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P&C Insurers Q2 Earnings Around the Corner: AFH, CNA & More
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The second-quarter earnings season is in top gear, with 208 members of the S&P 500 index having reported their financial results already as per the Earnings Trends report. Earnings of these index members are down 4.7% though revenues managed to improve 0.4%. However, the beat ratio is 73.1% for the bottom line and 51.9% for the top line.
About 51.1% of the companies in the Finance sector have already reported their results. Total earnings are down 4.6%, though revenues were higher by 0.5%. The beat ratio is 69.6% for earnings and 56.5% for revenues.
The property and casualty (P&C) insurance industry is part of the broader finance sector. Let’s see how the second quarter has turned up for insurers so far. This quarter witnessed varied catastrophes, including a wildfire in Canada, flooding in Europe, earthquakes in Japan and Ecuador, and hailstorms in Texas. The industry is estimated to incur an expected loss of $15 billion to over $20 billion due to 25 weather events that occurred in the quarter. These have weighed on the underwriting results of insurers, and hurt their underwriting income and combined ratio.
The bottom lines of the P&C insurers that have already reported suffered due to these catastrophe events.
However, prudent underwriting approaches have likely limited capital erosion.
To the disappointment of the sector, the interest rate remains unchanged as the Federal Reserve stayed away from raising the same due to weak employment data and Brexit induced uncertainties. Therefore, investment income, which forms a major component of insurers’ revenues, remained under pressure. But a broader invested asset base and alternative asset classes bring some respite.
Nonetheless, insurers in this well-capitalized industry remain well poised on the back of their expanded and diversified product and service portfolio, which is driving premiums higher. Effective capital deployment involving share buybacks should boost the bottom line.
Let’s see what’s in store for four P&C insurers that are reporting on Aug 1.
Atlas Financial Holdings Inc. through its subsidiaries underwrites commercial automobile insurance policies in the United States, with heightened focus on the light commercial vehicle sector. The company delivered a negative 8.11% earnings surprise last quarter. Atlas Financial has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). The Most Accurate estimate and the Zacks Consensus Estimate for the quarter are both pegged at 37 cents.
With respect to the surprise trend, Atlas Financial surpassed expectations in two of the last four quarters, with an average beat of 17.08%.
CNA Financial Corp. (CNA - Free Report) is a leading commercial insurance writer and property and casualty company in the U.S. The company’s portfolio includes an array of standard commercial lines, specialty lines, surety, marine and other property and casualty coverages. CNA Financial delivered a 6.67% positive earnings surprise last quarter. For the second quarter, CNA Financial has an Earnings ESP of -5.56% as the Most Accurate estimate stands at 68 cents while the Zacks Consensus Estimate is pegged higher at 72 cents. The company currently carries a Zacks Rank #4.
The company is likely to witness lower net operating income in the to-be-reported quarter, primarily due to lower limited partnership investment income. Also, higher catastrophe losses might lead to such weak results. However, the commercial segment is expected to benefit from increased focus and commitment to underwriting discipline. (Read: CNA Financial Q2 Earnings: Disappointment in Store?)
With respect to the surprise trend, CNA Financial surpassed expectations in two of the last four quarters, with an average miss of 34.18%.
Endurance Specialty Holdings Ltd. through its subsidiaries underwrites specialty lines of personal and commercial property and casualty insurance and reinsurance across the globe. Endurance Specialty delivered a 6.68% positive earnings surprise last quarter. The company has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at $1.15. Plus, the company carries an unfavorable Zacks Rank #4.
With respect to the surprise trend, Endurance Specialty surpassed expectations in three of the last four quarters, with an average beat of 25.18%.
Mercury General Corporation (MCY - Free Report) along with its subsidiaries writes personal automobile insurance in the United States. The company also engages in writing homeowners, commercial automobile, commercial property, mechanical breakdown, and umbrella insurance. Mercury General delivered an 81.16% negative earnings surprise last quarter. The company has an Earnings ESP of -32.00% as the Most Accurate estimate stands at 34 cents while the Zacks Consensus Estimate is pegged higher at 50 cents. So, the company is unlikely to beat on earnings although it carries a Zacks Rank #3.
