Insurance companies' stocks moved higher alongside broader markets that rallied this week as hopeful news on COVID-19 vaccine development provided reasons for optimism even as uncertainty over the pandemic's course continues to loom.
The S&P 500 rose 3.20% for the week ending May 22 to close at 2,955.45, while the SNL U.S. Insurance Index climbed 3.12% to 971.95.
As first-quarter earnings season came to a close and companies revealed declines in income and rising losses, Piper Sandler & Co. analyst Paul Newsome said the message he received was that "the hard market is here."
Newsome said claims inflation looks likely to be "pretty high," and there are a good number of pandemic-related claims that have companies questioning how they underwrite segments, including business interruption, directors and officers, and specialty casualty. Insurers are also reevaluating how they cover cruise lines, hospitals and nursing homes.
"I think the first quarter was really just an introduction to what will be an enormous year of change for the insurance industry," Newsome said in an interview.
That change starts with the second quarter, where investors and analysts will hear how much of an impact COVID-19 had on the industry's bottom line. Newsome said insurers will have to come up with estimates of their pandemic-related losses and report on the effect stay-at-home orders had on their business.
Newsome said there were a lot of unknowns that showed up in March, but it was still too early to tell how the pandemic would shake out. The second quarter is likely to be far more revelatory.
Progressive Corp. finished down 1.96% in what was a mixed week for many big property and casualty insurers. The company reported a $506.5 million charge in April generated by the credits issued to personal auto customers in response to a sharp decline in claims frequency due to the pandemic.
Allstate Corp., which also initiated a credit program for its auto policyholders, dipped 0.59%. The company posted estimated pretax catastrophe losses of $632 million in April from six weather events.
The big P&C movers for the week included W. R. Berkley Corp., up 18.27%, Cincinnati Financial Corp., up 16.39%, Chubb Ltd., up 17.60% and RLI Corp., up 12.49%.
Centene Corp., down 5.62% this week, announced that it is waiving in-network costs for all primary care visits, as well as the costs for outpatient, non-facility-based behavioral health visits for the remainder of the year. This follows the company's previous decision to waive preauthorizations, copays, and other costs related to COVID-19 testing and medically necessary treatment through the end of 2020.
Like most industries, the managed care space is seeing an impact from the pandemic as well. Stephens analyst Scott Fidel said in a note that analysis from The Commonwealth Fund showed an enrollment increase of about 162,000 for public health-insurance exchanges in 10 states and the District of Columbia from pandemic-related special enrollment periods. Fidel said the increase was a benefit for Molina Healthcare Inc., up 0.44% this week, Centene, and Anthem Inc., down 0.35%.
Top healthcare-related performers for the week included eHealth Inc., which jumped 13.50%.
Genworth Financial Inc. had the strongest week among life insurers. The company posted a 17.41% rise in its share price, while CNO Financial Group Inc. rose 8.48%, Lincoln National Corp. added 6.87% and Prudential Financial Inc. gained 6.33%.