Black Monday's Market Spared Few Insurance Stocks According to SNL Insurance Report

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Insurance stocks were not immune from the market carnage on Aug. 24, with the overwhelming majority of Nasdaq- and NYSE-traded underwriters seeing red. Only a handful of stocks managed to eke out gains, among them Kingsway Financial Services Inc. and Citizens Inc.

US exchange-traded insurance underwriter stocks with relatively low 1-yr betas

According to analysis from SNL Financial today, insurance stocks were not immune from the market carnage on Aug. 24, with the overwhelming majority of Nasdaq- and NYSE-traded underwriters seeing red.

According to analysis from SNL today, insurance stocks were not immune from the market carnage on Aug. 24, with the overwhelming majority of Nasdaq- and NYSE-traded underwriters seeing red.

Some of the largest companies in the sector took a drubbing, including UnitedHealth Group Inc., which is a Dow Jones Industrial Average component. The health insurance giant lost roughly 5% on the day, leading the so-called Big Five managed care companies downward. Cigna Corp., Aetna Inc., Anthem Inc. and Humana Inc. saw declines of 4.9%, 4.3%, 4.1% and 3.6%, respectively.

Still, many of these stocks have gained year-to-date, amid a flurry of consolidation within the group. Even with the Aug. 24 sell-off, Aetna and Humana (which have agreed to merge) were up more than 20% each for the year, and Anthem and Cigna (which also have agreed to merge) were 11.9% and 31.9% higher, respectively.

Only a handful of stocks managed to eke out gains, among them Kingsway Financial Services Inc. and Citizens Inc. But even those gains were slight. A number of buyout targets also seemed to have less pain inflicted upon them, such as PartnerRe Ltd., which was down only about 0.5% to $137.55 per share. PartnerRe agreed to an all-cash deal with Exor SpA that values the company at $137.50 per share.

True to form, the 10 companies with relatively high amounts of beta saw, on average, steeper drops than the 10 with the lowest amounts of beta. American Independence Corp., which actually has a negative correlation with the S&P 500, was down only 0.4% during the session. Beta is a generally accepted measure of a volatility of a given stock, and is based on its correlation with a benchmark return over a given time period.

The market did not seem to discriminate in terms of forward earnings, however, based on SNL's analysis. The 10 companies with the lowest 2016 price-to-earnings ratios, based on estimates collected by FactSet, seemed to be hit, on average, just as hard as the list of the 10 companies with the highest P/E ratios. For the purposes of this analysis, SNL limited the companies under observation to those having at least three analyst estimates. The average decline for the high-estimate group was roughly 4.3%, compared with 4.5% for the low-estimate group. In light of this, it might be that investors merely hit the panic button, rather than having any determined motivation to sell off stocks with higher price tags relative to future earnings.

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Christina Twomey
@SNLInsurance
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