P&C Insurers Q1 Earnings Roster For Apr 24: CB, TRV & More

The first-quarter earnings season is in its first leg with 87 members of the elite S&P 500 index having already reported financial numbers so far. Per the latest Earnings Preview, performances of these index participants indicate 25% increase in total earnings on 10.7% higher revenues. The beat ratio is impressive with 82.8% companies surpassing bottom-line expectations and 67.8% outperforming on the top-line front.

The Finance sector (one of the 16 Zacks sectors) has delivered a sturdy performance till now with earnings growing 27.8% on 9.1% stronger revenues. The beat ratio is solid with 89.7% companies exceeding bottom-line estimates and 51.7% outpacing the top-line mark. Per Earnings Preview, earnings are expected to rise 27% on 5.4% more revenues.

Integral to the Finance sector, the insurance industry is likely to witness better results this yet-to-be-reported quarter on the back of an improving rate environment, tax cuts, favorable operating environment and a better domestic growth scenario.

Although the first quarter witnessed a California mudslide as well as northeast winter storms, the calamities still might not heavily weigh on the company’s underwriting profitability. Insurers having already suffered the severities of cat loss last year, should have managed to withstand the first-quarter shortfalls. A Morgan Stanley (NYSE:MS) analyst estimates first-quarter global insured cat loss between $5 billion and $10 billion.

Improved pricing, prudent underwriting practices, portfolio repositioning as well as resorting to reinsurance covers are expected to have helped insurers survive the deficits.

A progressing interest rate environment is likely to have boosted higher net investment income, an important component of an insurer’s top line. Though the same is far from reaching a historical high, yet it is showing an upward trend. With economic growth gaining traction, the Fed has hiked rate five times since December 2015 and has hinted two more raises this year, followed by three in 2019 and a couple of in 2020.

The first quarter is likely to benefit from the tax cut. Per the implementation of the new tax rate effective January 2018, the tax incidence has been lowered to 21% from 35%. This rate reduction will probably provide an additional boost to insurers’ bottom line.

Apart from the above-mentioned tailwinds, diverse product offerings, a wide geographic footprint and strategic consolidations are anticipated to have enhanced insurers’ performance in the quarter to be reported.

With 682 companies (178 S&P 500 members) set to announce earnings results this week, let’s find out where the following insurers stand ahead of their quarterly releases on Apr 24.

Chubb Limited (NYSE:CB) has projected catastrophe loss at nearly $125 million while loss from northeast winter storms is estimated at $195 million for the first quarter.

Premiums have probably increased on an improved commercial property and casualty pricing across numerous business lines as well as a compelling product portfolio. Higher net investment income is expected to have cushioned the company’s top line. Chubb expects its quarterly investment income run rate to range between $845 million and $855 million.

The Zacks Consensus Estimate of $2.24 per share for the yet-to-be-reported quarter reflects a 9.7% year-over-year decline. Chubb carries a bearish Zacks Rank #4 (Sell), which decreases the predictive power of ESP. Further, combined with an Earnings ESP of -0.17%, makes surprise prediction unlikely as the company needs a positive ESP to be confident about an earnings surprise.

(Read more: Can Catastrophe Loss Mar Chubb's Q1 Earnings Prospects?)

Chubb Limited Price and EPS Surprise

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

The Travelers Companies, Inc.’s (NYSE:TRV) premiums are predicted to increase on the back of higher retentions and renewals, improving pricing environment, rise in new business as well as an expansive product portfolio. Pricing and underwriting actions implemented are forecast to consistently drive results in auto business.

Given a not-so-active catastrophe environment and prudent underwriting practices, underwriting profitability has possibly improved. A lower tax rate provided an additional impetus to the bottom line. Nonetheless, a higher debt-level due to an increase in interest expenses constrain the margin expansion.

The Zacks Consensus Estimate is pegged at $2.68 for the soon-to-be-reported quarter, up 24.1% year over year. Though Travelers has a favorable Zacks Rank #3, which increases the predictive power of ESP, its Earnings ESP of -1.21% leaves surprise prediction inconclusive. (Read more: Is a Beat in the Cards for Travelers in Q1 Earnings?)

The Travelers Companies, Inc. 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 Markel Corporation (NYSE:MKL) is pegged at $8.71, up 8.7% year over year. Though the company is a Zacks #3 Ranked player, its Earnings ESP of -10.53% leaves surprise prediction inconclusive.

Markel Corporation Price and EPS Surprise

The Zacks Consensus Estimate for W.R. Berkley Corporation (NYSE:WRB) stands at 89 cents, up 27.1% year over year. The company has an Earnings ESP of 0.00%, making surprise prediction difficult and a Zacks Rank of 4, which lowers the predictive power of ESP.

W.R. Berkley Corporation Price and EPS Surprise

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