Insurance stocks generally followed the broader markets for this week, one in which equities whipsawed as fears of a recession spiked amid an inversion of the U.S. government bond yield curve.
After enduring one of their worst one-day sessions on Wednesday, U.S. equity markets regained much of the lost ground in the final two days of the week ending Aug. 16. The S&P 500 finished down 1.03% at 2,888.68. The SNL U.S. Insurance Index slipped 1.95% to 1,065.44.
The yield on the 10-year Treasury slid below that of the two-year bond on Aug. 14, a phenomenon that can rattle the markets because it is considered a potential warning sign for an upcoming economic recession. The S&P 500 lost nearly 3% of its value that day.
How much impact an inverted yield curve or a recession can have on an insurance company depends on its business mix and lines, according to CFRA Research analyst Cathy Seifert. Life insurance stocks tend to slide when Treasury yields either flatten or invert, Seifert said. That is because life insurers are more negatively impacted by economic slowdowns and low-interest-rate environments. Insurance brokers and personal lines property and casualty insurers tend to do relatively better because they do not experience the same direct impacts, she added.
A number of big-name life insurers fell slightly further than the broader index. MetLife Inc. dropped 3.30%, Prudential Financial Inc. declined 3.29%, CNO Financial Group Inc. lost 4.35% and Lincoln National Corp. slid 4.62%.
Elsewhere in the life insurance sector, Genworth Financial Inc. became one of the week's biggest gainers after it announced that it would sell its controlling interest in Genworth MI Canada Inc. to Brookfield Business Partners LP for about C$2.4 billion. Seifert said the market views the deal positively as evidenced by Genworth shares shooting up after the stake sale was announced.
Despite a positive response from the market, the company is still trading about 20% below China Oceanwide Holdings Group Co. Ltd.'s offering price of $5.43 per share. That is evidence that investors are "still casting a skeptical eye" on the possibility of the Oceanwide acquisition actually closing, the analyst said. The deadline for that deal was recently extended for the 12th time since the original 2016 announcement.
Genworth Financial ended the week up 9.95%, while Genworth MI Canada's shares declined 4.16%.
Health Insurance Innovations Inc. is this week's biggest loser as it fell 17.73%. Close behind was Syncora Holdings Ltd., which announced a deal and its second-quarter earnings this week. Its stock finished down 16.21%.