“Insurance companies typically hold large amounts of cash to back the policies they write. As such, the investments insurance companies own are typically ultra-safe, meaning bonds. Therefore, when interest rates are low, bonds owned by insurance providers typically sport low yields, limiting the income stream,” reports Investopedia. “The bottom line is that an insurance company makes money off the spread between what is owed to policyholders and the profit yielded by its bond investments. Higher interest rates usually increase that spread in the insurance industry’s favor.”
Competitors to KIE include the iShares US Insurance ETF (NYSEArca: IAK), PowerShares KBW Property & Casualty Insurance Portfolio (NYSEArca: KBWP) and >PowerShares KBW Insurance Portfolio (NYSEArca: KBWI).
Although it took insurance stocks awhile to get going in the current bull market, KIE has been one of the best-performing ETFs since March 2009, returning an average annualized return of 27.2% since 2009.
Many many think of KIE as an outstanding play, but the insurance ETF has been enjoying a streak of record runs, especially in recent months, with a notable spike after President Donald Trump’s election day win.
For more information on the insurance industry, visit our insurance category.