As they have done for several weeks, insurance stocks swung with the market as investors grappled with renewed fears about the coronavirus pandemic and its longer-term impact on the U.S. economy.
The recent rally hit a brick wall June 11 as equities endured their worst day since March. The final session saw stocks regain some of that lost ground, but the S&P 500 still finished the week ending June 12 down 4.78% at 3,041.31. The SNL U.S. Insurance Index slumped 8.46% to 992.69.
Worries about new COVID-19 outbreaks were fueled by reports of rising cases in Texas, Arizona and California. Hospitalizations reached their highest levels in Arizona this week, while some parts of Texas also hit new peaks. Also this week, the Federal Reserve said it was keeping its benchmark interest rate near 0% and hinted it could stay there until at least 2022. Chairman Jerome Powell said that while the latest monthly jobs report showed the U.S. economy adding jobs in May, the pandemic could result in "many millions of people" losing their jobs permanently.
Worries about the pandemic's effect on the economy are generating the most significant pressure on the market, said CFRA Research analyst Cathy Seifert. Investors are trying to assess where there will be permanent structural changes in the economy, and whether the virus will lead to permanent demand destruction in some areas.
The market is trying to sort out "what is cyclical and what is secular" in terms of the changes that the economy is experiencing right now, Seifert said in an interview. "I think that issue is weighing on the market — not that it doesn't have enough stuff already weighing on it."
In commercial lines, investors are assessing how the economic situation factors into commercial loan insurance, according to Seifert. This is of particular interest in the small-business market, "where there may not be the same kind of recovery that there is likely to be in the large account market," she added.
In personal lines, the market is coming to grips with the changing demand for auto insurance and new driving patterns, Seifert said. She also said there could be changes in the way risk is priced and assessed for all drivers.
Several property and casualty insurers dropped more than 10% this week, including W. R. Berkley Corp., down 10.71%; Chubb Ltd., down 10.65%; and Cincinnati Financial Corp., down 11.27%.
Big-name life insurers that experienced double-digit declines included Lincoln National Corp., Hartford Financial Services Group Inc., Athene Holding Ltd. and CNO Financial Group Inc.
Few widely traded insurance companies gained any ground this week, though mortgage insurer Essent Group Ltd. and managed care company Molina Healthcare Inc. lost less than 1%.