Ummm Harry, insurers are getting killed today on the street thanks to your comments. If you aren’t the Gator Senator, certainly you are now on his Christmas card list eh?
Shares of insurers mostly fell Thursday amid overall market uneasiness about the economy and whether the financial bailout package will be able to help the economy avoid a recession. The remarks also came a day after Senate majority leader Harry Reid said a major insurer is on the verge of going bankrupt, but analysts generally said that was not moving the financial sector or the overall market.
During a press conference Wednesday, Reid, a Democrat from Nevada, did not disclose the name of the insurer, but said it was brought up by another senator during recent meetings.
Reid told reporters Wednesday that “one of the individuals in the caucus today talked about a major insurance company — a major insurance company — one with a name that everyone knows that’s on the verge of going bankrupt.”
But a Reid spokesman, Rodell Mollineau, said Thursday, “Sen. Reid is not personally aware of any particular company being on the verge of bankruptcy. He has no special knowledge about nor has he talked to any insurance company officials. Rather, his comments were meant to refer to the conditions in the financial sector generally. He regrets any confusion his comments may have caused.”
Analysts generally dismissed Reid’s comments as a market-mover.
“That’s part of it,” said Craig Peckham, market strategist at Jefferies & Co., but he said Reid’s comments were not the market’s main worry.
“The proceedings in Washington are a real focal point, but they’re starting to be overshadowed by broader concerns about the direction of global demand.”
Asked about Reid’s comments, Ryan Larson, head of equity trading at Voyageur Asset Management, said,”There’s rumors going around the market all the time, but it doesn’t really matter. The drop you’re seeing is that the market isn’t fully believing if the House will pass this. If they pass the bailout, sentiment will shift back to the economy. Couple that with earnings season and you’re setting up for the perfect storm.”
And Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners, said, “The insurers are down, but that’s not moving the market as a whole.”
“You know, there’s always rumors out there. Could it be he wanted to get Congress to pass this, and that’s why he said it? I don’t know. There’s a lot of politics going on.”
Several analysts issued research notes on insurance companies Thursday. A Sterne Agee analyst advised investors not to jump into insurance stocks just yet. But Citi Investment Research analyst Joshua Shanker was upbeat about the sector.
Shanker said current price valuations at some major insurers, such as Allstate Corp., Hartford Financial Services Group Inc. and XL Capital Ltd., more than discount real worst-case scenario losses from mortgage investments. He recommends buying shares of Allstate, Hartford Financial and XL at their current prices despite the possibility of further losses in the insurers’ investment portfolios.
Nearly all financial institutions with investments in mortgages and mortgage-backed securities have been hit hard by losses since the middle of 2007, as the loans tied to those securities have increasingly defaulted.
The $700 billion financial rescue package, which received new life in the Senate Wednesday, would allow the government to purchase soured mortgage debt from financial firms, which could help alleviate some of the pressure in the credit markets.
Among the day’s sharpest decliners, Hartford Financial Services shares fell $4.11, or 10.8 percent, to $34 in late morning trading. XL shares fell $2.17, or 12.6 percent, to $15.10.
Metlife Inc. shares fell $5.40, or 11.2 percent, to $42.75. Earlier in the session, shares hit a 52-week low of $39.47.
Allstate shares fell 85 cents, or 1.93 percent, to $43.15.
American International Group Inc. shares were flat at $3.95