The second-quarter earnings season is in full swing, with 103 members of the S&P 500 index having already reported their financial results (as of Jul 21) as per the Earnings trend report. Earnings of these companies declined 2.1% while revenues increased a meager 1.4%. The beat ratio is 68.9% for the bottom line and 56.3% for the top line.

About 27.8% of the companies in the Finance sector have already reported their results. Total earnings are down 5.2% and revenues declined 1.5%. The beat ratio is 72% for earnings and 64% for revenues. The performance for the finance sector has been worse than the S&P 500 results, which reported an earnings decline of 2.1% and revenue growth of 1.4%.

The property and casualty (P&C) insurance industry is part of the broader finance sector. A look at how the second quarter has turned up for these insurers so far is warranted.

Earnings for property and casualty players this quarter will feature the impact of a rise in incurred claims and adjustment expenses — especially claims from catastrophes — little growth in the U.S. economy, and continuing historically low interest rates.

The players are will 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 which 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 – their highest levels since 2011.  The U.S. accounted for 47% of global insurance losses sustained by public and private insurance entities in the period under review.

Despite a considerable rise in claims, weak economic growth and persistently low interest 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 low catastrophe losses and prudent reserving practices.

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

With little sign that inflation is picking up and Brexit-induced uncertainties still remaining, the Fed is keen on keeping interest rates near their current lows for the foreseeable future. This will lead to depressed investment yields, consequently pressuring investment income, which is one of the revenue drivers for the sector. Nevertheless, a broader invested asset base and alternative asset classes bring some respite.

Insurers are expected to benefit from widened exposure in key areas of the economy such as new vehicle sales and construction. Besides, continued growth in workers’ compensation premiums and continued growth in premiums related to residential construction will drive premium growth.

Let see what’s in store for three insurance companies that will report on Jul 25.

OneBeacon Insurance Group, Ltd (OB Quick QuoteOB - Free Report) provides a wide variety of property and casualty insurance and services. The company delivered a 100% positive earnings surprise last quarter. OneBeacon Insurance has an  Earnings ESP of -7.69% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter is pegged at 13 cents.

With respect to the surprise trend, OneBeacon Insurance surpassed expectations in two out of the last four quarters, with an average beat of 14.7%.

W.R. Berkley Corporation (WRB Quick QuoteWRB - Free Report) , an insurance holding company, operates as commercial lines writers in the United States. The company delivered a 1.14% positive earnings surprise last quarter. W.R. Berkley Corporation as an Earnings ESP of +1.27% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter is pegged at 79 cents.

With respect to the surprise trend, W.R. Berkley Corporation surpassed expectations in three out of the last four quarters, with an average beat of 4.88%.

BERKLEY (WR) CP Price and EPS Surprise

White Mountains Insurance Group, Ltd. (WTM Quick QuoteWTM - Free Report) through its subsidiaries engages in insurance, reinsurance and insurance services businesses. The company missed the estimates by 295.1% last quarter. White Mountains Insurance has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). The Zacks Consensus Estimate for the quarter is pegged at a loss of 76 cents.

The company doesn’t have a respectable earnings surprise. It missed estimates in two of the last four quarters, with an average miss of 81.5%.

WHITE MTN INS Price and EPS Surprise

Everest Re Group Ltd. , through its subsidiaries, provides reinsurance and insurance products. The company missed estimates by 7.65% last quarter. Everest Re has an Earnings ESP of - 2.94% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter is pegged at $2.72.

With respect to the surprise trend, Everest Re surpassed expectations in two of the last four quarters, with an average beat of 9.58%.

EVEREST RE LTD Price and EPS Surprise

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

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