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KIE vs. ETF Alternatives
The SPDR® S&P® Insurance ETF, before expenses, seeks to closely match the returns and characteristics of the S&P® Insurance Select Industry Index (ticker: SPSIINS). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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Thu, May. 15, 11:43 AM
- Hit particularly hard in today's selloff are the life insurers, whose hopes of beginning to get better returns on their fixed-income investments in 2014 look dashed at the moment.
- Off another six basis points today to 2.48%, the 10-year Treasury yield - above 3% at the start of this year - is all the way back to levels seen last summer.
- Leading the decline is Lincoln National (LNC -6%). Others: MetLife (MET -3.2%), Prudential (PRU -3.7%), Protective Life (PL -3.8%).
- Related ETFs: KIE, IAK, KBWP, KBWI
- Previously: Strong economic data doesn't slow Treasury rally; Wal-Mart in focus
Mon, Apr. 28, 10:52 AM
- Property & casualty insurers are bouncing from a tough Friday session which was led by declines in Chubb and Cincinnati Financial after tough Q1 results. Today's biggest gainer is United Insurance Holdings (UIHC +4.8%) - continuing a big run after being initiated with an Outperform rating at Wells Fargo.
- Aren't insurers supposed to be bought after a tough quarter for catastrophes as it means they can raise rates?
- Others: HCI Group (HCI +3.1%), Universal Insurance (UVE +3.5%), W.R. Berkley (WRB +1.2%), Travelers (TRV +1.6%), Allstate (ALL +1.3%), Chubb (CB +1.3%), and Cincinnati Financial (CINF +0.9%).
- ETFs: KIE, IAK, KBWP, KBWI
Wed, Apr. 16, 3:18 PM
- Alongside Barclays' Jay Gelb's upgrade of Lincoln Financial (LNC +2.3%) to Overweight is a downgrade of Reinsurance Group of America (RGA -0.3%) to Equal Weight and cut in the price target to $81 from $88, citing increased competition in the life reinsurance market.
- For Lincoln, Gelb has boosted confidence in the company's ability to generate strong earnings growth despite the low interest rate environment.
- His top picks in the sector remain Prudential (PRU +1.6%), MetLife (MET +0.8%), Aflac (AFL +1.5%), and Protective Life (PL +1.2%), and he has a "positive outlook" on AIG and Hartford Financial (HIG +1.4%).
- "AFL has a top-tier ROE as well as robust share buybacks, and should benefit in 2015 from the Japan Post partnership," writes Gelb, noting yen weakness will hurt GAAP earnings, but the company has hedged profit repatriation back to the States. AIG and HIG, he says, "should deliver substantial share buybacks along with attractive valuations and ultimately higher ROEs."
- ETFs: KIE, IAK, KBWI, KBWP
Thu, Mar. 20, 10:54 AM
- Much of the financial sector is lit up bright green, continuing to outperform following yesterday's suggestion by the FOMC and Janet Yellen that rate hikes could come sooner than expected. XLF +1.1%, KBE +1.6%, KRE +1.6%.
- At new 52-week or even multi-year highs are JPMorgan (JPM +2.3%), Wells Fargo (WFC +1.7%), Morgan Stanley (MS +1.4%), and Bank of America (BAC +1.6%).
- Regional lenders: U.S. Bancorp (USB +1%), Huntington (HBAN +1.5%), PNC (PNC +1.3%), BB&T (BBT +1.5%), Fifth Third (FITB +1.8%), First Niagara (FNFG +2.1%).
- Leading among the life insurers are Lincoln National (LNC +1.9%), Protective Life (PL +1.6%), Manulife (MFC +1.2%), and Sun Life (SLF +1.1%).
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, KIE, IAT, SEF, IYG, IAK, FXO, PFI, KBWB, RKH, QABA, FNCL, FINU, KRU, RWW, KBWR, RYF, PSCF, KBWI, KBWP, KRS, FINZ
Wed, Mar. 19, 3:13 PM
- A check of sectors following the FOMC statement and updated projections suggesting a quickened pace of rate hikes in the future finds the banks and life insurers notably moving higher. Both groups have struggled earning a spread amid ZIRP and are positively levered to higher rates.
- Lenders: Bank of America (BAC +1%), Citigroup (C +1%), JPMorgan (JPM), Regions (RF +1.7%), KeyCorp (KEY +0.9%), SunTrust (STI +0.7%).
- Life insurers: MetLife (MET +1%), Prudential (PRU +0.7%), Lincoln National (LNC +1%).
