trending Market Intelligence /marketintelligence/en/news-insights/trending/VaCZMiNcRo6azsl97MPyAA2 content esgSubNav
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us
In This List

Life insurers' values slide amid concerns over investment income

Infrastructure Issues: Tools to Dig Deep on Potential Risks

Part Two IFRS 9 Blog Series: The Need to Upgrade Analytical Tools

2018 US Property Casualty Insurance Market Report

Fintech

Fintech Funding Flows To Insurtech In February


Life insurers' values slide amid concerns over investment income

Lifeinsurance shares continued their retreat on the markets as economic uncertaintyand a longer horizon of low interest yields dimmed earnings prospects.

TheSNL Insurance Index contracted for the week, falling 1.6% to 740.36. TheS&P 500 edged down 0.24% to 2,097.90.

Insurance M&A adviser Grace Vandecruze thinks thedarkened outlook thatfollowed the U.K.'s vote to exit the European Union could pressure interestrates downward and force U.S. life insurance companies to reformulate theirportfolio mix for investment income.

"The industry could have to do a drastic recalibrationof their investment models as companies continue to search for yield andnavigate this unchartered rate territory," Vandecruze, founder of GraceGlobal Capital, said in an interview.

Those waters could lead to hazardous straits of zero andeven subzero interest rates with further quantitative easing, Vandecruze said.Several nations have seen interest rates dip below zero, and the world hasbecome more economically uncertain, she added.

"The path to economic recovery has become more and moredifficult to foresee, and coupled with geopolitical risk, the Feds may have tocontinue easing," she said.

MetLifeInc. declined 3.09% for the week to close at $38.27. dropped 2.76% to $69.04, and Lincoln National Corp. fell 3.25% to $37.49. closedat $2.43, down 5.81%.

Insurance companies with exposure to Puerto Rico's debtcrisis saw their share prices decline during the week following federalenactment of a billrestructuring the island government's financial obligations. Shares ofMBIA Inc., andAmbac Financial GroupInc. had suffered while Puerto Rico wrestled with its $70 billiondebt.

The Puerto Rico Oversight, Management and Economic StabilityAct, or PROMESA, did not prevent a default on about $1 billion in generalobligation bonds, however. Units of Assured Guaranty began making on some ofthe defaulted bonds. Obligors to which Assured Guaranty had exposure had $403million of gross principal and interest due at the July 1 default date.

Meanwhile, Ambac is facing a investors filed claiming thatthe company failed to disclose the risk of Puerto Rico's government bonds.Ambac lost 1.95% for the week, closing at $16.08. Assured Guaranty declined3.15% to $24.91, and MBIA fell 1.29% to finish at $6.91 for the week.

AllstateCorp. also edged downward for the week. Sandler O'Neill analystPaul Newsome nevertheless believes the company's shares are among the surestinvestments among large-cap insurance companies. Peers such as ,Chubb Ltd., andXL Group Plc aredealing with various issues, including merger integration, capital marketexposures or management transitions, Newsome wrote in a July 1 note.

"We think some of these companies will resolve theirissues and emerge as core investments, but for the moment, Allstate is therelatively 'safe play' where there is also 'earnings power,'" Newsomewrote. He maintained his "buy" rating on Allstate while increasinghis price target $1 to $77.

Allstate dropped 0.89% to $68.94. Travelers ticked down1.13% to $117.51, and XL Group closed at $32.62, a decline of 1.48% for theweek.

NationalInterstate Corp. finished higher after American Financial Group Inc. its offer price for thecompany to $32 per share in cash from $30.75. National Interstate hadspurned the earlier offerbecause it did not think it was in the best interests of minority shareholders.

National Interstate rose 1.09% to $30.47 on the week, whileAmerican Financial shed 1.80% to close at $72.04.

AetnaInc. and HumanaInc. saw their share prices drop, as federal regulators about thecompanies' planned combination. Aetna declined 3.73% for the week to$115.47. Humana lost 6.47% and closed the week at $162.74.