Anthem soars after Q3 earnings report; Globe Life down amid high COVID-19 claims

Insurance stocks raced ahead of the broader market, which had a solid week as the third-quarter earnings season heated up.

The S&P 500 rose 1.65% to 4,544.97 for the week ending Oct. 22, while the S&P 500 Insurance Index climbed 2.86% to 558.28.

The news that jobless claims had fallen to their lowest rate since the start of the pandemic gave the S&P 500 a midweek boost. Equity markets initially tumbled during the last session of the week after Federal Reserve Chairman Jerome Powell said the central bank would soon be tapering its asset purchases and that he expected inflationary pressures to persist "well into next year." But stocks had bounced back sharply by the end of the day.

The insurance industry's earnings season will soon kick into full gear; Piper Sandler analyst John Barnidge said he will be watching how a number of life insurers compare with Globe Life Inc., which reported Oct. 20.

Barnidge noted that Globe Life's life insurance business increased its COVID-19 sensitivity by 75% from the second to the third quarter. The company's health business, primarily made up of supplemental benefits products, continues to have strong earnings.

"I think the key question is ... where do you apply it the next week?" Barnidge said in an interview. "From that perspective, I think people are going to be keenly focused on COVID earning sensitivity given how Globe Life reported."

Barnidge said Globe has a "unique target audience," competing against disposable income rather than other life insurers.

Globe Life finished the week down 4.41%.

Ameriprise Financial Inc., up 2.87%, and Principal Financial Group Inc., up 1.15%, report their third-quarter results Oct. 26, while CNO Financial Group Inc., up 0.12%, and Aflac Inc., up 1.78%, report the following day.

Barnidge will be looking to see whether Aflac, CNO Financial and Principal experience same favorable health margin as Globe Life. He will also be tuned in to the latest on the efforts of Principal and Ameriprise to pursue risk transfers of legacy insurance liabilities.

Athene Holding Ltd., which announced the acquisition of a majority stakeholder interest in Nexera Holding LLC from Warburg Pincus LLC, had a strong week, finishing up 18.61%.

Barnidge raised his target price on Athene to $73.06 from $69.62 based on the pending merger with Apollo Global Management Inc., which is expected to close early in 2022. He said there was favorable reception to Apollo's investor day, where CEO Marc Jeffrey Rowan said the company's assets under management will double over the next five years.

Stirring Anthem

Anthem Inc.'s third-quarter net income soared to $1.5 billion, or $6.20 per share, up from $222 million, or 88 cents per share, a year ago, while operating revenue grew to $35.5 billion, up 16% year over year from $30.6 billion, or 17.5% when adjusted for the repeal of the health insurance tax.

The results prompted Cantor Fitzgerald analyst Steven Halper to increase his price target on Anthem's stock to $470 from $455. Halper said in a note to clients that the new price target implies a 2022 price-to-earnings multiple of 13.7x, which was "very reasonable."

"We continue to believe our long-term model assumptions are conservative and valuation levels will increase over time," Halper said.

Anthem rose 10.18% for the week.