United Insurance Holdings Corp.'s stock reacted positively after the company revealed intentions to consider a merger or a sale but could not finish the week with gains.
The broader markets fared poorly for the week ending July 15, as inflation continued to skyrocket, bolstering the likelihood of another major rate hike from the Federal Reserve later this month. Prices rose 9.1% year over year in June, the largest 12-month increase since the period ending November 1981, according to the U.S. Bureau of Labor Statistics.
The S&P 500 Insurance Index dropped 3.83% to 518.16 on the week, while the S&P 500 fell 0.93% to 3,863.16.
Douglas Ruth, research analyst and president of Lenox Financial Services, said insurers with a lot of exposure to Florida-based business have experienced a "one-two punch."
"Both the weather and the litigation in combination have just been relentless for carriers in the state of Florida," Ruth said.
United Insurance Holdings on July 13 announced that a board-initiated strategic review resulted in the company considering a possible sale or merger. The insurer is also mulling other options, such as forming a Florida-domiciled reciprocal exchange, divesting a subsidiary and selling equity or surplus notes.
The company warned that there is no guarantee that the process would result in a particular deal and also stated that it has no intention to disclose further developments unless it was deemed "appropriate or necessary."
United Insurance Holdings' stock rose after the announcement but ultimately ended the week down 9.52%.
Other Florida-based insurers, FedNat Holding Co. and Heritage Insurance Holdings Inc., landed spots among the biggest losers of the week.
FedNat's shares dropped 5.02% while Heritage Insurance's stock lost 13.12%.
In the managed care space, Molina Healthcare Inc. announced this week that it has agreed to acquire all the assets of the Medicaid managed care organization My Choice Wisconsin Inc. for about $150 million, net of expected tax benefits and required regulatory capital.
Stephens analyst Scott Fidel said in a note that My Choice Wisconsin focuses on the Medicaid long-term services and supports market, which has repeatedly been a "key target area" for Molina's M&A strategy over the past several years. Fidel also said the acquisition should be about 3.5% additive to Molina's annual revenues on a trailing basis.
Molina's shares ended the week up 4.83%.
Earnings season kicks off
A few insurers also reported second-quarter earnings toward the tail end of the week.
UnitedHealth Group Inc. released second-quarter results that were above expectations and also raised its full-year profit outlook. Second-quarter net income attributable to shareholders climbed to $5.07 billion, or $5.34 a share, from $4.27 billion, or $4.46 a share, in the year-ago period.
The managed care insurer's stock finished the week higher by 2.14%.
The Progressive Corp. also revealed its results on the final trading day of the week. The property and casualty insurer reported a net loss of $436.7 million, or 75 cents per share, for June, a reversal from net income of $132.8 million, or 22 cents per share, a year earlier.
Progressive's stock fell 3.57%.
Horace Mann Educators Corp. pre-announced its second-quarter earnings, revealing that the insurer experienced catastrophe losses above its historical 10-year average and suffered from the significant equity market declines in the period. Horace Mann projected core earnings per share for full year 2022 to fall between $2.10 and $2.30, a decrease from previous guidance.
Second-quarter catastrophe losses are expected to fall between $44 million and $47 million, before tax, and were driven by severe thunderstorms and wind and hail events in the Midwest and Plains states.
Horace Mann has recently faced an increased need to take rate in its property and casualty business, according to Piper Sandler analyst John Barnidge.
"We believe the pre-announcement likely increases that need further still," Barnidge said in a note. "We anticipate shares to react negatively."
Horace Mann shares plummeted 10.50% on the week.
