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Insurance Stock Q2 Earnings Roster for Aug 3: AIG, CNA & More

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The insurance industry, which broadly encompasses life, property and casualty (PC) as well as multiline insurers, has been suffering a setback from the COVID-19-led adversity. In fact, insurers had earlier predicted that their second-quarter results will be impacted significantly due to coronavirus-induced restrictions. The June quarter is likely to have witnessed a decline in new sales of insurance products.

The life insurance industry has been particularly hit hard by the very low interest rate levels, given their exposure to products that provide guaranteed minimum returns. PC insurers are witnessing weak investment income, induced by soft investment yields and equity market declines. Property and casualty insurers are more susceptible to equity investments than life insurers. 

Given the current economic upheavals, property and casualty insurers should be better off than life insurers. These companies have been enjoying top-line growth with vast and diversified businesses. Premium rates in Personal and Commercial lines of insurance have been rising over the last several quarters, a trend that most likely continued in the to-be-reported quarter as well. Thus, a rise in the insurance rates is expected to have driven premiums (the major component of an insurer’s revenues) in the June quarter too. Marsh’s Global Insurance Market Index estimated commercial policy pricing to increase 6% in the second quarter of 2020 per a FINSMES report.

Further, the industry players with wide exposure to auto insurance business should be relatively better-placed. Notably, precautionary measures to contain the spread of the COVID-19 pandemic prompted Americans to stay home. This, in turn, led to a reduction in driving and frequency of road accidents. Thus, it bodes well for players dealing in automobile insurance business in the form of lower claims outgo. Moreover, this upside is likely to have aided the concerned companies’ underwriting margins.

However, insurers are likely to bear the brunt of COVID-19-related charges as well as catastrophe losses from weather-related events. Allstate Corp. (ALL), a leading  property and casualty insurer, expects to incur $1.19 million in pre-tax catastrophe losses due to weather-related disruption that occurred in April, May and June. Another  P&C insurer Chubb Limited (CB) incurred an after-tax charge of $1.2 billion in relation to the COVID-19 pandemic, which hurt the quarterly results. These expenses are in turn, likely to have escalated insurers’ claim costs and stressed margins.

For Life insurers, changes in the product portfolio like shifting from guaranteed savings products to the protection category of unit-linked savings products and refraining from selling long-duration term life insurance are likely to have helped these players by maintaining solid sales and profitability.

Nonetheless, adoption of technologies like artificial intelligence is expected to have enabled insurers to curb operational costs and boost margin expansion.

The Finance  sector, to which the insurance industry belongs is anticipated to see a 41.9% plunge in second-quarter earnings, according to the latest Earnings Trends. However, the slump is not restricted to this sector alone as 15 of the 16 Zacks sectors are expected to witness declines this earnings season, primarily due to the pandemic.


Let’s see how some of the sector participants are placed ahead of their respective second-quarter earnings releases on Aug 3.

American International Group Inc.’s (AIG - Free Report) General Insurance segment is likely to have incurred losses related to Travel, Contingency, Commercial Property, Trade Credit and Workers’ Compensation due to COVID-19 adversity. Further, this is likely to have drained the company’s underwriting profit in the segment.

Net investment income is also expected to have been dragged down, given the low interest rate environment.

The company’s Life and Retirement segment is also likely to have taken a hit from soft Fixed Annuities deposits due to lower interest rates. (Read more: What Awaits American International’s Earnings in Q2?)

The company’s bottom line surpassed estimates in two (and missed in the remaining two) of the last four quarters, the average negative surprise being 26.75%.

American International Group, Inc. Price and EPS Surprise

The Zacks quantitative model predicts that the combination of a positive Earnings ESP. and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.  But that is not the case with American International. You can see the complete list of today’s Zacks #1 Rank stocks here.

American International currently has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -10.3%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

CNA Financial Corporation (CNA - Free Report) offers commercial P&C insurance products, mainly across the United States. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four  quarters (missed estimates in one), the average miss being 0.88%.

The company currently has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%.

The Zacks Consensus Estimate for the company’s second-quarter earnings has moved 20% south to $2.44 per share over the past 30 days, suggesting a 32% drop from the prior-year reported figure.

CNA Financial Corporation Price and EPS Surprise

Kemper Corp. (KMPR - Free Report) is a financial services provider. It specializes in property and casualty insurance, life and health insurance products for individuals, families and small businesses.

The company’s bottom line surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.25%.

Kemper Corporation Price and EPS Surprise

The company currently has a Zacks Rank of 4 and an Earnings ESP of +28.27%.

The Zacks Consensus Estimate for second-quarter earnings is currently pegged at $6.25, which indicates a dip of 0.32% from the prior-year reported number.

National General Holdings Corp. (NGHC - Free Report) is a specialty personal lines insurance holding company. The company, through its subsidiaries, provides personal and commercial automobile insurance, recreational vehicle and motorcycle insurance, supplemental health insurance products and other niche insurance products. It operates under two segments, namely Property and Casualty, and Accident and Health

The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters (missed the mark in the other two), the average surprise being 5.68%.

National General Holdings Corp Price and EPS Surprise

The company currently has a Zacks Rank #3 (Hold) and an Earnings ESP of +7.05%.

The Zacks Consensus Estimate for second-quarter earnings is currently pegged at $3.22, implying growth of 17.09% from the prior-year reported figure.

Mercury General Corporation (MCY - Free Report) is engaged primarily in writing all risk classifications of automobile insurance in a number of states, principally California. The company offers automobile policyholders the following types of coverage: bodily injury liability, underinsured and uninsured motorist, property damage liability, comprehensive collision and other hazards specified in the policy. 

The company’s bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters (lagged estimates on the remaining two occasions), the average surprise being 0.47%.

Mercury General Corporation Price and EPS Surprise

The company currently has a Zacks Rank of 3 (Hold) and an Earnings ESP of 0.00%.

The Zacks Consensus Estimate for second-quarter earnings is currently pegged at $2.85, hinting at a 9.62% rise from the year-earlier reported figure.

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