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Aflac shares slip as company reveals 2020 outlook; big P&C stocks mixed


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Aflac shares slip as company reveals 2020 outlook; big P&C stocks mixed

Aflac Inc.'s stock lost ground during the week the company held its 2020 outlook call, while several property and casualty insurers that do business in California were mixed after the state's regulator issued a one-year moratorium on nonrenewals of certain homeowners insurance policies.

For the week ending Dec. 6, the S&P 500 ticked up 0.16% to 3,145.91. The SNL U.S. Insurance Index edged down 0.18% to 1,149.45.

California Insurance Commissioner Ricardo Lara earlier this week ordered a moratorium on nonrenewals of home insurance for policyholders living near recently declared wildfire disaster areas. CFRA Research analyst Cathy Seifert said Lara's order is an "attempt to delay what may prove to be unavoidable" — a crisis of coverage in the state.

Sandler O'Neill & Partners analyst Paul Newsome said the moratorium, which covers more than 800,000 residential policies, restricts insurers from clearing unprofitable policies from their books. It stands to be a negative for the profitability of companies like American International Group Inc., Chubb Ltd., Travelers Cos. Inc. and Hartford Financial Services Group Inc., which are exposed to wildfire risk in the Golden State, Newsome said in an email.

AIG fell 1.52%, The Hartford ticked down 1.65%, Travelers lost 0.72% and Allstate Corp. decreased 0.22%. Meanwhile, Chubb climbed 0.30% and Mercury General Corp. increased 0.96%.

In the life insurance sector, Aflac in an outlook call said it is anticipating EPS for 2020 within the range of $4.30 to $4.50. The guidance, according to Sandler analyst John Barnidge, is positive considering the level of conservatism Aflac historically has in its outlooks.

Aflac's commentary on Japan Post channel sales volume, which is expected to decline by 20% to 30% in 2020, was also approached conservatively, Barnidge said. Japan Post Co. Ltd. suspended insurance sales in mid-July after it was discovered to have improperly sold approximately 104,000 Aflac-issued insurance policies, leaving customers temporarily uninsured or resulting in double charges.

Barnidge maintained his "buy" call on Aflac's stock and said the third quarter showed that the company is the industry's best performer from an operational execution point of view. "The underwriting and expense discipline — despite investment in digital and technological improvements — continued to shine through," Barnidge said in a research note.

But despite that positive tone from the Sandler analyst, Aflac's shares finished the week down 3.37%.

UnitedHealth Group Inc. also revealed its outlook for 2020, expecting revenues of $260 billion to $262 billion, net EPS of $15.45 to $15.75 and adjusted net EPS of $16.25 to $16.55. The company also said its EPS for 2019 will be at higher end of its previous forecast.

The company's shares ticked up 0.11%.

Two weeks after its stock shed nearly a quarter of its value, Health Insurance Innovations Inc. ended this week in the green with a gain of 7.57%. Genworth Financial Inc. was also among the strongest performers, rising 4.55%.

Among the biggest losers was Unum Group, which lost 4.78%.