- Related ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, KIE, SEF, IYG, IAK, FXO, PFI, KBWB, FNCL, FINU, RWW, RYF, PSCF, KBWP, KBWI, FINZ, KBE, KRE
- Not necessarily positively levered to higher rates are the mortgage REITs (REM -1.6%): Annaly (NLY -1.8%), American Capital (AGNC -1.7%), (MTGE -1.9%), Armour (ARR -1.3%), Two Harbors (TWO -2%) CYS Investments (CYS -3.3%), Capstead (CMO -1.3%), MFA (MFA -1.8%).
- Related ETFs: MORT, MORL
Tue, Mar. 11, 12:40 PM
- The insurance industry finds an ally in Maine Senator Susan Collins who introduces an amendment to Dodd-Frank seeking to clarify new capital rules for nonbank financials.
- Insurance companies have made the case they're not banks and already meet state-imposed leverage requirements, and thus shouldn't be subject to the same rules as banks, and the Fed - now a regulator of AIG and PRU, and maybe MET soon as well - has asked for guidance about whether Dodd-Frank allows it leeway.
- Not a member of the Senate Banking Committee, Collins testified the Fed does indeed have flexibility and her bill seeks to make that clear.
- Related ETFs: KIE, IAK, KBWI, KBWP
Mon, Jan. 27, 2:54 PM
- “It is now obvious to us that the continuing objective of the Obama administration and the U.S. Attorney General is to punish banks and finance," writes Daivd Kotok's Cumberland Advisors, explaining a decision to underweight the banks.
- The firm previously had been overweight the regionals via the KRE and just two weeks added exposure to the larger lenders through the KBWB, but has quickly decided to reverse that move. "We were wrong" in thinking the "persecution" of the banks was near over, says Cumberland.
- "The investment strategy we pursued for our clients in this case was not to confront the U.S. Attorney General with an overweight position in a sector that he views as adversarial.”
- Related ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, PSP, IYF, EUFN, IAI, KIE, IPF, IAT, SEF, IYG, IAK, PFI, FXO, IXG, KBWB, PEX, KME, RKH, QABA, FINU, KCE, KRU, RWW, KBWR, FNCL, RYF, KBWI, PSCF, FEFN, AXFN, KBWP, KRS, FINZ, EMFN, KBWC, KBWX
Dec. 8, 2013, 5:15 AM
- Airlines have canceled over 1,000 flights, while freight companies and online retailers have delayed deliveries, due to severe winter weather across the U.S., particularly in the south.
- American Airlines (AAMRQ, LCC) has been especially affected after more than 400 flights from Dallas/Fort Worth, American's largest hub, were scrapped.
- FedEx (FDX) and UPS (UPS) have also felt the impact of the weather, while eBay (EBAY) has warned of shipment delays.
- Meanwhile, ice storms have cut power to over 200,000 homes from Texas to Tennessee.
- More freezing weather is predicted for tomorrow.
- It's likely to take a while for the economic cost of the storm to be calculated. Insurer Aon (AON) reckons that the losses from the tornadoes and thunderstorms that hit the U.S. last month will top $1B. Allstate (ALL) may take a large hit after towns in Illinois, where it is the second-biggest insurer, were among those to feel the full wrath of the storms.
- ETFs: KIE, IAK, KBWP, KBWI
Nov. 18, 2013, 3:18 AM
- Thunderstorms and tornadoes battered the Midwest over the weekend, killing at least six people, decimating the town of Washington in Illinois, and leaving tens of thousands without power.
- If they haven't already, the insurance assessors are likely to start counting the cost of the destruction.
- Insurance ETFs: KIE, IAK, KBWI, KBWP
Nov. 15, 2013, 12:32 PM
- Deutsche's Yaron Kinar may have downgraded Prudential (PRU -0.9%) this morning, but he's not bearish on the life insurance sector. The Pru move was about valuation and the company's relative lack of interest rate sensitivity.
- Those who stand to benefit more from higher rates had their price targets lifted: Buy-rated MetLife (MET +0.4%) is upped to $59 from $57 and Lincoln National to $56. Hold-rated Torchmark (TMK -0.5%), Unum (UNM -0.3%), and Principal Financial (PFG -0.1%) also had their targets raised.
- He notes current valuations imply about a 3% 10-year Treasury yield a year from now, but the taper could see the 10-year to 3.5% or higher, along with expectations from further increases.
- Related ETFs: KIE, IAK, KBWI, KBWP
Nov. 8, 2013, 10:41 AM
- Up sharply as interest rates fly higher (the 10-year is up 15 basis points to 2.75%) are the life insurers - all of whom have had their investment returns more than a little constrained by puny yields. IAK +2.4%
- MetLife (MET +5.9%), Prudential (PRU +4.5%), Lincoln National (LNC +6.8%), Hartford (HIG +3.1%).
