The picture brightened for property and casualty insurers focused on Florida as their share prices moved higher after the Sunshine State dodged a direct hit from Hurricane Dorian.
The S&P 500 rose 1.79% to 2,978.71 for the week ending Sept. 6, while the SNL U.S. Insurance Index ticked up 0.85% to close at 1,062.36.
After seeing their stocks lose significant ground last week, Florida-focused P&C companies were among this week's biggest gainers. Universal Insurance Holdings Inc. rose 7.92%, United Insurance Holdings Corp. was up 9.98%, HCI Group Inc. added 6.03%, Heritage Insurance Holdings Inc. increased 6.25% and FedNat Holding Co. climbed 3.19%.
JMP Securities analyst Matthew Carletti said Florida avoiding the effects of a storm that first made landfall as a Category 5 hurricane in the Bahamas was obviously good news for those carriers.
"Looking at the kind of direct hit on South Florida scenario that it kind of looked like going into last weekend, yes, they're breathing a sigh of relief," Carletti said in an interview.
Carletti said some insured losses from Dorian are expected in Florida, but he does not expect them to be "massive."
"When you dump that much rain on anything and you have a hole in your roof, it finds it," he said, adding that the losses will be a "little dent" in third-quarter results and not a "knockout punch."
Share prices for reinsurance companies also made good gains this week after a dip last week as Dorian approached the U.S. mainland.
Everest Re Group Ltd. led the way, rising 5.57%, while RenaissanceRe Holdings Ltd. jumped 4.34%. AXIS Capital Holdings Ltd. finished the week up 4.63%, and Third Point Reinsurance Ltd. gained 4.56%.
Despite the recent improvement in his company's stock price, FedNat CEO Michael Braun this week said the market is undervaluing his company as it tries to complete its acquisition of 1347 Property Insurance Holdings Inc.
Speaking at a Sept. 5 KBW insurance conference, Braun said his company's stock, which has dropped to $12.62 from more than $25 a year ago, is trading at "a deep, deep discount."
JMP's Carletti said FedNat's situation is a "self-inflicted wound," calling the deal for 1347 Property Insurance a "poorly structured acquisition."
"They did not have an out, so there's no breakup potential," he said. "The other side could break it up and they couldn't."
Once the deal is closed in December, FedNat will be traded more on fundamentals and the market will be able to actually vote on how it feels about the deal, the analyst added.
In the life space, Prudential Financial Inc. got general approval from analysts for its acquisition of insurtech startup Assurance IQ Inc. for approximately $2.35 billion. Wells Fargo analyst Elyse Greenspan said she expects the deal would not impact the company's share price because it does not change Prudential's buyback expectations.
Prudential finished the week up 2.60%.
Many managed care companies had a rough week. Molina Healthcare Inc. was the insurance industry's worst performer overall, falling 8.01%. Health Insurance Innovations Inc. slumped 6.38%, while eHealth Inc. continued its downward trend, falling 2.70% after plummeting 13% last week. Also finishing in the red this week were Anthem Inc., down 4.64%, and Humana Inc., which dropped 3.52%.
