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Insurance stocks bounce back in wake of scrapped healthcare reform

Insurance stocks took a breather after last week, when the sector tumbled amid news of healthcare reform, lawsuits and investigations.

Sandler O'Neill analyst Paul Newsome pointed out that insurance stocks had relatively little news to trade on during the final week of the first quarter.

The SNL Insurance Index inched higher by 0.90% to 887.59, and the S&P 500 finished 1.03% higher at 2,368.06.

Some U.S. health insurance providers saw their shares underperform the broader market. Large managed care companies fluctuated between gains and losses over the period following news that Republicans failed to gather enough votes to repeal and replace the Affordable Care Act with their own legislative package, the American Health Care Act.

Between March 24 and March 30, Humana Inc. shares were down 0.19% to $206.87, while Aetna Inc. was up just 0.11% to $126.91.

Mark Kepner, an equity trader at Chatham, N.J.-based Themis Trading LLC, said the managed care stock reaction to news of the ACA remaining in place did not seem dramatic. That may be because it was clear before Republicans pulled their healthcare bill from its scheduled vote that the process of repealing and replacing the ACA would take time, Kepner said.

Overall, political efforts to reshape healthcare likely mean more for smaller managed care companies, said Wells Fargo senior global equity strategist Scott Wren. By comparison, a smaller portion of the overall business of large managed care companies stands to be disrupted by shifts in healthcare policy, he added. While future reform could affect managed care companies, this subset of the insurance industry is likely focused on growing their business outside of government programs, Wren noted.

UnitedHealth Group Inc. edged down 0.01% to $164.99 during the week, which included news that the U.S. Department of Justice joined a second whistleblower lawsuit alleging the company committed fraud with its Medicare Advantage health plans.

Life insurers as well as property and causality insurers had a particularly "benign" week, with a few exceptions and notable events, according to Newsome.

American International Group Inc. shares rose 2.78% to $62.57 in the days after the company held its sell-side analyst day. Newsome said there had been concerns since the announced departure of AIG's CEO that the company would stray from its capital management strategy, which promised that $25 billion would be returned to investors by the end of 2017. The analyst said his biggest takeaway from the meeting with management was that the board is still committed to that plan.

Cincinnati Financial Corp.'s stock was up 0.63% to $72.33 for the week. Newsome noted that the company's shares tend to move with the broader stock market, since it has relatively high exposure to equities.

More broadly, Newsome pointed out that recent declines in insurance stocks have mostly been tied to economic concerns and worries about whether or when Congress will pursue regulatory and tax reform.

In other insurance news, Athene Holding Ltd. shares nudged down 0.22% to $49.76 for the week following its announcement that an offering of 25 million class A common shares will be sold by certain shareholders.