The Q3 earnings reporting cycle is well underway with results from 16.2% of the S&P 500 Index members already on board. Earnings of these 81 members (accounting for 19.9% of the index’s total market capitalization) are up 3.8% on 3.6% higher revenues as per the latest Earnings Trends report. While 80.2% of these companies delivered positive earnings surprises, 63% managed to beat revenue estimates.

The Finance sector (one of the 16 Zacks sectors) has given the Q3 earnings season a solid start. In fact, the financial performance of 21.1% companies from this sector that have already reported  show 4.6% earnings growth on a 4.7% increase in revenues. Moreover, the beat ratios of 89.5% for the bottom line and 78.9% for the top line compare favorably with the S&P 500.

Notably, the Finance sector is highly diversified and includes several industries like insurance, banks and financial transaction services to name a few.

The property and casualty (P&C) insurance industry is part of the broader finance sector. Let’s see how the third quarter has turned up for insurers so far.

The second-quarter bore the brunt of high catastrophe losses that weighed on the earnings of P&C players. The third quarter should be free from such losses thanks to benign cat activity.

Nevertheless, a still low interest rate environment will lead to depressed investment yields and consequently hurt investment income, which is one of the revenue drivers for the sector. However, a broader invested asset base and alternative asset classes should bring some respite.

The industry is, however, expected to post another profitable quarter aided by capital gains and reserve releases. We also expect to see favorable reserve development owing to low catastrophe losses in the past few years 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 dividend, and indulging in mergers and acquisitions. These efforts will also be accretive to earnings.

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

Meanwhile, let’s take a look at how these three insurers might fare when they report their third-quarter numbers on Oct 24..

Argo Group International Holdings, Ltd. AGII underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered a 61.54% positive earnings surprise last quarter. Argo Group has an Earnings ESP of 2.47% and a Zacks Rank #4 (Sell). The Zacks Consensus Estimate for the quarter is pegged at 81 cents.

With respect to the surprise trend, Argo Group surpassed expectations in each of the last four quarters, with an average beat of 21.7%.
 

ARGO GROUP INTL Price and Consensus

ARGO GROUP INTL Price and Consensus | ARGO GROUP INTL Quote

Everest Re Group, Ltd. RE, through its subsidiaries, provides reinsurance and insurance products. The company operates in five segments: U.S. Reinsurance, International, Bermuda, Insurance, and Mt. Logan Re.  The company delivered a 16.5% positive earnings surprise last quarter. For the quarter to be reported, the Zacks Consensus Estimate is pegged at $4.56 per share. Everest Re has an Earnings ESP of 2.41% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

With respect to the surprise trend, Everest Re surpassed expectations in three of the last four quarters, with an average beat of 16.5%.

EVEREST RE LTD Price and Consensus

EVEREST RE LTD Price and Consensus | EVEREST RE LTD Quote

Torchmark Corporation TMK through its subsidiaries, provides various life and health insurance products, and annuities in the United States, Canada and New Zealand. It operates through the Life Insurance, Health Insurance and Annuities segments. The company delivered a 0.91% positive earnings surprise last quarter. Torchmark has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter is pegged at $1.12 per share.

With respect to the surprise trend, Torchmark Corporation surpassed expectations in three of the last four quarters with an average beat of 0.70%.

Torchmark is likely to have witnessed improvement in premiums owing to better performance by the American Income Exclusive Agency. Riding on higher agent count, life sales are likely to have increased. However, the insurer may have witnessed higher administrative expenses, which might weigh on margin expansion and bottom line. (Read: Can Torchmark Pull a Surprise this Earnings Season?)

TORCHMARK CORP Price and Consensus

TORCHMARK CORP Price and Consensus | TORCHMARK CORP Quote

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