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Insurance stocks cap Q4’20 earnings season with modest increases – S&P Global

Insurance stocks finished the week higher as the fourth-quarter 2020 earnings season ended, while the broader market gave back gains made in the middle of the week and finished lower.

The S&P 500 fell 2.45% to 3,811.15 for the week ending Feb. 26, while the SNL U.S. Insurance Index rose 0.81% to finish at 1,221.27.

While results ran the gamut as far as earnings went, there were few “significant surprises” in the property and casualty sector, according to CFRA Research analyst Cathy Seifert, who said results were in line with analysts’ “fairly muted expectations.”

Seifert said the property and casualty market continues to be hard after prices accelerated throughout 2020, but the economy has taken a toll on the demand curve. There also is still a lot of pandemic fallout on the horizon, Seifert said, warning that the industry, investors and the general public “need to sort of brace themselves for another wave of COVID-related and liability-driven claims.”

The analyst said there is the expectation that underwriting results could deteriorate somewhat in the personal auto insurance market as the pandemic’s effects continue to be assessed.

“We’ll have to see what the longer-term impacts of the pandemic will be on driving patterns, driving habits and how people want to consume insurance,” Seifert said in an interview.

Seifert also said Allstate Corp.’s recent decision to the sale its life insurance business is part of a larger trend in the industry.

“We’re seeing an acceleration in restructuring trends, more on the life side, but also on the P&C side, where they want to decouple from the life business and drive greater growth and greater returns,” Seifert said.

Allstate was one of the top property and casualty movers during the week, finishing higher by 3.04%. Other companies with positive weeks included W. R. Berkley Corp., up 2.14% and Kemper Corp., up 1.86%. Progressive Corp., which was one of 10 auto insurers named in a lawsuit related to premium pricing during the pandemic, was down 1.27%.

Sell-side analysts, including Wells Fargo’s Elyse Greenspan, said fourth-quarter 2020 pandemic-related losses for life insurers were mostly in line with expectations. But the outlooks for the first two quarters of this year appear mixed, Greenspan said, with estimates trending lower due to higher COVID-19 losses.

The pandemic, according to PiperSandler analyst John Barnidge, took a big bite out of life companies with mortality businesses. The impacts were less severe for companies with benefits businesses, as the pandemic created claims-utilization tailwinds for companies with individual disability, Medicare supplemental product and critical care businesses.

Barnidge saw some positive trends in the opening weeks of 2021, such as capital return making a comeback and the expectation that ultimate credit losses are on their way down. The analyst said institutional sales have turned around, and he anticipates that distribution will improve on the retail side.

“In my opinion, you’re definitely seeing signs that there’s a secular demand tailwind for life products because of what we’ve all experienced over the last year, unfortunately,” Barnidge said. “Those with legacy liabilities are keen to invest on them and transfer into the private markets.”

It generally was a positive week in the markets for life companies, as Unum Group rose 3.40% and Voya Financial Inc. was up 3.17%. Prudential Financial Inc. ticked up 3.12% and MetLife Inc. was up 2.73%. However, Genworth Financial Inc. fell 4.88%.

Top performers in the managed care sector included Anthem Inc., up 2.79% and Cigna Corporation, up 2.74%. Molina Healthcare Inc. dipped 1.84%.

Source: Google | Insurance News

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