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Insurance Q2 Earnings Aug 2 Lineup: AIG, GNW, Y, AFG, MKL

We now have Q2 results from 317 S&P 500 members that combined account for 73.5% of the index's total market capitalization.

As per the Earnings Preview report, total earnings for these companies are down -3.3% from the same period last year on -0.9% lower revenues, with 72.9% beating EPS estimates and 53.6% coming ahead of top-line expectations.

About 80% of the companies in the Finance sector have already reported their results. Total earnings are down 4.2% while revenues have increased 1.1%. The beat ratio is 66.7% for earnings and 52.8% for revenues.

The insurance industry is part of the broader Finance sector.

Here, we will focus on how the second quarter has turned up for insurers so far.

Earnings for insurers this quarter are featuring the impact of a rise in incurred claims and adjustment expenses, especially claims from catastrophes, as well as little growth in the U.S. economy and continuing low interest rates.

The players will also see an earnings drain from a series of catastrophes that hit the quarter. The industry is expected to witness a higher loss ratio from 25 weather events that are estimated to cause a loss of around $15 billion to over $ 20 billion. These events include a wildfire in Canada, flooding in Europe, earthquakes in Japan and Ecuador and hailstorms in Texas.

According to Aon Benfield's report, for the first half of 2016, preliminary global economic losses reached $98 billion and global insured losses were $30 billion - the highest levels since 2011. The U.S. accounted for 47% of global insurance losses incurred by public and private insurance entities in the period under review.

However, in spite of all the catastrophe and niggling low rates, the industry is expected to post another profitable quarter aided by capital gains and reserve releases.

We also expect to see favorable reserve development related to the past years led by relatively low catastrophe losses and prudent reserving practices.

The sector is flushed with excess capital, due to benign catastrophe activity in recent years. The players are therefore putting to work the un-deployed capital by buying back shares, hiking dividends, and indulging in mergers and acquisitions. These efforts should be accretive to earnings.

With little sign that inflation is picking up and Brexit-induced uncertainties remaining, the Fed is keen on keeping interest rates near its current lows for the foreseeable future. This will lead to depressed investment yields, consequently hurting investment income, which is one of the revenue drivers of the sector. Companies in the insurance sector will experience lower net investment income led by negative performances of alternative investments in hedge funds. This decline in investment income will be to some extent offset by an increase in invested assets.

A strong dollar will affect earnings of players with international exposure.

Let see what's in store for the below mentioned five insurers:

American International Group, Inc. AIG , provides insurance products and services for commercial, institutional, and individual customers in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. Last quarter, this multiline insurer missed the estimate by 34.34%. American International Group as an Earnings ESP of -12.09% and a Zacks Rank #3.

Earnings at American International Group will likely suffer from catastrophe losses (from the Japanese/Ecuador earthquakes and Texas floods) of $200-$300 million across its commercial and consumer businesses.

Net premium written are expected to be down due to an increase in use of reinsurance along with exits from unprofitable lines.

The quarter's earnings might also see a shortfall due to lower returns from its alternative investments. Its corporate segment which houses the Direct Investment Book and Global Capital Markets (GCM) investments may also incur losses.

The company doesn't have an impressive earnings surprise record. It missed the consensus estimate in three out of the past four reported quarters, with the average miss being 23.04%. (Read more: Will Cat Loss Mar American International Q2 Earnings? ).

AMER INTL GRP Price and EPS Surprise

AMER INTL GRP Price and EPS Surprise | AMER INTL GRP Quote

Alleghany Corp. Y engages in property and casualty reinsurance and insurance businesses in the United States and internationally. The company delivered a 27.15% positive earnings surprise last quarter. The company has an Earnings ESP of 0.00% and a Zacks Rank #3. The Most Accurate estimate stands at $5.08 per share, which is the same as the Zacks Consensus Estimate.

With respect to the surprise trend, Alleghany Corp. surpassed expectations in three out of the last four quarters, with an average beat of 16.61%.

ALLEGHANY CORP Price and EPS Surprise

ALLEGHANY CORP Price and EPS Surprise | ALLEGHANY CORP Quote

Markel Corp. MKL , markets and underwrites specialty insurance products in the United States and internationally. The company delivered a 74.4% positive earnings surprise last quarter. It has an Earnings ESP of 0.00% and a Zacks Rank #3. Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $6.97 per share.

With respect to the surprise trend, Markel Corp. surpassed expectations in each of the last four quarters, with an average beat of 52.57%.

MARKEL CORP Price and EPS Surprise

MARKEL CORP Price and EPS Surprise | MARKEL CORP Quote

American Financial Group Inc. AFG through its subsidiaries, provides property and casualty insurance products in the United States. The company delivered a 3.31% positive earnings surprise last quarter. It has an Earnings ESP of 0.00% and a Zacks Rank #3. The Most Accurate estimate stands at $1.26 per share, in line with the Zacks Consensus Estimate.

The company doesn't have a decent earnings surprise record. It missed the consensus estimate in two out of the past four reported quarters, with the average miss being 0.98%.

AMER FINL GROUP Price and EPS Surprise

AMER FINL GROUP Price and EPS Surprise | AMER FINL GROUP Quote

Genworth Financial, Inc GNW provides insurance and homeownership solutions in the United States and internationally. The company delivered a 50% positive earnings surprise last quarter. It has an Earnings ESP of 0.00% and a Zacks Rank #3. The Most Accurate estimate stands at 21 cents per share, in line with the Zacks Consensus Estimate.

Genworth Financial's mortgage insurance segment is likely to report profits, primarily due to better performing U.S. Mortgage Insurance. Further, the life insurer might experience earnings improvement in the to-be-reported quarter driven by the solid execution of its commercial strategy and a continued reduction in delinquencies from the 2005 through 2008 books of business.

In addition, the company is likely to witness an increase in new insurance written in the second quarter. A gradual improvement in the U.S. housing market, strong loss mitigation programs and a growing private mortgage insurance market are expected to drive the upside

The company doesn't have an impressive earnings surprise track. It missed the consensus estimate in three out of the past four reported quarters, with the average miss being 45.53%.(Read more: Genworth Financial Q2 Earnings: What's in Store? ).

GENWORTH FINL Price and EPS Surprise

GENWORTH FINL Price and EPS Surprise | GENWORTH FINL Quote

Stay tuned! Check back on our full write-up on earnings releases of these stocks.

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GENWORTH FINL (GNW): Free Stock Analysis Report

AMER INTL GRP (AIG): Free Stock Analysis Report

MARKEL CORP (MKL): Free Stock Analysis Report

ALLEGHANY CORP (Y): Free Stock Analysis Report

AMER FINL GROUP (AFG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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