Insurance stocks outperform despite broader market declines

Insurance stocks have recently performed well, even while other financial sectors face challenges. Despite concerns about a potential recession, insurance companies have outperformed the broader market. The SPDR S&P Insurance ETF (KIE) has increased by more than 2% over the past month. In comparison, the SPDR Financial Sector Fund (XLF) saw losses of about 6%, while the SPDR Bank ETF (KBE) dropped by 10%. Notably, around 80% of stocks in the KIE are above their 50-day moving average, contrasting with only one-third of the XLF and just 3% of the KBE. This outperformance is significant, marking the best relative performance for insurance stocks in over ten years. The increase occurs during a decline in Treasury yields. The yield on the 10-year note fell from about 4.80% to around 4.30% since late January. Lower yields can hurt financial companies, but they benefit insurance companies because they can raise premiums and reduce claims costs. Analysts suggest that insurance stocks are becoming more appealing as investors shift from growth to value stocks. Bank of America analyst Joshua Shanker noted that as risk appetite decreases, insurance is seen as a safer option. Additionally, Citizens JMP Securities analyst Matthew Carletti emphasized that companies with less exposure to equity markets and steady investment income will likely perform better in the coming months.