- Also set to benefit from a steeper yield curve (if we're to believe their models) are the banks, and they're leading the S&P 500 higher. The TBTFs: Bank of America (BAC +3.3%), JPMorgan (JPM +3.1%), CItigroup (C +3.3%), Wells Fargo (WFC +2.6%). The regionals (KRE +3.4%): Huntington (HBAN +2.6%), Regions (RF +4.2%), PNC (PNC +2.8%), FIfth Third (FITB +3.4%), First Niagara (FNFG +2%), Keycorp (KEY +3.5%), Zions (ZION +4.1%), Comerica (CMA +3.1%).
- The XLF +1.9%.
- FInancial sector ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, KIE, SEF, IAT, IAI, IYG, IAK, FXO, PFI, KBWB, RKH, QABA, RWW, FINU, RYF, KRU, KBWR, PSCF, KBWP, KBWI, KRS, FINZ, FNCL
Oct. 9, 2013, 11:49 AM
- The property-casualty insurance cycle is "petering out," says the team, noting "outright softening" in reinsurance pricing, a leveling out in commercial-insurance price gains, decelerating personal line pricing, and flat auto-insurance prices (home-insurance prices remain on the rise).
- Still, Sandler's Q3 estimates remain above consensus, mostly because of the lack of catastrophe losses, and the firm has Buy ratings on ACE, AIG, ALL, TRV, and XL.
- American Financial (AFG -0.7%) is downgraded to Hold - a valuation call after a big run has the stock near Sandler's $58 price target.
- Price targets on ProAssurance (PRA -1.3%) and State Auto Financial (STFC -0.5%) are cut $2 to $47 and $1 to $20, respectively.
- Relevant ETFs: KIE, IAK, KBWP, KBWI.
Sep. 26, 2013, 1:18 PM
- 80% of insurers say their businesses will have to change to produce adequate returns over the next three years, is one of the conclusions of a BlackRock study: Global Insurance: Investment strategy at an inflection point?
- The low-yield environment has forced a majority of the industry to fine new fixed asset classes to invest in, and half to find new asset classes - like alternatives and derivatives - in which to put money. Along with those changes are greater risk management - 90% have increased investment in this area.
- Turning to operations, nearly two-thirds say regulatory changes are stopping them from moving into certain lines of business, particularly guaranteed products.
- Samples: "Pre-2008 crisis, mortgage-backed securities, corporate credit structures and credit default options were a large part of the supply, and that’s no longer there ... the supply of fixed income is minimal whereas the demand is greater than ever on the part of institutional investors."
- "The action of regulators, principally in Europe, has been to reduce the supply of capital available to provide ready markets to legitimate investors such as ourselves."
- ETFs: KIE, IAK, KBWP, KBWI.
- Individual names of interest: MET, PRU, HIG, XL, MMC, AXAHY.PK.
Sep. 19, 2013, 10:51 AM
- Life insurers continue to slide following yesterday's non-taper as investors face the prospect of interest rates maybe not rising as quickly as hoped.
- Mike Newton reminds: Sunlife (SLF -1.6%) disclosed in its recent quarterly report a 100 basis point move higher in rates would boost EPS BY $0.23 per share; for Manulife (MFC -2.6%) it's $0.16.
- MetLife (MET -2.4%), Prudential (PRU -1.4%), Hartford (HIG -1.7%), ING U.S. (VOYA -3.7%), Lincoln National (LNC -4.5%).
- ETFs of interest: KIE, IAK, KBWP, KBWI.
Aug. 15, 2013, 3:45 PM
- 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.
Aug. 1, 2013, 3:08 PM
- The insurance sector (KIE +2.1%) is flying higher with a number of new 52-week highs, led by MetLife (MET +6.2%) and Lincoln National (LNC +6.6%) which both posted big earnings numbers overnight.
- MetLife meant what it said about a shift away from capital and market-sensitive products with variable annuity sales off 40%. While management will not launch share buybacks while the SIFI designation process winds along (another 7-8 months), the team wouldn't rule out (CC transcript) another increase in the dividend (it raised it to $1.10 from $0.74 earlier this year).
- Under no such regulatory thumb, Lincoln has been busy buying back its shares at well below book value for some time. On the CC (transcript), management trimmed guidance for the negative impact of low interest rates from a $100M hit to earnings to a $35M hit (company made $351M in Q2).
- Other insurers on the move: Prudential (PRU +4.8%), Aflac (AFL +2.7%), Hartford (HIG +3.6%), ING US (VOYA +3%), Old Republic (ORI +2.5%).
- AIG (AIG +3.4%) nears a new 52-week high ahead of its earnings after the bell.
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