AmericanEquity Investment Life Holding Co. saw one of the biggest losses amongSNL-covered insurers in the week ended April 28 where most other insurers saw stocksdecline as some first-quarter earnings were announced.
The SNL Insurance Index fell 0.88% on the week to 746.29,and the S&P 500 dropped 0.75% to 2,075.81.
American Equity Investment reported operating income of $21.0 million, or 25 cents pershare, down from $48.8 million, or 62 cents per share, in the prior-year quarter.The company saw shares fall 11.92% to $14.33 on the week.
Raymond James analyst Steven Schwartz said in an April27 note that relative to his estimates, the company's EPS was affected by 2 centsper share of prepayment income, offset by excess cash holdings. The analyst alsosaid nonrecurring and nontrendable negative items negatively affected EPS by 1 centper share.
The decline in shares comes as the company continues toconfront issues with the U.S. Department of Labor's Conflict of Interest Rule. Thecompany said during theweek that the regulation may force it to expand its suite of annuities productsafter saying new restrictions placed on fixed-indexed annuities were "not draftedto be workable" for independent agent distribution of those annuities.
Another insurer that saw a big drop in shares during theweek was XL Group Plc,which reported first-quarteroperating net income of $103.4 million, or 35 cents per share, compared with $194.4million, or 75 cents per share, in the year-ago period. The company's shares lost8.78% to end at $32.74.
In an April 27 note, Janney analyst Ryan Byrnes noted thatthe company's miss of his operating net income estimate of 48 cents per share reflectedhigher-than-expected expenses, notably within the insurance segment, and modestlylower-than-expected investment income. Although the analyst described the quarteras "mildly disappointing" given the continued elevated expenses, he thinksXL's stock has meaningful downside protection, noting that it trades at 88% of bookvalue. Byrnes added that he believes the company's Catlin deal can drive its transformation into an averageunderwriter with "appropriate" operating leverage.
In the managed care segment, Centene Corp. posted one of the biggest gains during theperiod. The company ended the week with shares up 2.04% to $63.62 after it a first-quarter net lossattributable to common shareholders of $17 million, or 13 cents per share attributableto the company, compared with net earnings attributable to common shareholders of$63 million, or 51 cents per share attributable to the company, in the year-agoperiod.
Leerink analyst Ana Gupte in an April 27 note reiteratedher "outperform" rating on the company, citing "decent" first-quarterresults and a better-than-expected update to guidance following the completion ofits Health Net Inc. . Gupte also notedthat the company's management remains bullish on its performance in the public exchanges,adding that the company generated margins at the top end of its 3.3% to 3.5% targetrange.
The shares of other insurers in the managed care spacethat reported earnings during the week did not fare as well. Aetna Inc. dropped 0.17% to end the period at $114.63, whileAnthem Inc. declined 2.39%to $144.00.
Aetna reportedfirst-quarter operating earnings of $810.8 million, or $2.30 per share, down from$844.3 million, or $2.39 per share, in the year-ago quarter. Anthemreported first-quarternet income of $703.0 million, or $2.63 per share, down from $865.2 million, or $3.09per share, in the year-ago quarter.
Morningstar analyst Vishnu Lekraj said in an interviewthat the main thing that came out of Aetna's and Anthem's first-quarter resultswas a lot of pressure on the public exchanges in terms of profitability, the surroundinguncertainty and the strategy that each company will take to navigate these headwinds.The analyst also noted the growth in government programs such as Medicare and Medicaidwhere the pace of the shift of membership from historical employer commercial-typeplans has quickened.
"There is an opportunity for them to grow membershipand likely grow volume and likely grow revenue, but this growth is going to comeat a low level of profitability," Lekraj said.
Seeing the biggest gains during the week were , AMERISAFE Inc. and RadianGroup Inc. Assurant rose 6.23% to $84.59, AMERISAFE gained 5.06% to$54.62 and Radian Group climbed 4.67% to $12.99.