Insurers Q2 Earnings To Watch On Aug 10: SLF, OXBR

The second-quarter earnings season is on the last lap, with 87% of the S&P 500 members having already reported their financial results. Earnings of these 433 index members (with 87.7% of the index’s total market capitalization) have declined 4.1% on 0.9% lower revenues as per the Earnings Preview report. However, the beat ratio is 70.7% for the bottom line and 52.7% for the top line.

The earnings season for the finance sector is also wrapping up now with results from 97.9% of the companies on board. So far, earnings have declined 7.1%, while revenues have decreased 3.2%. The beat ratio for earnings (65.9%) compares unfavorably with the S&P 500 index while the same for top line (53.4%) compares favorably.

The insurance industry is part of the broader finance sector. The second quarter witnessed varied catastrophes, 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. Industry loss is estimated at $15–$20 billion. The bottom lines of P&C insurers that have already reported suffered due to these catastrophe events.

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

Nevertheless, 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.

This week 525 companies are reporting, of which 26 are index members. Let’s see what’s in store for two insurers that are reporting on Aug 10.

Sun Life Financial, Inc. (TO:SLF) is the third largest insurer in Canada. The company provides protection and wealth management products and services to individual and group customers worldwide. The company delivered a 3.08% negative earnings surprise last quarter. However, Sun Life Financial is poised for an earnings beat this time around as it has the right combination of the two key ingredients of a positive Earnings ESP and a favorable Zacks Rank #3 (Hold) or better.

Sun Life Financial’s Earnings ESP is +1.47% as the Most Accurate estimate stands at 69 cents and the Zacks Consensus Estimate is pegged lower at 68 cents. The company carries a Zacks Rank #2 (Buy).

With respect to the surprise trend, Sun Life Financial surpassed expectations in three of the last four quarters, with an average beat of 9.27%.

Oxbridge Re Holdings Limited (NASDAQ:OXBR) is a provider of reinsurance business solutions largely to property and casualty insurers in the Gulf Coast region of the United States. The insurer writes collateralized policies to cover property losses stemming from certain catastrophes.

Oxbridge Re Holdings has an Earnings ESP of 0.00%and a Zacks Rank #3.

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