AIG Earnings Propelling Solid Gains for the Invesco KBWP ETF

Insurance company American International Group (AIG) is propelling gains for the Invesco KBW Property & Casualty Insurance ETF (KBWP).

AIG is up 8% to start the new year and KBWP has been on an uptrend the last 3 months, gaining over 20%:

KBWP Chart

KBWP seeks to track the investment results of the KBW Nasdaq Property & Casualty Index. The underlying index is a modified-market capitalization-weighted index designed to track the performance of companies primarily engaged in U.S. property and casualty insurance activities, as determined by the index provider.

AIG comprises about 7.7% of the fund’s holdings as of January 6. While AIG has seen better days in terms of its stock price, the tide could be turning given its recent strength.

“Sadly, 2020 has put many Americans in touch with their mortality. But that’s good news for insurance stocks like American International Group,” an Investorplace article noted. “Despite a recent surge, AIG stock is still down 25% for the year and faces cost pressures due to low interest rates.”

“In the best of times, the annuities market is challenging, but it’s been particularly brutal in 2020,” the article added further. “But that could be changing. This, in turn, is putting pressure on the company’s revenue and ultimately its earnings. But analysts are becoming more bullish on the prospects for AIG stock. And the biggest reason for the optimism is the fact that the economy is getting better. Rising jobs numbers are an indication that policyholders who may have been foregoing premium payments to make ends meet will be able to get back on track. And the recent upturn in the market is helping the company generate more income from its investment of insurance premiums.”

AIG is up 38% the last few months:

AIG Chart

Traders Placing Their Bets on AIG?

Action in the options market also appears to be brewing due to a higher implied volatility. A potential bullish sentiment among traders could help fuel AIG and KBWP further.

“Clearly, options traders are pricing in a big move for American International shares, but what is the fundamental picture for the company? Currently, American International is a Zacks Rank #3 (Hold) in the Insurance – Multi line industry that ranks in the Bottom 33% of our Zacks Industry Rank,” a Yahoo! Finance article said. “Over the last 60 days, no analyst has increased the earnings estimates for the current quarter, while three have dropped the estimates. The net effect has taken Zacks Consensus Estimate for the current quarter from 96 cents to 94 cents in that period.”

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