usually suffer due to natural calamities in any given second quarter, per a carriermanagement.com report.
Improved pricing, prudent underwriting practices, portfolio repositioning as well as reliance on reinsurance covers have possibly helped insurers survive the deficits.
A steady increase in interest rates is likely to have boosted net investment income, an important component of an insurer’s top line. Reflecting economic stability, the Federal Reserve raised the key interest rate in June, marking the second hike in 2018.
Also, an improving employment scenario and strengthening labor market have boosted demand for insurance covers. This in turn should have driven premium revenues for the insurers.
A diversified portfolio, a wide geographic footprint, strategic consolidations and lower taxes are anticipated to have enhanced insurers’ performance in the quarter to be reported.
Let’s find out where the following insurers stand ahead of their quarterly releases on Jul 30.
Loews Corporation’s L second quarter results likely have benefited from solid performance at CNA Financial and Loews Hotels. Focus on core competencies in commercial property casualty insurance plus favorable rate changes and a growing new business should continue to drive results at CNA Financial. Boardwalk Pipeline is expected to have delivered better numbers on the strength of its growth projects. However, lower day rate and lower rigs working are expected to have weighed on Diamond Offshore segment.
The Zacks Consensus Estimate of 73 cents per share for second-quarter earnings reflects a 3.9% year-over-year decline. Loews carries a Zacks Rank #3 (Hold) combined with an Earnings ESP of 0.00%, which makes surprise prediction difficult. (Read more: What's in the Cards for Loews This Earnings Season?)
The company beat earnings estimates in three of the last four reported quarters, the average positive surprise being 557.35%. The same is depicted in the chart below.
Loews Corporation Price and EPS Surprise
Loews Corporation Price and EPS Surprise | Loews Corporation Quote
The Zacks Consensus Estimate for Everest Re Group Ltd.’s RE second-quarter earnings per share is pegged at $1.02, reflecting an 81.5% year-over-year decline. Everest Re has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%, hinting at slim chances of a beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The company beat earnings estimates in each the last four reported quarters, the average being a positive 9.55%. The same is depicted in the chart below.
Everest Re Group, Ltd. Price and EPS Surprise
Everest Re Group, Ltd. Price and EPS Surprise | Everest Re Group, Ltd. Quote
Unum Group’s UNM compelling product portfolio and solid execution, improved sales and higher persistency likely have driven premiums higher at Unum U.S. segment. Colonial Life segment is estimated to have benefited from improved persistency and sales. Banking on prudent underwriting, solid persistency and favorable benefit ratio trends, margins are anticipated to have strengthened in the core business segments.
However, volatility in Unum U.K. might have persisted due to the noise surrounding Brexit, which induced an uncertain business environment. Management expects a still low interest rate environment and the tightening of credit spreads to weigh on earnings and reserve levels at the Closed Block and Corporate segment.
The Zacks Consensus Estimate of $1.27 for the yet-to-be-reported quarter earnings reflects a 20.9% year-over-year increase. The company has an Earnings ESP of 0.00% which decreases the odds of an earnings surprise. Meanwhile, a Zacks Rank #3 (Hold) increases the predictive power of ESP, making surprise prediction inconclusive. (Read more: Will Strong Unum U.S. Drive Unum Group's Q2 Earnings?)
The company beat earnings estimates in three the trailing four quarters at a positive 3.15% average. The same is depicted in the chart below.
Unum Group Price and EPS Surprise
Unum Group Price and EPS Surprise | Unum Group Quote
CNA Financial Inc.'s CNA premiums in the second quarter likely have improved on an increase in new business, renewal premium change, favorable currency fluctuation impact as well as solid retention. Owing to gradual improvement in interest rates and a possibility of higher limited partnership returns as well as increased fixed income securities, we expect CNA Financial to see an improvement in second-quarter results.
However, the company has possibly witnessed higher expenses, primarily due to increasing net incurred claims and benefits plus amortization of deferred acquisition costs.
The Zacks Consensus Estimate for earnings is pegged at 96 cents, up 9.1% year over year. The company’s Zacks Rank #4 combined with an Earnings ESP of -0.26% makes surprise prediction difficult. (Read more: What's in Store for CNA Financial in Q2 Earnings?)
The company beat earnings estimates in each the last four reported quarters, the average positive surprise being 47.96%. The same is depicted in the chart below.
CNA Financial Corporation Price and EPS Surprise
CNA Financial Corporation Price and EPS Surprise | CNA Financial Corporation Quote
The Zacks Consensus Estimate for Mercury General Corporation’s MCY second-quarter earnings is pinned at 55 cents, reflecting a decline of 19.1% year over year. The company’s Zacks Rank of 3 and Earnings ESP of 0.00% lowers possibility of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company beat earnings estimates in two the last four reported quarters, the average surprise being a negative 15.28%. The same is depicted in the chart below:
Mercury General Corporation Price and EPS Surprise
Mercury General Corporation Price and EPS Surprise | Mercury General Corporation Quote
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Unum Group (UNM) : Free Stock Analysis Report
Loews Corporation (L) : Free Stock Analysis Report
Everest Re Group, Ltd. (RE) : Free Stock Analysis Report
CNA Financial Corporation (CNA) : Free Stock Analysis Report
Mercury General Corporation (MCY) : Free Stock Analysis Report
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