Managed care stocks up, broader market down ahead of Independence Day weekend

Managed care insurers' stocks were largely up this week as investors digest a number of recent political developments in that space.

Insurance stocks overall outperformed the broader market for the week ending July 1. The S&P 500 Insurance index rose 0.54% to 542.06, while the S&P 500 slipped 2.21% to 3,825.33.

A number of factors may be driving performance for managed care insurers this week, some of which may signal the potential for a brighter future for the space, according to CreditSights analyst Josh Esterov. For example, there has been some momentum and a degree of bipartisan agreement around getting Affordable Care Act marketplace credits extended beyond the end of the year, Esterov said.

"That would be favorable across the managed care space, especially as a number of leading insurers are looking to expand their presence in the marketplace," he said in an interview.

Esterov also noted that investors are looking for opportunities in high quality and more "defensive" names given the souring economic outlook.

"The managed care sector [is] typically substantially less sensitive to inflationary cost pressures, and they can also be somewhat less sensitive to macroeconomic pressures," he said.

The U.S. Supreme Court on June 24 triggered a political earthquake when it overturned the landmark Roe v. Wade case, but Esterov said that decision would not have significant implications for the managed care sector.

"Broadly, it might be a very modest net negative," Esterov said. The decision in Dobbs v. Jackson, which now leaves abortion regulation up to each state, could lead to more individuals utilizing health insurer pregnancy and childbirth benefits, according to the analyst. The ruling could also introduce other legal complications for the sector as well, he added.

Centene Corp., Humana Inc. and UnitedHealth Group Inc. saw shares rise 3.93%, 4.85% and 4.39%, respectively. Molina Healthcare Inc. ended the week among the biggest winners with its shares increasing 5.90%.

Cigna Corp. shares increased in the same week it closed on the sale of its life, accident and supplemental benefits business in six markets across Asia-Pacific to Chubb Ltd. in a deal valued at about $5.4 billion.

Cigna's shares ended the week up 1.09% while Chubb added 1.74%.

Elsewhere, S&P Global Ratings this week put the BBB long-term issuer credit rating of SiriusPoint Ltd. and the A- long-term issuer credit and insurer financial strength ratings of SiriusPoint America Insurance Co. and SiriusPoint International Insurance Corp. on CreditWatch with negative implications. The rating agency said the move amid potential concerns over the group's ability to execute on a "relatively new" strategy to improve operating performance after the sudden departure of its COO, which followed close on the heels of SiriusPoint losing its CEO and chair.

In a statement, SiriusPoint's interim CEO, Dan Malloy, said he is confident that the group's business, balance sheet and prospects were strong and that the group is in a "great position" to execute its strategy.

SiriusPoint's stock ended the week up fractionally.

Also, according to a regulatory filing released this week, Berkshire Hathaway Inc. recently bought another 794,389 shares of Occidental Petroleum Corp., bringing its overall stake in the Texas-based oil company to nearly 16.4%.

The move comes at a time when activists and investors are increasingly pushing for insurers and companies across sectors to prioritize net-zero goals and cutting investments in carbon-intensive sectors.

Berkshire's stock ended the week with a modest decrease of 0.37%.