Fourth-quarter results of insurance, one of the Finance sector industries, are likely to reflect better pricing and exposure growth, accelerated digitalization and a favorable interest rate. However, cat losses are likely to have weighed on profitability. Per the latest Earnings Preview, the Finance sector’s fourth-quarter 2024 earnings are expected to improve 24.3%. Revenues are estimated to rise 11.2%.
See the Zacks Earnings Calendar to stay ahead of market-making news.
With the help of the Zacks Stock Screener, we have identified four insurers, namely Palomar Holdings PLMR, Assurant Inc. AIZ, Brighthouse Financial Inc. BHF and Unum Group UNM, which are poised to outperform the Zacks Consensus Estimate in fourth-quarter earnings. These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy), #3 (Hold) — to surpass expectations. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors Likely to Impact Q4 Results
Underwriting results, reflecting the performance of insurers, are likely to benefit from better pricing, increased exposure, solid retention, new business growth, portfolio repositioning, proper segmentation, reinsurance covers and favorable reserve development.
Non-life insurers, by the nature of their business, are exposed to catastrophe losses. Thus, their profitability is vulnerable to catastrophe losses. The fourth quarter witnessed the wrath of catastrophe activities, which weighed on the profitability of insurers. CoreLogic estimated losses from Hurricane Milton to be about $34 billion with insured losses between $17 billion and $28 billion. Florida insurers are likely to have been affected the most.
Higher catastrophe losses continue to provide impetus to policy renewal rates and pricing. Per recent analysis by MarketScout’s Market Barometer, the commercial insurance sector saw a composite rate increase of 2.64%. Per the report, the personal lines composite rate increased 4% in the fourth quarter of 2024.
Given increased travel worldwide, auto premiums are likely to have increased. However, the loss ratio is likely to have been hampered, given increased severity per claim due to higher vehicle repair and medical costs.
A stronger mortgage market is likely to have favored mortgage insurance premiums. A low unemployment rate is likely to have aided commercial insurance and group insurance.
A rise in demand for protection products is likely to have driven sales for life insurers. Life insurers continue to roll out investment products that provide bundled covers of guaranteed retirement income, life and healthcare to cater to customers preferring policies with “living” benefits more than those with death benefits.
Though the Federal Reserve cut rates twice in the fourth quarter, a larger investment asset base and positive returns from alternative investments limited the downside, driving investment income.
Continued investment in technological advancements is likely to have driven margin expansion. Share buybacks are expected to have provided an additional upside to the bottom line.
Potential Q4 Outperformers
Palomar Holdings focuses on the provision of catastrophe insurance for personal and commercial property. It provides specialty property insurance products to both individuals and businesses in its target markets. Premiums are expected to have benefited from new business generated with existing partners, strong premium retention rates for existing businesses and expanded products’ geographic and distribution footprint. Higher average balance of investments and increase in fixed-income yields are likely to have favored investment income. Expenses are likely to have increased owing to higher incurred losses and loss adjustment expenses.
The Zacks Consensus Estimate for PLMR’s fourth-quarter earnings is pegged at $1.24, suggesting a decrease of 11.7% from the year-ago reported figure. PLMR has an Earnings ESP of +0.27% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Palomar Holdings, Inc. Price and EPS Surprise
Palomar Holdings, Inc. Price and EPS Surprise
Palomar Holdings, Inc. price-eps-surprise | Palomar Holdings, Inc. Quote
Assurant is a global provider of risk management solutions in the housing and lifestyle markets, protecting people’s homes and the goods they buy. Solid performance at the Global Housing segment, as well as growth in Global Lifestyle, is likely to have aided the fourth-quarter performance of Assurant. Net investment income is likely to have gained from higher yields and asset balances in fixed-maturity securities, cash and cash equivalents and short-term investments. Total benefits, losses and expenses might have escalated because of higher underwriting and selling, general and administrative expenses. Continued share buybacks are likely to have aided the bottom line in the to-be-reported quarter.
The Zacks Consensus Estimate for AIZ’s fourth-quarter earnings is pegged at $3.96, suggesting a decrease of 13.5% from the year-ago reported figure. AIZ has an Earnings ESP of +9.37% and a Zacks Rank #2.
Assurant, Inc. Price and EPS Surprise
Assurant, Inc. Price and EPS Surprise
Assurant, Inc. price-eps-surprise | Assurant, Inc. Quote
Brighthouse Financial is a diversified life insurance and investment management company. Improving average life insurance in-force and margin expansion initiatives are likely to aid quarterly results. A compelling suite of life and annuity products, strong market presence and the ramp-up of new sales of life insurance products are likely to have favored premium. A well-diversified and high-quality portfolio, alternative investment income and asset growth are likely to have boosted investment income. Expenses are likely to have increased owing to higher policyholder benefits and claims.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $4.44, indicating an increase of 52.1% from the year-ago reported figure. BHF has an Earnings ESP of +0.82% and a Zacks Rank #3.
Brighthouse Financial, Inc. Price and EPS Surprise
Brighthouse Financial, Inc. Price and EPS Surprise
Brighthouse Financial, Inc. price-eps-surprise | Brighthouse Financial, Inc. Quote
Unum Group provides long-term care insurance, life insurance, employer- and employee-paid group benefits and related services. Favorable persistency and better sales in the operating segments are likely to have favored premiums in the fourth quarter. The performance of Unum U.S. and Colonial Life, two of the largest operating segments, is likely to have been driven by higher premium income, favorable persistency, favorable benefit experience in the life and accident, sickness, and disability product lines, favorable recoveries in the long-term disability product line and favorable stop loss experience.
Expenses are likely to have increased because of higher policy benefits, commissions, interest and debt expense, amortization of deferred acquisition costs and other expenses. However, share buybacks in the to-be-reported quarter are anticipated to have provided a boost to the bottom line.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.13, indicating an increase of 19% from the year-ago reported figure. UNM has an Earnings ESP of +0.23% and a Zacks Rank #3.
Unum Group Price and EPS Surprise
Unum Group Price and EPS Surprise
Unum Group price-eps-surprise | Unum Group Quote
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