With respect to the surprise trend, Mercury General surpassed expectations in two of the last four quarters. However, on average, the company saw a negative surprise of 20.13%.
OneBeacon Insurance Group Ltd. (OB - Free Report) , through its subsidiaries, provides specialty property and casualty insurance products and services. OneBeacon Insurance delivered an 81.16% negative earnings surprise last quarter. The company has an Earnings ESP of -7.69% and a Zacks Rank #3. The Most Accurate estimate stands at 12 cents while the Zacks Consensus Estimate for the quarter is pegged higher at 13 cents.
With respect to the surprise trend, OneBeacon surpassed expectations in two of the last four quarters, with an average beat of 14.66%.
White Mountains Insurance Group Ltd. (WTM - Free Report) , through its subsidiaries, is involved in insurance, reinsurance, and insurance services businesses. The company delivered a 295.08% negative earnings surprise last quarter. The company has an Earnings ESP of 0.00% and a Zacks Rank #4. The Most Accurate estimate and the Zacks Consensus Estimate are both pegged at a loss of 76 cents.
With respect to the surprise trend, White Mountains Insurance surpassed expectations in two of the last four quarters, but still saw an average miss of 81.46%.
Keep an eye on our full earnings articles to see how these companies finally fared.
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P&C Insurers Q2 Earnings Around the Corner: AFH, CNA & More
The second-quarter earnings season is in top gear, with 208 members of the S&P 500 index having reported their financial results already as per the Earnings Trends report. Earnings of these index members are down 4.7% though revenues managed to improve 0.4%. However, the beat ratio is 73.1% for the bottom line and 51.9% for the top line.
About 51.1% of the companies in the Finance sector have already reported their results. Total earnings are down 4.6%, though revenues were higher by 0.5%. The beat ratio is 69.6% for earnings and 56.5% for revenues.
The property and casualty (P&C) insurance industry is part of the broader finance sector. Let’s see how the second quarter has turned up for insurers so far. This quarter witnessed varied catastrophes, including a wildfire in Canada, flooding in Europe, earthquakes in Japan and Ecuador, and hailstorms in Texas. The industry is estimated to incur an expected loss of $15 billion to over $20 billion due to 25 weather events that occurred in the quarter. These have weighed on the underwriting results of insurers, and hurt their underwriting income and combined ratio.
The bottom lines of the P&C insurers that have already reported suffered due to these catastrophe events.
However, prudent underwriting approaches have likely limited capital erosion.
To the disappointment of the sector, the interest rate remains unchanged as the Federal Reserve stayed away from raising the same due to weak employment data and Brexit induced uncertainties. Therefore, investment income, which forms a major component of insurers’ revenues, remained under pressure. But a broader invested asset base and alternative asset classes bring some respite.
Nonetheless, insurers in this well-capitalized industry remain well poised on the back of their expanded and diversified product and service portfolio, which is driving premiums higher. Effective capital deployment involving share buybacks should boost the bottom line.
INSURANCE-PROP/CAS/TITLE Industry Price Index
INSURANCE-PROP/CAS/TITLE Industry Price Index
Let’s see what’s in store for four P&C insurers that are reporting on Aug 1.
Atlas Financial Holdings Inc. through its subsidiaries underwrites commercial automobile insurance policies in the United States, with heightened focus on the light commercial vehicle sector. The company delivered a negative 8.11% earnings surprise last quarter. Atlas Financial has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). The Most Accurate estimate and the Zacks Consensus Estimate for the quarter are both pegged at 37 cents.
With respect to the surprise trend, Atlas Financial surpassed expectations in two of the last four quarters, with an average beat of 17.08%.
