US markets ended the week ending July 29 strongly, as property and casualty insurers continued to report strong second-quarter premiums.
The S&P 500 rose 4.26% to 4,130.29, while the S&P 500 Insurance index rose 2.72% to 538.09 for the week.
Second-quarter results, particularly in the casualty sector, have been “healthy,” according to CFRA Research analyst Cathy Seifert. But inflation in these industries is “slightly growing,” he said, so the level of economic demand may start to slow again as the economy cools.
“The double-digit inflation and year-over-year increases are over,” Seifert said in an interview. “So now we’re going into the silence.”
Quarterly numbers seen by Seifert show that some carriers are executing their strategies better than others, pointing to Chubb Ltd., up 2.45% for the week, and Cincinnati Financial Corp., down 12.17%.
The second-quarter results were indicative of a “late turnaround” with “high-quality, high-quality players” like Chubb leading the pack, the CFRA analyst said.
Others, such as Cincinnati Financial, may find that their strategies are not working. Cincinnati Financial’s inability to deal with rising interest rates is now hitting home, Seifert said, adding that he doubts whether its management can handle the situation.
“The company has historically invested heavily in peers because the market has rewarded their aggressive investment strategy, and they’re on top of their peers’ growth,” Seifert said. “I think the strategy is starting to get undone or difficult to use and I have a hard time seeing how the stock is going to continue its valuation.”
In the case of Arch Capital Group Ltd., up 1.67%, Seifert said it had “real good records,” but also experienced financial results that had a significant impact on the top line. Although Arch Capital’s top growth may not be as strong as previously thought, Seifert still sees the stock as “undervalued.”
Lemonade lays off Metromile employees
Former Metromile CEO Dan Preston, who is now Lemonade’s vice president of operations, reportedly told employees that the layoffs came as a surprise.
Insurtech Advisors expert Kaenan Hertz in an email to S&P Global Market Intelligence said the job cuts should it was not surprising.
“You don’t lose 20% and act like it was unexpected,” Hertz said, noting that at least seven insurtech firms have laid off more than 350 people since May. These workforce reductions have cut many businesses, as well as distributors, distributors, and senior management, he said.
The purpose of the layoffs is to save money, Hertz said. The insurtech space has seen a significant amount of funding of late, with the exception of the $400 million raised in a Series D round of funding led by wefox Germany GmbH.
“Everywhere, I feel like nobody wants to do anything, so people are trying to ride out the storm,” Hertz said. “On the other hand, there is more [venture capital] Money is still money that is going on, but it’s different [because] VCs want to make sure they see a way to make a profit. “
Metromile layoffs will be 20% of its workforce, according to a news report. Metromile shares stopped trading on the Nasdaq on July 28, while Lemonade’s stock closed the week down 1.51%.