Peek Into Jul 27 Insurers Q2 Earnings: AHL, EIG, HMN, TMK

The second-quarter earnings season is in full swing, with financial results from 25% of the S&P 500 index already on board. Earnings of these 126 index members (accounting for 32.7% of the index’s total market capitalization) have declined 1.1% on 2.6% lower revenues as per the Earnings Preview report. However, the beat ratio is 70.6% for the bottom line and 55.6% for the top line.

Total earnings of 35.6% of the companies in the Finance sector that have already reported their results declined 5.1%, while revenues have also decreased 0.7%. Nonetheless, the beat ratios (75% for earnings and 59.4% for revenues) compare favorably with the S&P 500.

The insurance industry is part of the broader finance sector. The second quarter witnessed varied catastrophe, including a wildfire in Canada, flooding in Europe, earthquakes in Japan and Ecuador, and hailstorms in Texas. Underwriting results were affected, with underwriting income and combined ratio witnessing deterioration.

Despite a slight rise in interest by the Fed last December, the interest rate environment still remains low. This in turn will keep investment results under pressure. Nonetheless, the slight rate rise is a breather for life insurers which suffered spread compression on products like fixed annuities and universal life due to sustained low rates.

Nonetheless, insurers in this well-capitalized industry remain well poised on the back of their expanded and diversified product and service portfolio that is driving premiums higher.

As many as 951 companies are due to report their quarterly results this week, including 189 S&P 500 members. Among these, let’s see what’s in store for four insurers that are reporting on Jul 27.

Torchmark Corp. TMK provides annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements, and long-term healthcare policies. The company delivered a 0.93% positive surprise last quarter. Torchmark has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at $1.10. Moreover, the company carries a Zacks Rank #4 (Sell). We caution against Sell-rated stocks ahead of the earnings release.

The better performing American Income Exclusive Agency is likely to have driven proved premiums while an improving agent count may have driven life sale. Continued share buyback should boosted to the bottom line. However, the company may have witnessed higher administrative expenses. Also, Part D can weigh on excess investment income. (Read: Is a Surprise in Store for Torchmark Q2 Earnings?)

With respect to the surprise trend, Torchmark surpassed expectations in two of the last four quarters.

Aspen Insurance Holdings Limited AHL is a provider of reinsurance and insurance coverage to clients in various domestic and global markets. The company delivered a 3.20% positive surprise last quarter. For the second quarter of 2016, Aspen Insurance has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 56 cents. It currently carries a Zacks Rank #4.

With respect to the surprise trend, Aspen Insurance lagged expectations in two of the last four quarters, with an average miss of 8.68%.

Employers Holdings, Inc. EIG operates in the commercial property and casualty insurance industry primarily in the United States. The company provides workers' compensation insurance to small businesses in low to medium hazard industries. The company delivered a 1.96% positive earnings surprise last quarter. Employers Holdings has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Most Accurate estimate and the Zacks Consensus Estimate are the same at 57 cents.

With respect to the surprise trend, Employers Holdings surpassed expectations in the last four quarters, with an average beat of 51.27%.

Horace Mann Educators Corp. HMN provides auto, homeowners and life insurance, retirement products, and other financial solutions. Horace Mann delivered a 55.0% positive earnings surprise last quarter. Horace Mann has an Earnings ESP of 0.00% and a Zacks Rank #4. The Most Accurate estimate and the Zacks Consensus Estimate for the quarter are both pegged at 21 cents.

With respect to the surprise trend, Horace Mann lagged expectations in two of the last four quarters, with an average miss of 2.41%.

Keep an eye on our full earnings articles to see how these companies finally fared.

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