ATLAS FINL HLDG Price and EPS Surprise
ATLAS FINL HLDG Price and EPS Surprise | ATLAS FINL HLDG Quote
CNA Financial Corp. (CNA - Free Report) is a leading commercial insurance writer and property and casualty company in the U.S. The company’s portfolio includes an array of standard commercial lines, specialty lines, surety, marine and other property and casualty coverages. CNA Financial delivered a 6.67% positive earnings surprise last quarter. For the second quarter, CNA Financial has an Earnings ESP of -5.56% as the Most Accurate estimate stands at 68 cents while the Zacks Consensus Estimate is pegged higher at 72 cents. The company currently carries a Zacks Rank #4.
The company is likely to witness lower net operating income in the to-be-reported quarter, primarily due to lower limited partnership investment income. Also, higher catastrophe losses might lead to such weak results. However, the commercial segment is expected to benefit from increased focus and commitment to underwriting discipline. (Read: CNA Financial Q2 Earnings: Disappointment in Store?)
With respect to the surprise trend, CNA Financial surpassed expectations in two of the last four quarters, with an average miss of 34.18%.
CNA FINL CORP Price and EPS Surprise
CNA FINL CORP Price and EPS Surprise | CNA FINL CORP Quote
Endurance Specialty Holdings Ltd. through its subsidiaries underwrites specialty lines of personal and commercial property and casualty insurance and reinsurance across the globe. Endurance Specialty delivered a 6.68% positive earnings surprise last quarter. The company has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at $1.15. Plus, the company carries an unfavorable Zacks Rank #4.
With respect to the surprise trend, Endurance Specialty surpassed expectations in three of the last four quarters, with an average beat of 25.18%.
ENDURANCE SPLTY Price and EPS Surprise
ENDURANCE SPLTY Price and EPS Surprise | ENDURANCE SPLTY Quote
Mercury General Corporation (MCY - Free Report) along with its subsidiaries writes personal automobile insurance in the United States. The company also engages in writing homeowners, commercial automobile, commercial property, mechanical breakdown, and umbrella insurance. Mercury General delivered an 81.16% negative earnings surprise last quarter. The company has an Earnings ESP of -32.00% as the Most Accurate estimate stands at 34 cents while the Zacks Consensus Estimate is pegged higher at 50 cents. So, the company is unlikely to beat on earnings although it carries a Zacks Rank #3.
With respect to the surprise trend, Mercury General surpassed expectations in two of the last four quarters. However, on average, the company saw a negative surprise of 20.13%.
MERCURY GENL CP Price and EPS Surprise
MERCURY GENL CP Price and EPS Surprise | MERCURY GENL CP Quote
OneBeacon Insurance Group Ltd. (OB - Free Report) , through its subsidiaries, provides specialty property and casualty insurance products and services. OneBeacon Insurance delivered an 81.16% negative earnings surprise last quarter. The company has an Earnings ESP of -7.69% and a Zacks Rank #3. The Most Accurate estimate stands at 12 cents while the Zacks Consensus Estimate for the quarter is pegged higher at 13 cents.
With respect to the surprise trend, OneBeacon surpassed expectations in two of the last four quarters, with an average beat of 14.66%.
ONEBEACON INSUR Price and EPS Surprise
ONEBEACON INSUR Price and EPS Surprise | ONEBEACON INSUR Quote
White Mountains Insurance Group Ltd. (WTM - Free Report) , through its subsidiaries, is involved in insurance, reinsurance, and insurance services businesses. The company delivered a 295.08% negative earnings surprise last quarter. The company has an Earnings ESP of 0.00% and a Zacks Rank #4. The Most Accurate estimate and the Zacks Consensus Estimate are both pegged at a loss of 76 cents.
With respect to the surprise trend, White Mountains Insurance surpassed expectations in two of the last four quarters, but still saw an average miss of 81.46%.
WHITE MTN INS Price and EPS Surprise
WHITE MTN INS Price and EPS Surprise | WHITE MTN INS Quote
Keep an eye on our full earnings articles to see how these companies finally fared.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report