The insurance industry is anticipated to have gained on rate hikes, strong retention rates, new business growth, an active merger and acquisition (M&A) strategy and ongoing technological advancements in the fourth quarter of 2024. However, interest rate cuts, an active catastrophe environment and continued inflationary pressures are likely to have constrained overall growth prospects for insurers. Some of the insurers, including The Allstate Corporation ALL, MetLife, Inc. MET and Aflac Incorporated AFL, are set to report fourth-quarter earnings on Feb. 5.

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The insurance space is housed within the broader Finance sector (one of the 16 broad Zacks sectors within the Zacks Industry classification). Per the latest Earnings Preview, the total earnings of finance companies for fourth-quarter 2024 are anticipated to rise 22.6% from the prior-year quarter’s figure. These companies’ revenues are anticipated to improve 6.2%.

Factors Likely to Decide the Fate for Insurers in Q4

Revenues of insurance companies are likely to have benefited from an expanding premium base, which, in turn, is expected to have benefited from continued rate hikes, exposure growth and solid customer retention rates. Growing premiums bode well for insurers as they account for a significant chunk of their top line. 

The Fed reduced interest rates three times in 2024 and signaled the possibility of additional cuts in 2025. Life insurers, who benefit from higher rates by investing premiums to fulfill policyholder obligations, are likely to have witnessed investment returns pressured by these rate reductions.

Meanwhile, lower interest rates are likely to have encouraged insurers to seek loans for M&A activities, thereby enabling them to conserve cash reserves while driving growth. An active M&A strategy enables them to build diversified portfolios, which is likely to have minimized concentration risks and boosted the sale of insurance policies in the fourth quarter. Higher policy sales are likely to have fetched higher premiums to insurers. 

An active catastrophe environment resulting from Hurricanes Helene and Milton is expected to have created roadblocks for insurers’ underwriting results. Although catastrophe losses bring challenges, they often drive higher policy renewal rates and encourage insurers to implement premium increases. Insurers also mitigate these losses through reinsurance coverage and favorable reserve development, strengthening their ability to manage risk.

An aging U.S. population is likely to have sustained the solid demand for insurance and protection products of life insurers, fetching steady premium flows. With commercial and industrial activities in full swing, demand for worker compensation insurance policies are likely to rise. Meanwhile, the adoption of safety measures and improving working conditions are expected to have lowered claims in the fourth quarter.

A higher number of cars plying on roads is likely to have boosted auto premiums of insurers. However, persistent inflationary headwinds and uninterrupted claim expenses are expected to have exerted strain on the profits of auto insurers. 

The insurance industry frequently resorts to significant technology investments in light of a booming digital era, which are expected to have automated processes and brought operational efficiencies. These investments are likely to have curbed costs and aided the margins of insurers .    

Let’s find out how the following insurers are placed before their fourth-quarter 2024 results on Feb. 5.

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Allstate: Its results are likely to be driven by higher net premiums earned across most of its business lines, supported by rate increases. Net investment income is expected to have benefited from stronger market-based returns in the fourth quarter. The Auto insurance business might have been aided by lower expenses. Despite these positive trends, the company's overall performance is likely to have been partially offset by challenges in the Health and Benefits unit and an elevated expense level. (Read more: Allstate Q4 Earnings Countdown: How to Play ALL Stock Ahead of Results)

The Zacks Consensus Estimate for Allstate’s fourth-quarter 2024 earnings is pegged at $6.51 per share, which indicates an 11.9% improvement from the prior-year quarter’s figure. The consensus mark for revenues is pegged at $16.7 billion, implying 12.1% growth from the year-ago quarter’s figure.

ALL has an Earnings ESP of +3.44% and a Zacks Rank #3.

Allstate’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 135.21%. The same is depicted in the chart below:

MetLife: MetLife’s fourth-quarter results are expected to benfit from rising premiums across most business segments. Strengthening operations in international markets, particularly in Asia and Latin America, serve as a key growth driver. Higher profitability in Asia and Latin America is likely to have contributed to MetLife’s growth over the prior year. Despite these tailwinds, rising costs and expenses are expected to have partially constrained profit expansion during the quarter. (Read more: Will Rising Expenses Dampen MetLife's Q4 Earnings Growth?)

The Zacks Consensus Estimate for MET’s fourth-quarter 2024 earnings is pegged at $2.13 per share, indicating a 10.4% rise from the prior-year quarter’s figure. The consensus mark for revenues is $19.2 billion, implying 2.7% growth from the year-ago quarter’s figure.

MetLife has an Earnings ESP of +0.97% and a Zacks Rank of 3.

MET’s earnings outpaced estimates in one of the trailing four quarters, matched the mark once and missed the same twice on the remaining two occasions, the average negative surprise being 1.16%. The same is depicted in the chart below:

Aflac: Aflac's revenue growth is expected to have been driven by strong performance in its U.S. operations, supported by rising net earned premiums and higher returns from fixed-income investments. Premium growth is likely to have benefited from increased sales of Group Life Absent Management and Disability products, along with individual voluntary benefits. Aflac’s Japan segment is anticipated to have faced headwinds due to declining net earned premiums, primarily due to a reduction in paid-up policies. (Read more: Can Aflac Navigate Through Weak Japan Operations in Q4 Earnings?)

The Zacks Consensus Estimate for AFL’s fourth-quarter 2024 earnings is pegged at $1.63 per share, which indicates a 30.4% rise from the prior-year quarter’s figure. The consensus mark for revenues is $4.4 billion, implying 17.4% growth from the year-ago quarter’s figure.

Aflac has an Earnings ESP of -1.54% and a Zacks Rank of 3. 

AFL’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 8.06%. The same is depicted in the chart below:

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