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Insurers Set for Q2 Earnings on Aug 6: BHF, AEL, NGHC, ARGO

The second-quarter earnings season has crossed the halfway mark with 381 members of the elite S&P 500 index having already reported their financial numbers. Per the latest Earnings Preview, the performance of these index participants indicates a 25% increase in total earnings on 10.4% higher revenues. The beat ratio is impressive with 80.1% companies surpassing bottom-line expectations while 73.8% outperforming on the top-line front. This uptrend bears an encouraging picture of the ongoing reporting cycle.

The Finance sector (one of the 16 Zacks sectors) is expected to deliver earnings growth of 20.5% on 6.3% higher revenues for the second quarter of 2018.

Integral to the Finance sector, the insurance industry is likely to witness better results this time around on the back of an improving rate environment, tax cuts and an overall favorable operating environment.

The insurance industry faced a catastrophe loss in the second quarter. Successive rain storms in the United States as well as Canada did cause damages but the loss was lower than the year-ago quarter’s shortfalls. A Morgan Stanley analyst noted that the second-quarter cat loss estimate is equivalent to about half of what the insurers usually suffer due to natural calamities in any given second quarter, per a report.

Improved pricing, prudent underwriting practices, portfolio repositioning as well as reliance on reinsurance covers have possibly helped insurers survive the deficits.

A steady increase in interest rates is likely to have supported net investment income, an important component of an insurer’s top line. Reflecting economic stability, the Federal Reserve raised the key interest rate in June, marking the second hike in 2018.

Also, a progressing employment scenario and a strengthening labor market have boosted demand for insurance covers. This in turn, should have driven premium revenues for the insurers.

A diversified portfolio, a wide geographic footprint, strategic consolidations as well as lower taxes are anticipated to have enhanced insurers’ performance in the quarter to be reported.

Let’s find out how the following insurers are placed ahead of their quarterly releases on Aug 6.

Brighthouse Financial, Inc.’s  BHF expansive and a compelling suite of life and annuity products plus a strong market presence and efforts to enhance sales of annuity products should have supported Brighthouse Financial’s second-quarter results.

The company’s sustained efforts to boost distribution platform and network coupled with developing new products have likely aided the premium increase.

However, higher expenses should have continued to pressure on the margin. The company expects second-quarter corporate expenses to be considerably high. (Read more: Brighthouse Financial Q2 Earnings: What's in Store?)

The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.03 per share for Brighthouse Financial. The stock carries a Zacks Rank #3 (Hold), which raises the predictive power of ESP. However, its Earnings ESP of -1.28% leaves surprise prediction inconclusive as a company needs to have a positive ESP to be confident about an earnings surprise.

Per the company’s earnings history, its bottom line beat estimates in two of the last three quarters, the average negative surprise being -17.61%. The same is depicted in the chart below.

Brighthouse Financial, Inc. Price and EPS Surprise

The Zacks Consensus Estimate for American Equity Investment Life Holding Company’s AEL second-quarter earnings stands at 85 cents, reflecting a 19.7% year-over-year improvement. The company has a Zacks Rank #2, which increases the predictive power of ESP. Further its Earnings ESP of +0.59% increases the odds of a positive earnings surprise.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The company’s earnings impressively surpassed estimates in each of the trailing four quarters, the average beat being 24.38%. The same is depicted in the chart below.

American Equity Investment Life Holding Company Price and EPS Surprise

The Zacks Consensus Estimate for National General Holdings Corp’s NGHC second-quarter bottom line is pegged at 50 cents, representing a blockbuster 354.6% year-over-year improvement. Although the company carries a Zacks Rank of 3 Earnings ESP of 0.00%, makes surprise prediction difficult.

The company’s track record shows earnings beat in three of the previous four quarters, the average being a positive 16.93%. The same is depicted in the chart below.

National General Holdings Corp Price and EPS Surprise

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Argo Group International Holdings, Ltd.’s ARGO second-quarter earnings stands at 89 cents, down 21.9% year over year. The company’s Zacks Rank #3 combined with an Earnings ESP of +1.70% makes us reasonably confident about an earnings surprise.

The company’s earnings exceeded estimates in three of the preceding four quarters, the average positive surprise being 11.87%. The same is depicted in the chart below.

Argo Group International Holdings, Ltd. Price and EPS Surprise

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American Equity Investment Life Holding Company (AEL): Free Stock Analysis Report
National General Holdings Corp (NGHC): Free Stock Analysis Report
Brighthouse Financial, Inc. (BHF): Free Stock Analysis Report
Argo Group International Holdings, Ltd. (ARGO): Free Stock Analysis Report
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