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Insurers Reporting Q2 Earnings on Jul 29: RE, ACGL, MCY, NGHC

Zacks Equity Research

Insurance industry players’ second-quarter results are likely to benefit from a benign catastrophe environment, improved pricing, reinsurance agreements, compelling products and service portfolio and adoption of technologies to curb operational costs. A sturdy capital level supporting strategic mergers and acquisitions should also act as catalysts. Improved employment scenario along with rising wages is expected to boost policy sales, thus driving premiums higher.

The second quarter of a year escapes the hurricane season that causes major damage and weighs on underwriting profits of insurers. Underwriting is expected to exhibit improvement on better pricing and prudent practice.

While most of the commercial insurance lines should witness rate increase, workers compensation and international liability are likely to face downward pricing pressure this time around.

Following an accelerated pace in rate hike till last year, the Fed put rate hikes on hold this year. Insurers, who are major beneficiaries of a rising rate environment because of their sensitivity to interest rates, are still expected to exhibit improvement given broader invested asset base.

Further, adoption of technologies like AI, robotic process automation, cognitive intelligence and blockchain should help insurers curb operational costs in the soon-to-be reported quarter.

Also, a sturdy capital level widens scope for capital deployment to fund growth initiatives as well as reward shareholders via dividend hikes, special dividends and share buyback.

Let’s take a sneak peek into how the following insurers are poised prior to their second-quarter earnings releases on Jul 29.

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.

Everest Re Group, Ltd.’s RE second-quarter results are likely to benefit from its global presence, product diversification, capital adequacy, financial flexibility and traditional risk management capabilities. Better pricing at property and commercial auto books as well as primary general liability and various professional lines should aid premium. However, rate pressure is expected to weigh on U.S. workers' compensation. A benign catastrophe environment is likely to aid underwriting profitability. (Read more: Everest Re to Report Q2 Earnings: Is a Beat in Store?)

The Zacks Consensus Estimate for earnings per share of $6.66 indicates surge of 579.6% from the year-ago quarter reported figure. The company’s has an Earnings ESP of +0.53% and a Zacks Rank 2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The company surpassed estimates in three of the last four reported quarters, with the average surprise being 15.45%. This 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. price-eps-surprise | Everest Re Group, Ltd. Quote

Arch Capital Group Limited ACGL is expected to benefit from improved property and select casualty lines pricing. Prudent underwriting is expected to boost premiums.  The mortgage insurance business is likely to benefit from better credit conditions and conservative lending standards. A benign catastrophe environment is likely to aid underwriting profitability. However, operating expenses are likely to weigh on margins. (Read more: Arch Capital to Report Q2 Earnings: What's in Store?)

The Zacks Consensus Estimate for EPS of 69 cents indicates an increase of 17% from the year-ago reported figure. Though it carries a Zacks Rank #2, its Earnings ESP of 0.00% makes surprise prediction difficult.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s earnings outpaced estimates in the last four reported quarters with the average being 14.83%. The same is depicted in the chart below:]

Arch Capital Group Ltd. Price and EPS Surprise

Arch Capital Group Ltd. Price and EPS Surprise

Arch Capital Group Ltd. price-eps-surprise | Arch Capital Group Ltd. Quote

Mercury General Corporation MCY: The Zacks Consensus Estimate for earnings per share of 91 cents for the second quarter indicates an increase of 3.4% year over year. The combination of its Zacks Rank #3 and Earnings ESP of 0.00% makes surprise prediction difficult.

The company’s earnings outpaced estimates in three of the last four reported quarters, with the average positive surprise being 5.71%. 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 price-eps-surprise | Mercury General Corporation Quote

National General Holdings Corp NGHC: The Zacks Consensus Estimate for earnings per share of $2.88 indicates an increase of 7.1% year over year. It carries a Zacks Rank #2 and has an Earnings ESP of -1.70%.

The company’s earnings outpaced estimates in the last four reported quarters, with the average being 25.21%. The same is depicted in the chart below:

National General Holdings Corp Price and EPS Surprise

National General Holdings Corp Price and EPS Surprise

National General Holdings Corp price-eps-surprise | National General Holdings Corp Quote

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Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
 
Mercury General Corporation (MCY) : Free Stock Analysis Report
 
Everest Re Group, Ltd. (RE) : Free Stock Analysis Report
 
National General Holdings Corp (NGHC) : Free Stock Analysis Report
 
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