ProSight slides after takeout deal announced; health insurers lose ground

M&A announcements moved a pair of insurance stocks in a week that saw insurance companies and the broader market both lose ground.

The SNL Insurance Index dropped 1.20% to 1,220.33 for the week ending Jan. 15, while the S&P 500 declined 1.48% to close at 3,768.25.

Deal news bookended the week as two publicly traded insurance companies look to be taken private, albeit by very different buyers. The stocks of those companies to be acquired also moved in opposite directions.

In the property and casualty sector, Farm Bureau Property & Casualty Insurance Co. on Jan. 11 said it agreed to acquire all of the outstanding FBL Financial Group Inc. class A and class B common shares that neither it nor the Iowa Farm Bureau Federation currently own for $56.00 per share in cash. Shares of FBL moved higher this week, closing up 6.19%.

On the other hand, shares of ProSight Global Inc. fell by around 10% on Jan. 15 following news that affiliates of private equity firms TowerBrook Capital Partners LP and Further Global Capital Management LP will acquire the company in an all-cash transaction valued at approximately $586.0 million. The deal would pay ProSight Global stockholders $12.85 for each of their shares. The company had been trading modestly higher than the takeout price in the days prior to the announcement; for the week the stock was down only 1.16% and closed at $12.75.

Managed care companies mostly declined this week. Headlines in the healthcare space have been dominated by Amazon, which recently launched a new online pharmacy platform. Analysts believe the venture has the potential to disrupt the healthcare market, but it will not challenge the dominate health insurers and their pharmacy benefit management operations in the near future.

Molina Healthcare, Inc. and Humana Inc. landed among the biggest losers as they fell 9.20% and 6.86%, respectively. Centene Corp. followed behind, with its stock slipping 6.19%. UnitedHealth Group Inc.'s stock dropped 3.33% and Anthem Inc. declined 3.16%.

In reinsurance, RenaissanceRe Holdings Ltd. this week disclosed that it expects to book an operating loss attributable to common shareholders for the fourth quarter of 2020 as losses stemming from catastrophe events and COVID-19 hit its results. The company anticipates a net negative impact of about $175 million associated with the pandemic-related losses.

RenaissanceRe shares lost 3.89% for the week.

Talking about the P&C sector's earnings expectations, Keefe Bruyette & Woods analyst Meyer Shields wrote in a research note that 2020 fourth quarter results should showcase very manageable catastrophe and weather losses, and some COVID-19 losses depending on individual companies' reserving approaches.

Several large life insurers logged substantial gains this week. Unum Group was one of the best performers as its stock rose 8.05%. Aflac Inc. climbed 4.47%, Prudential Financial Inc. increased 3.61% and Hartford Financial Services Group Inc. picked up 3.57%.

More broadly, the equity market was influenced by a slew of economic data that came in weaker than expected, especially the initial jobless claims figures for the week. Investors were also influenced by President-elect Joe Biden unveiling a pandemic rescue package, which includes another round relief checks and raising the federal minimum wage. The proposal would hike the minimum wage to $15 per hour, increase the supplemental unemployment benefit to $400 a week from $300, and extend the moratorium on evictions and foreclosures to the end of September.