Although interest rates remaining low has weighed on insurance stocks and ETFs, the industry’s fundamentals are healthy and increased regulatory scrutiny has not triggered material changes to the industry’s business model.
In an August research note, S&P Capital IQ highlighted better matches between insurance companies’ assets and liabilities while noting “Many insurers in our coverage universe have held the line on pricing and have achieved rate increases. For some, however, the offset has been a decline in retention levels. During 2013, retention levels varied rather widely among carriers. Some of this is intentional: as firms seek to manage their risk profile and businesses, they may let certain business go,” said the research firm. [Low Interest Rates Crimp Insurance ETFs]
Additionally, the insurance sub-sector is inexpensive, trading at 10 times earnings compared to 17 times for the S&P 500, according to CNBC.
SPDR S&P Insurance ETF
