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Insurance stocks recover alongside broader markets


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Insurance stocks recover alongside broader markets

Many insurance stocks recovered value alongside the broader markets after the selloff during the previous week, even as several of the largest underwriters posted mixed results in their quarterly earnings reports.

MetLife Inc. released its fourth-quarter results Feb. 13, following a delay accompanying the report of a reserve charge for its annuities business. The company's quarterly adjusted earnings declined year over year to 64 cents per share.

President and CEO Steven Kandarian said during the insurer's earnings presentation that MetLife was embarrassed by its failure to locate retirees owed pension payments. The company was undertaking several measures to improve the operations that led to MetLife taking a $331 million after-tax charge for the quarter, Kandarian said.

With its earnings report coming two weeks after the company announced the delay and reported the reserve development, investors registered confidence in the insurance giant's shares, which rose 5.53% for the week to $46.73. The company's stock price even fared better than the insurance index the day after the earnings release.

CFRA analyst Cathy Seifert maintained her "strong buy" investment opinion on MetLife's shares, writing in a Feb. 13 note that the reserve development was disappointing, but one she expected the company to fix.

"We view [MetLife] as undervalued and see higher rates and a global recovery as catalysts for the shares," Seifert wrote. The health of the global economy favors MetLife’s business, she added in an interview.

“There are a number of attractive macro catalysts, including a worldwide growth in investable assets which helps them both in the U.S. and overseas,” she said.

A rising-interest-rate environment in the U.S. should help investment income and margins in many of their spread-based businesses.

American International Group Inc. reported fourth-quarter 2017 after-tax income of 57 cents per share, reversing a loss on the same line in the prior year. The company saw rate improvements across a number of lines and improved pricing in each month of the quarter in its U.S. property business.

One of the positives that Sandler O'Neill analyst Paul Newsome noted for the company was the absence of major adverse developments like those AIG reported previously.

"It was a fear by some investors that AIG would repeat the reserve charge seen in the third quarter, or, perhaps, a charge as large as the one in the fourth quarter of 2016," Newsome wrote in a Feb. 9 research note. Newsome maintained his "buy" call on AIG's shares and $73 price target.

The company underperformed the SNL Insurance Index for the week ending Feb. 15 as its stock edged up 1.63% to $59.23. The SNL Insurance Index rose 4.37% for the week to 1,038.12, and the S&P 500 jumped 5.82% to 2,731.20.

At opposite ends of the share-price performance spectrum for the week were the parties to Kemper Corp.'s $1.4 billion offer to buy Infinity Property & Casualty Corp. Infinity's shares closed the week as one of the biggest gainers, rocketing more than 24% to $117.75, while Kemper's stock was down a little more than 1.5% at $55.50.