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Life, managed care insurance stocks start 2019 in the green


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Life, managed care insurance stocks start 2019 in the green

Insurance stocks generally fared well alongside the broader market during the first full week of trading in 2019.

The S&P 500 rose 2.54% to $2,596.26, while the S&P 500 Insurance index gained 2.04% to 358.16 for the week ending Jan. 11. The majority of life insurers saw modest gains, which could be due in part to a more optimistic mindset among investors as a new year begins, said John Barnidge, an analyst for Sandler O'Neill.

"My opinion is that the sell-off [at the] end of the year was overdone," Barnidge said. "Not that it should be the case, but when a calendar changes, sometimes people think a little differently."

Barnidge also added that people might be coming to a realization that investment portfolios, capital and the operating environment are altogether much better than they were during the global financial crisis, which could also be contributing to the market's good start to the year.

"The rise off the post-Brexit lows has been significant enough that it’s probably going to lead to spread compression abating this year, and that can more than offset the decline that we saw in equity markets in any given quarter," Barnidge said.

Manulife Financial Corp. and Unum Group ticked up 5% and 3.25%, respectively. Voya Financial Inc. gained 3.51% while Lincoln National Corp. shares rose 2.77%.

In the same week that MetLife Inc. named Michel Khalaf to serve as the company's next president and CEO, its shares went up 3.41%. Khalaf will succeed Steven Kandarian, effective May 1.

A number of managed care companies were among the biggest winners of the week, with Molina Healthcare Inc. and Health Insurance Innovations Inc. leading the pack. The two companies saw gains of 21.63% and 16.24%, respectively. Molina's stock skyrocketed in the same week management expressed optimism over margin outlook and an analyst upgraded the company to "overweight" from "neutral."

Several other managed care companies were also up this week. Centene Corp. shares ticked up 5.68%, WellCare Health Plans Inc. gained 6.24% and UnitedHealth Group Inc. moved up 3.36%.

Maiden Holdings Ltd. stuck out as an outlier in the group, ending the week in the red with its stock slumping 19.14%.

Maiden's stock began its decline Jan. 3, the same day the company announcement that it had mutually agreed to a partial termination amendment to its currently in-force quota share agreement with AmTrust Financial Services Inc.

The amendment dictates that Maiden will return roughly $700 million in gross unearned premium to AmTrust, which will net to about $480 million after consideration of ceding commission and brokerage.

In addition, Maiden recently sold its unit, Maiden Reinsurance North America Inc., to Enstar Group Ltd. for $272.4 million. Enstar shares remained largely unmoved with just a 1.57% increase at the end of the week.

Other reinsurers operating in the U.S. delivered a mixed bag of results this week. Alleghany Corp.'s stock declined 1.41% and Everest Re Group Ltd. ticked down 0.85%, while shares of Reinsurance Group of America Inc. went up 1.78%, and RenaissanceRe Holdings Ltd. shares slightly increased 0.31% at the end of the week.