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Progressive slumps after August results; life insurers climb as bonds rally

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Progressive slumps after August results; life insurers climb as bonds rally

One of the largest U.S. property and casualty insurers saw its shares take a hit this week after reporting a sharp drop in monthly net income.

The S&P 500 climbed 0.96% to 3,007.39 for the week ending Sept. 13, while the SNL U.S. Insurance Index rose 1.48% to 1,078.05.

Market sentiment was negative on Progressive Corp. as it reported a 36% year-over-year decline in net income attributable to the company in the month of August. That figure stood at $175.9 million for the most recently completed month, down from from $274.7 million a year earlier. Net income per share available to common shareholders slid year over year to 30 cents from 46 cents. Weighing on the results were pretax net realized losses on securities of $33.7 million, as compared to a $76.4 million gain in the prior-year period.

While the investment portfolio may have hurt the bottom line in August, Progressive's underwriting results were solid, according to CFRA analyst Cathy Seifert. The analyst in an interview said Progressive may experience significant losses in the fourth quarter, but reiterated that year-to-date figures are not so bad.

Nevertheless, Progressive was one of the worst performers among all publicly traded U.S. insurance companies, losing 6.09% this week. Only eHealth Inc. and Blue Capital Reinsurance Holdings Ltd. fared worse, with the former declining 6.75% and the latter tumbling 19.13%.

A number of life insurers moved higher during a week that saw Treasury bonds rally. Big life insurers in mid-August saw their stocks slump after the yield curve inverted, but that phenomenon flipped earlier in September and the yield on the 10-year Treasury has stayed above of the two-year bond for most of the month.

Unum Group, Lincoln National Corp., American Equity Investment Life Holding Co., Citizens Inc. and CNO Financial Group Inc. were among the best-performing stocks as each saw increases of more than 10%. Unum rose 12.42%, Lincoln added 11.72%, American Equity gained 11.70%, Citizens increased 11.67% and CNO gained 11.21%.

Managed care companies were a mixed bag, as Anthem Inc., UnitedHealth Group Inc., Humana Inc. and Cigna Corp. saw modest-to-moderate increases, while Molina Healthcare Inc. and Centene Corp. were down.

The title insurance space was shaken up this week after Fidelity National Financial Inc. and Stewart Information Services Corp. agreed to call off their proposed merger after the Federal Trade Commission filed a lawsuit to block the deal. The Fidelity-Stewart deal is the largest terminated deal in the title insurance sector since 2015 and the sixth-largest canceled transaction in the entire insurance industry in that time frame.

Fidelity executives during a conference presentation shortly after the deal was terminated said they have many options for the nearly $1 billion the company had set aside for the merger. Among those could be smaller M&A transactions, stock buybacks or a higher dividend, they said.

The prospect of more capital returning to shareholders did not help Fidelity's stock this week, though. The company's shares finished down 2.04% at $43.67, while Stewart Information, on the other hand, added 4.01% to close at $35.00.