Insurance stocks gained ground in a week that saw a healthcare private equity takeout, the announcement of a flurry of second-quarter catastrophe loss estimates and the kickoff to earnings season.
The S&P 500 rose 1.25% to 3,224.73 for the week ending July 17, while the SNL U.S. Insurance Index gained 5.13% to finish at 1,045.99.
In the first major earnings announcement for the second-quarter season, UnitedHealth Group Inc. disclosed very favorable results. Moody's analyst Dean Ungar said the report was "not surprising" since there were very few nonessential medical procedures performed in April and May. Those procedures would typically have represented a fairly substantial percentage of claims. Ungar said the entire managed care industry likely benefited from lower expenses this quarter.
UnitedHealth shares ended the week with an increase of 5.25%.
Other health insurers also moved higher this week. Molina Healthcare Inc., Centene Corp. and Humana Inc. shares gained 5.29%, 5.46% and 6.00%, respectively.
Benefytt Technologies Inc., the health insurance technology company formerly known as Health Insurance Innovations, announced this week that it has agreed to be acquired by funds affiliated with Madison Dearborn Partners LLC. Industry analysts said the timing for the deal seems ideal and that a private equity takeout could help it grow its business. The company soared 38.58% on the week.
Also, a slew of property and casualty companies released estimates for second-quarter catastrophe losses, and CreditSights analyst Josh Esterov said there has been a "pretty wide disparity" in terms of the estimates for pandemic-related payouts.
"Going off the few insurers that have provided estimates it looks like the coronavirus will be akin to a pretty significant catastrophe event, like a meaningful hurricane from a cost perspective," Esterov said.
Esterov also said he would not be surprised if the pandemic ends up being one of the most costly events for the industry in its history.
"To the extent that we get a resurgence in the rest of the United States or potentially in Europe and Asia and elsewhere, it could very realistically be a top one event," Esterov said. "It's unfortunately still too early to tell."
Travelers Cos. Inc. pegged its second-quarter pretax catastrophe losses at $854 million and noted that the losses were driven by severe storms in several U.S. regions and civil unrest. The company also said it will also recognize favorable pretax prior-year reserve development related to the claims of approximately $400 million, net of expenses and reinsurance, in the third quarter. Travelers shares rose 4.67%.
Hartford Financial Services Group Inc. announced this week that it expects its second-quarter COVID-19 losses to land at $251 million pretax. The company found itself among one of the biggest winners of the week, with its shares jumping 12.14%.
Cincinnati Financial Corp. projected that its second-quarter results will include about $231 million of pretax catastrophe losses, which it attributed to April storms, civil unrest and COVID-19. Cincinnati Financial's shares increased 8.77%.
Meanwhile, Allstate Corp. posted estimated pretax catastrophe losses at $204 million for the month of June, bringing its total estimated pretax catastrophe losses for the second quarter to $1.19 billion. Its shares gained 5.40%.
Chubb Ltd., which so far holds the biggest projected COVID-19 losses for the second quarter at $1.37 billion, saw its shares go up 5.86%.
Also, Argo Group International Holdings Ltd.'s shares increased 3.20% in the same week Insurance Insider reported it would sell Ariel Re. Activist investor Voce Capital Management LLC had previously criticized the performance of Argo's international businesses.
