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Argo shares rise after upgrade; life insurers slide as Fed takes dovish stance

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Argo shares rise after upgrade; life insurers slide as Fed takes dovish stance

Argo Group International Holdings Ltd. saw its shares tick up during a week that saw one analyst upgrade his call on the company.

A majority of publicly traded U.S. insurance companies were modestly lower along with the broader markets, though the domestic insurance index rose. The S&P 500 slipped 0.77% to 2,800.71 for the week ending March 22, while the SNL U.S. Insurance Index climbed 2.60% to 1,035.82

Compass Point analyst Bijan Moazami on March 19 raised his rating on Argo's shares to "buy" from "neutral," saying the company stands to be one of the main beneficiaries of a hardening excess and surplus lines insurance market. The analyst said he anticipates the excess and surplus market in the U.S. to "significantly harden" due to woes at the Lloyd's market and at American International Group Inc.'s Lexington Insurance Co. Lloyd's and AIG write nearly a third of all U.S. excess and surplus business, he said.

Moazami praised Argo's domestic operation, referring to it as a "gem." The company's stock closed the week at $70.00, up 2.53%.

Argo has been under fire lately from activist investor Voce Capital Management LLC, which said the company has posted "unacceptably" low return on equity for years. It also lashed out against CEO Mark Watson for his lavish lifestyle and accused him of using corporate funds inappropriately. Voce has nominated a number of independent directors to Argo's board.

Regarding the company's corporate expenses, Compass Point's Moazami said Argo could cut its overhead by canceling certain corporate sponsorships, reducing its corporate jet usage and other consolidating leases.

"The good news is that management appears to have taken action to address this issue," he said.

Moazami this week started coverage of National General Holdings Corp. at "buy," as he anticipates high-single-digit topline growth rate and midteens earnings expansion for the company in 2019 and 2020. National General went mostly along with the broader markets, as its stock slipped 2.42% to $23.84.

Major life insurers were among the week's biggest decliners, as the Federal Open Market Committee sounded a more dovish tone on interest rates. Lincoln National Corp. dipped 8.04% to $57.68, CNO Financial Group Inc. slid 6.65% to $15.71, and Prudential Financial Inc. fell 6.26% to $89.97.

MetLife Inc. saw its shares downgraded by Sandler O'Neill & Partners analyst John Barnidge to "hold" from "buy." It finished the week down 7.75% at $41.80.

Health Insurance Innovations Inc. suffered steep losses for a second straight week. After losing more than 12% last week, the online health broker shed another 14.14% this week, closing at $29.34.