Higher rates of no benefit today to insurers and regional banks


Is it something more than interest rates at work? Selloffs earlier this summer were notable for exempting certain sectors set to benefit from higher rates - insurance (KIE -1.4%) and regional banks (KRE -1.1%) - but not today.

Leading the insurance sector lower are AIG (AIG -2.3%), Aflac (AFL -2%), Cincinnati Financial (CINF -2.3%), Old Republic (ORI -1.3%), and Prudential (PRU -1.6%).

In regional banks it's Huntington (HBAN -1.5%), SunTrust (STI -1.5%), First Niagara (FNFG -1.6%), Synovus (SNV -1%), and KeyCorp (KEY -1.5%), and Flagstar (FBC -4%).

Related ETFs: IAT, KBE, KRE, RKH, QABA, KRU, KRS, KBWR.

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Comments (4)
  • db313706
    , contributor
    Comments (223) | Send Message
     
    So I'm definitely not the most experienced market participant, but... if even those firms that are supposed to proper from rising rates drop like a stone with everyone else, is this the highly elusive "correction" everyone has been waiting for?

     

    Anyone daring enough to postulate how far the roller coaster drop is?
    15 Aug 2013, 03:53 PM Reply Like
  • speedofov
    , contributor
    Comments (91) | Send Message
     
    For insurance companies that are efficiently run, higher rates will mean better margins and this will translate into higher stock prices. However, the questions is: when?
    15 Aug 2013, 05:30 PM Reply Like
  • Value Pursuit
    , contributor
    Comments (52) | Send Message
     
    Tapering is gradual reduction of purchasing. That means that insurance companies, since they do better with higher interest rates, should gradually grow stronger balance sheets.... "Should"
    15 Aug 2013, 06:38 PM Reply Like
  • Roke6362
    , contributor
    Comments (41) | Send Message
     
    Insurance company yields on investments will be better because they are required to place most of their claims surplus in fixed-income securities. The downside to rising rates is a reduction in the value of the security. Therefore, claims surplus values will decrease.

     

    To some companies that will cause premium-to-surplus ratios to get too high.

     

    It really doesn't matter what economic situation we're in at any given moment.

     

    With p&c insurance companies, focus on debt-to-equity, premium-to-surplus, and combined ratio. If your time horizon is long enough, you'll do fine.
    16 Aug 2013, 08:46 AM Reply Like
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