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]
The $328.4 million SPDR KBW Insurance ETF (NYSEArca: KIE), an equal-weight ETF allocates 8% of its combined weight to Symetra, Hartford, Assurant and Lincoln National. While life insurers are the second-largest insurance sub-sector within KIE, the ETF’s 26.1% weight to that group is well below its nearly 36% allocation to property and casualty firms. [Differences Among Insurance ETFs]
While insurance ETFs may be able to fight off the ill effects of a strong dollar to some degree, there is no denying the combination of the a strong dollar and low interest rates is harmful. Interest rates plunged over the past 12 months while the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) surged 12.6%, but KIE and IAK posted an average gain of just 5.7% over that period.
SPDR S&P Insurance ETF
