Insurance companies outperform market even as S&P 500 hits new records
Insurance stocks outperformed the broader market in a week in which the S&P 500 recorded several all-time highs.
The benchmark index closed the week ending June 25 up 2.74% to 4,280.70, while the SNL US Insurance Index rose 3.44% to 1,388.81.
The race to end the merger between Aon PLC and Willis Towers Watson SA received a new hurdle when the US Department of Justice last week filed a antitrust prosecution to block the merger between two of the world’s three largest insurance brokers. The DOJ said the deal “would eliminate substantial direct competition and likely lead to higher prices and less innovation.”
Craig Wildfang, partner at Robins Kaplan LLP, said he was It is not uncommon for the DOJ’s antitrust division to tackle mergers in markets that would go from “essentially three big players to just two”.
“[The DOJ] defined relevant product markets, not only by what particular product or service is being offered, but also who the customer is, ”Wildfang said in an interview. I don’t see it every day. “
The question is how the parties will handle the legal battle and whether it will seek to resolve the issues raised by the DOJ. Wells Fargo analyst Elyse Greenspan said in a memo the outcome of the court battle was a “tossup” and a settlement could trigger more asset sales.
Wildfang said it is cWe know that there have already been discussions behind the scenes to “appease investors and preserve the competitive balance that the DOJ fears to see disappear as a result of the merger”.
Lawyers for Aon and the DOJ clashed this week over the timing of certain disclosures and the start of a civil trial. According to court documents, the DOJ is seeking to begin the trial in late February 2022, while Aon’s legal team has said she may be ready to try the case as early as August.
Aon ended the week up 3.64%, while Willis climbed 3.26%.
Elsewhere, Lincoln National Corp., up 6.48%, was among the major players in the life industry, while Everest Re Group, Ltd., up to 6.94%, had one of the best weeks among reinsurance companies. Kemper Corp., which added 4.28%, The Allstate Corp., up 3.94%, and The Progressive Corp., which gained 3.66%, were among the best non-life insurers.
Changes in the economy in the wake of the COVID-19 pandemic have resulted in a significant increase in the number of Medicaid memberships, according to a Analysis published June 17 by the Kaiser Family Foundation. Enrollments stood at 80.5 million in January, up from 71.2 million in February 2020, according to an analysis by the Centers for Medicare and Medicaid Services Performance indicator Project data shown.
The report says the increase in membership is due to the economic downturn caused by the pandemic and the federal government forcing states to keep Medicaid beneficiaries enrolled until the national emergency is over.
In the managed care space, UnitedHealth Group Inc. added 2.44%, Centene Corp. increased 1.55%, Molina Healthcare Inc. climbed 4.22% and Humana Inc. gained 4.02%.
Only a handful of insurance companies recorded stock declines this week, with the worst performing lightly traded Conifer Holdings Inc. Its shares slipped 6.51%.