Insurance ETFs Rallying on Solid Q3 Earnings (2024)

The insurance sector is one of the prime beneficiaries of a rate hike, as these are able to earn higher returns on their investment portfolio of longer-duration bonds. At the same time, these firms incur losses as the value of longer-duration bonds goes down with rising interest rates. Nevertheless, since insurance companies have long-term investment horizons, they can hold investments until maturity, and hence, no actual losses will be realized (read: 5 ETFs Set to Benefit From Higher Rates).

A slew of solid earnings from the leading players in the insurance industry added to the strength as some of the prominent players surpassed estimates for both earnings and revenues. This will pave the way for a further rally in insurance ETFs like SPDR S&P Insurance ETF (KIE - Free Report) and iShares U.S. Insurance ETF (IAK - Free Report) . Both ETFs have gained in double digits over the past month.

Prudential Financial (PRU - Free Report) , the second-largest U.S. life insurer, missed on earnings but beat on revenue estimates. Earnings per share of $2.13 lagged the Zacks Consensus Estimate of $2.21 and decreased 43.6% from the year-ago earnings. Revenues increased 10% year over year to $21.61 billion and edged past the consensus mark of $12.76 billion.

One of the leading property and casualty insurers, Chubb Corp (CB - Free Report) , outpaced the Zacks Consensus Estimate for earnings per share by 15 cents and for revenues by $391 million. Earnings per share improved 20.1% year over year. Another property and casualty insurer, Allstate (ALL - Free Report) , came up with a loss per share of $1.56, narrower than the Zacks Consensus Estimate of a loss of $1.57. The company reported earnings of 73 cents in the year-ago quarter. Revenues grew 8.1% year over year to $13.37 billion, well above the consensus mark of $12.69 billion.

Earnings per share of $1.42 reported by Aflac (AFL - Free Report) , a seller of supplement health insurance, trumped the Zacks Consensus Estimate by a penny but declined 19.6% from the year-ago earnings. Revenues dropped 8% year over year to $4.82 billion and beat the consensus mark by 4.4% (see: all the Financial ETFs here).

Personal property and casualty insurer Travelers (TRV - Free Report) posted earnings per share of $2.20, exceeding the Zacks Consensus Estimate by 43 cents but declining 15.4% from the year-ago earnings. Revenues grew 6.8% year over year to $9.4 billion and lagged the consensus mark of $9.16 billion.

SPDR S&P Insurance ETF (KIE - Free Report)

SPDR S&P Insurance ETF follows the S&P Insurance Select Industry Index, holding 50 stocks in its basket. About 46.7% of the portfolio is allocated to property and casualty insurance, while life & health insurance and insurance brokers round off the next two spots with double-digit exposure.

SPDR S&P Insurance ETF has managed $518.5 million in its asset base and trades in a good average daily volume of about 1.5 million shares. The product has an expense ratio of 0.35% and a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

iShares U.S. Insurance ETF (IAK - Free Report)

With AUM of $485 million, iShares U.S. Insurance ETF offers exposure to U.S. companies that provide life, property and casualty, and full-line insurance. It tracks the Dow Jones U.S. Select Insurance Index and holds 56 securities in its basket with a double-digit concentration on the top two firms (read: Top-Ranked ETFs That Beat the Market in October).

Property & casualty insurance accounts for the largest share at 55.3%, while life & health insurance and multiline insurance round off the next two spots with a double-digit exposure each. iShares U.S. Insurance ETF charges 39 bps in annual fees and trades in an average daily volume of 77,000 shares per day. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.