According to Zack’s,  the insurance sector and exchange traded funds(ETFs) is bound to impress investors with industry growth as the new rule of thumb is not to let earnings growth dictate the direction of an economic subset.

American International Group (NYSE: AIG) is back in positive territory that’s being fed by optimism about the prospect of improving conditions at the insurer, reports Michael Baron for TheStreet. A recent Government Accountability Office report showed that while AIG’s  fate is still a question mark, there were signs of stabilization and improvement in its businesses.

Gary Gordon for ETF Expert says that he believes that insurance ETFs are due for a “larger-than-broad-market” sell-off of between 10% and 15% anytime now.

Any sell-off could be due just because the seven-month bullish stampede may have run out of steam. Because of the nature of the insurance industry, while most companies are busy selling less and/or turning smaller losses from one year ago, the insurance industry may turn out to impress you.

Gordon says that at best, if key companies in the S&P 500 Index revise earnings estimates higher for 2010, insurance ETFs could outperform the broader market in a year-end, post-pullback push.

Whether this actually comes to pass remains to be seen, but if the predictions turn out to be correct, have your strategy in place to act on, if necessary.

  • SPDR KBW Insurance (NYSEArca: KIE): up 32.8% year-to-date
  • iShares Dow Jones US Insurance (NYSEArca: IAK): up 14.9% year-to-date
  • PowerShares Dynamic Insurance (NYSEArca: PIC): down 4.4% year-to-date

For more stories about insurance, visit our insurance category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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