AIG's stock makes gains, Genworth tanks after earnings reports

Insurance stocks were mixed in a week when one of the industry's biggest names reported earnings and a deadly winter storm devastated Texas and hammered other parts of the southern U.S.

The S&P 500 declined 0.71% to 3,906.71 for the week ending Feb. 19, while the SNL U.S. Insurance Index ticked up 0.38% to 1,213.22.

A report published by Moody's said insured losses from the winter storm are expected to total "in the billions of dollars" with claims filed across homeowners, commercial property and auto lines of business. Losses from flooding and other water damage caused by frozen and broken pipes are also anticipated, in addition to damaged home exteriors. The report also noted that insurers with high homeowners premiums in Texas will likely face larger losses.

Allstate Corp., Travelers Cos. Inc., Chubb Ltd. and Progressive Corp. are among property and casualty market share leaders in Texas. Allstate lost 0.93% on the week, Travelers was essentially flat and Chubb gained 0.34%. Progressive was the best performer of the group as its stock climbed 0.91%.

A handful of companies reported fourth-quarter and full-year 2020 earnings this week as the season starts to wind down.

American International Group Inc. released earnings that reflected a fourth-quarter 2020 net loss of $60 million, or 7 cents per share, and lower adjusted after-tax income attributable to shareholders year over year. Its general insurance segment saw $545 million in catastrophe losses for the quarter.

CreditSights analyst Josh Esterov said in an interview that it was a "pretty ugly headline in print" in terms of underwriting performance for the company. That said, AIG also managed to reach its tenth-consecutive quarter of underlying underwriting improvement.

"Especially as management continues to focus on divesting its life insurance operations, it's the underlying strength and core strength of the P&C operation that's going to be the end of the story for the insurer," Esterov said. "Continued success on that front is extremely important for AIG."

AIG executives shared on the earnings call that the company is "carefully weighing the relative merits" of a potential minority IPO for its life and retirement businesses against a minority sale of the business, for which AIG has received interest from high-quality companies.

AIG's shares ended the week up 2.85%.

Meanwhile, Genworth Financial Inc. found a spot among the biggest losers this week after it reported earnings and management again signaled their shifting focus to a potential IPO of its U.S. mortgage insurance business as its merger deal with China Oceanwide Holdings Ltd. has been put on indefinite hold.

Esterov said he thought the stock declined because of comments by management suggesting the deal was unlikely, but he was surprised by the market reaction.

"From my perspective, that deal was already dead," Esterov said. "I'm not sure who was investing under the hopes that the China Oceanwide deal would close over the last quarter, but clearly enough investors were."

At this point, the entire regulatory process would have to be restarted for the Oceanwide deal to close, Esterov said. With respect to earnings, the analyst said Genworth's long-term care business is actually benefiting from increased mortality from the COVID-19 pandemic. He also said Genworth's mortgage insurance business did "reasonably well."

The insurer's stock plummeted 20.19% on the week.

Argo Group International Holdings Ltd. shares rose slightly in the same week that it reported earnings that contained a fourth-quarter 2020 net loss attributable to common shareholders of $19.7 million, or a loss of 57 cents per share, which was an increase from a loss of $103.3 million, or a loss of $3.01 per share, a year ago.

The insurer ended the week up by a modest 0.67% margin.

Athene Holding Ltd. denied deal talks this week related to AIG's life and retirement business after Athene CEO Jim Belardi told Reuters that the company had expressed interest in acquiring a minority stake in the business unit.

The company also released earnings this week that reflected higher fourth-quarter 2020 net income available to shareholders on a year-over-year basis. Athene's stock ticked up 0.51%.