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UnitedHealth climbs after earnings release; reinsurance, P&C stocks rise

UnitedHealth Group Inc. shares gained ground in the week ended Jan. 17 after the company reported strong financial results, while shares of many major U.S. property and casualty and reinsurance companies were also up ahead of earnings season.

Insurance stocks modestly underperformed the broader market for the week ending Jan. 17. The SNL U.S. Insurance Index climbed 1.52% to 1,197.35 while the S&P 500 rose 1.97% to an all-time record close of 3,329.62.

Announcing results well ahead of its peers, UnitedHealth reported fourth-quarter 2019 earnings from operations of $5.10 billion, up from $4.50 billion a year earlier. Net earnings attributable to shareholders climbed to $3.54 billion, or $3.68 per share, from $3.04 billion, or $3.10 per share.

A majority of the largest managed care companies are expected to report year-over-year improvements in revenues and earnings for the fourth quarter of 2019, according to an analysis of sell-sider estimates.

Piper Jaffray analyst Sarah James in a note said UnitedHealth set a positive tone with strong fourth-quarter 2019 earnings and positive indicators for 2020 in Medicaid rates, Medicare growth and commercial cost trends, with little impact from the December flu uptick.

UnitedHealth's stock started the week down sharply, but rebounded after the company reported results Jan. 15. It added to those gains the next day, before giving back a bit of ground in the final session and ending the week higher by 1.13%.

Commenting on Jan. 1 reinsurance renewals, broker and rating agency reports said the period went smoothly and that, by and large, insurers were able to get the cover they needed from the reinsurance market, though at higher prices in some cases. With low interest rates and a history of significant catastrophe losses in 2017 and 2018, the performance among reinsurers is starting to diverge, according to an Aon executive. Overall, however, the outlook looks good for reinsurers as prices are expected to increase further at the April 1 and June 1 renewals.

Reinsurance Group of America Inc.'s stock increased 2.84%, RenaissanceRe Holdings Ltd. rose 2.17%. Everest Re Group Ltd. gained 1.87% and Third Point Reinsurance Ltd. ticked up 1.80%.

S&P Global Ratings kept a stable outlook for the U.S. property and casualty insurance sector, which it said was supported by the industry's capital strength, conservative investment strategies and underwriting discipline.

An uptrend in pricing is likely to continue into 2020, with steeper rate increases seen in commercial auto, large account property, financial and professional lines, the rating agency said. The hardening market has been loss-cost driven rather than capital-replenishment driven, S&P said, adding that prolonged pricing complacency could prove to be a more "immediate yet less palatable impetus for this hardening pricing cycle."

CFRA Research analyst Cathy Seifert said in an interview that optimism on insurance pricing, coupled with a positively sloped yield curve, likely fueled the optimism in P&C stocks.

Ahead of reporting its results next week, Travelers Cos. Inc. was one of the best performers in the P&C space as its shares climbed 3.85%. Allstate Corp., which disclosed pretax catastrophe losses of $25 million for December 2019, picked up 3.61%.

Also, Chubb Ltd. this week said net catastrophe loss for the fourth quarter of 2019 are estimated at $430 million pretax. Its shares added 1.79%.

Despite warning that it will see higher-than-anticipated noncatastrophe losses in the fourth quarter of 2019, Hanover Insurance Group Inc. still finished in the green, ticking up 1.70%.

The biggest gainer among all insurance companies was Health Insurance Innovations Inc., which jumped 9.75%. The health insurance broker this week disclosed that it is extending an ongoing strategic review process that may lead to a partial or full sale of the company. Rival eHealth Inc. also had a good week, rising 4.51%.