Why Life Insurers Slipped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of life insurance stocks MetLife (NYSE: MET  ) , Manulife (NYSE: MFC  ) , and ING U.S. (NYSE: VOYA  ) all sank more than 3% today on the Federal Reserve's decision not to cut back on its $85 billion-a-month bond purchases.

So what: The life insurance sector has soared over the past year on a steadily steepening yield curve, but the no-taper move is forcing Mr. Market to sober up a bit. After all, life insurers invest the premiums collected from customers until they have to pay them out in claims, so the Fed's decision suggests the group will be earning much lower interest for longer than Wall Street had expected.

Now what: Don't assume that tapering will just sync up over the next few months and that life insurers will follow. "We could begin later this year. But even if we do that, the subsequent steps will be dependent on continued progress in the economy," Fed Chairman Ben Bernanke said. "We don't have a fixed calendar schedule. But we do have the same basic framework that I described in June." Of course, for conservative Fools with a bit of patience, today's sector pullback might be providing an opportunity to pick up a few well-capitalized and relatively diversified insurers for the long haul.

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  • Report this Comment On September 20, 2013, at 7:15 AM, HarryKyin wrote:

    Markets by nature are volatile! It is very difficult to predict. Yet people try to do so to the best of their abilities, and sometimes they succeed and many a times they don't. It is quite obvious that it certainly pinches the investors when markets fall, especially for the insurance sector. After all they have to pay the insured amount in cases where claims arises. And as a matter of fact a recent survey found that many insurance companies are running in losses, well it sounds quite weird. But let us hope for the best and we would expect the markets to bounce back and give a positive sign. Fingers crossed!

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