Insurance Stock Q3 Earnings Slated on Oct 31: L, CNA, & More

The Q3 earnings season is in full swing with 39.6% of the S&P 500 Index members having reported their quarterly results so far. According to our latest Earnings Preview report, the performance of the 198 index members (accounting for 48.9% of the index’s total market capitalization) that have already reported their financial numbers this quarter indicate that total earnings have improved 3.2% on 1.9% higher revenues. The beat ratio is strong with 73.7% companies surpassing bottom-line expectations and 61.1% outperforming on the top-line front.

The Finance sector (one of the 16 Zacks sectors) has started the Q3 earnings season on a strong note. In fact, the financial performance of 54.4% companies from this sector that have revealed their quarterly results indicates 8.8% earnings growth due to a 5.9% increase in revenues, both on a year-over-year basis. Moreover, the beat ratios of 77.6% for the bottom line and 81.6% for the top line compare favorably with the S&P 500.

The Finance sector is highly diversified and includes several industries like insurance, banks and securities exchanges to name a few.

A benign catastrophe environment in Q3 supported the improvement in underwriting results. Lesser cat events favored capital gains and reserve release. Exposure to key areas of the economy, such as new vehicle sales and construction, is expected to have benefitted the property and casualty (P&C) insurers.

Riding on the strength of their core business, geographic expansion and strategic acquisitions, several insurers are poised to outperform in the quarter. Better payroll and employment scenario should also benefit these companies.

Companies that are skewed toward providing health benefits may gain from expansion of the Affordable Care Act, while improvement in the housing market should support mortgage insurers. On the other hand, improving healthcare and benefits consulting service should boost the top-line growth of insurance brokers.

However, a soft interest rate environment continues to weigh on investment results. Nonetheless, spread compression on products like fixed annuities and universal life should improve.

With a number of companies set to report their Q3 results soon, we expect to get a clearer idea about the trends of this earnings cycle. Meanwhile, let’s find out how these five insurers might perform when they report their quarterly numbers on Oct 31.
 
Loews Corp. L is a diversified holding company that provides commercial P&C insurance through its subsidiaries in the United States, Canada, the United Kingdom, Continental Europe, and Singapore. The company delivered a positive surprise of 5.26% in the last quarter. According to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) – to increase its odds of an earnings surprise. Loews has a Zacks Rank #3 and an Earnings ESP of +4.35%, which increases the odds of an earnings beat. Please check our Earnings ESP Filterthat enables you find stocks that are expected to come out with earnings surprises.

The Zacks Consensus Estimate for the quarter is pegged at 69 cents per share.

CNA Financial, a Loews subsidiary, is expected to perform well owing to the underlying strength in its business. Although CNA Financial faces challenges due to slowing premium rates, investment in information technology is likely to boost its underwriting capabilities. Loews Hotels’ results are expected to improve on its operational strength. However, Diamond Offshore, another subsidiary, is likely to underperform due to lower contract drilling revenues. The persistently soft interest rate environment is likely to weigh on investment results.  (Read more: Loews Corp Likely to Top Q3 Earnings: Stock to Gain?)

With respect to the surprise trend, Loews missed expectations in three of the last four quarters, with an average miss of 23.33%.

LOEWS CORP Price and EPS Surprise

 

LOEWS CORP Price and EPS Surprise | LOEWS CORP Quote

CNA Financial Corporation CNA is a provider of commercial property and casualty insurance products, primarily in the United States. The company delivered a positive surprise of 2.78% in the last quarter. The company’s Zacks Rank #2 and an Earnings ESP of +2.38% makes us confident of an earnings beat this season. You can see the complete list of today’s Zacks Rank #1 stocks here.

The Zacks Consensus Estimate for the quarter is pegged at 84 cents per share.

CNA Financial is likely to display growth in net premiums written in the to-be-reported quarter. The insurer is likely to experience improved results at its Commercial and Specialty segments. However, net investment income might be limited owing to lower limited partnership investments. (Read more: CNA Financial Q3 Earnings: Is a Beat in the Cards?)

With respect to the surprise trend, CNA Financial beat expectations in three of the last four quarters but reported an average miss was 24.61%.

CNA FINL CORP Price and EPS Surprise

 

CNA FINL CORP Price and EPS Surprise | CNA FINL CORP Quote

Allied World Assurance Company Holdings, AG, AWH provides property, casualty, and specialty insurance and reinsurance solutions worldwide. The company delivered a positive surprise of 106.82% in the last quarter. The company has a Zacks Rank #3 but an Earnings ESP of 0.00% makes surprise prediction difficult.

The Zacks Consensus Estimate for the quarter is pegged at 65 cents per share.

With respect to the surprise trend, Allied World beat expectations in three of the last four quarters with an average beat of 30.76%.

ALLIED WORLD AS Price and EPS Surprise

 

ALLIED WORLD AS Price and EPS Surprise | ALLIED WORLD AS Quote

Horace Mann Educators Corporation HMN is a multiline insurance company in the United States. The company delivered a positive surprise of 19.05% in the last quarter. Despite the company’s Zacks Rank #2, our surprise prediction is complicated by its Earnings ESP of 0.00%.

The Zacks Consensus Estimate for the quarter is pegged at 47 cents per share.

With respect to the surprise trend, Horace Mann beat expectations in two of the last four quarters with an average beat of 11.29%.

HORACE MANN EDS Price and EPS Surprise

 

HORACE MANN EDS Price and EPS Surprise | HORACE MANN EDS Quote

Mercury General Corporation MCY writes personal automobile insurance in the United States. The company posted a negative surprise of 31.37% in the last quarter. The company has a Zacks Rank #4 and an Earnings ESP of -32.69%. Please note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The Zacks Consensus Estimate for the quarter is pegged at 52 cents per share.

With respect to the surprise trend, Mercury General missed expectations in two of the last four quarters with an average miss of 27.21%.

MERCURY GENL CP Price and EPS Surprise

 

MERCURY GENL CP Price and EPS Surprise | MERCURY GENL CP Quote

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LOEWS CORP (L): Free Stock Analysis Report
 
HORACE MANN EDS (HMN): Free Stock Analysis Report
 
CNA FINL CORP (CNA): Free Stock Analysis Report
 
MERCURY GENL CP (MCY): Free Stock Analysis Report
 
ALLIED WORLD AS (AWH): Free Stock Analysis Report
 
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