Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Markel, Aflac, and Safety Insurance Group Stock Soared on Friday

By Matthew Frankel, CFP® - Updated Mar 15, 2020 at 4:27AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It was a rough week for insurance stocks, but Friday was a welcome reversal.

What happened

In the recent stock market downturn, and the financial sector has been one of the worst performers of all. And insurance stocks were no exception. AnConversely, when the market rebounded on Friday, insurance stocks were some of the best performers. Markel (MKL 2.21%), Aflac (AFL 1.65%), and Safety Insurance Group (SAFT 2.46%) ended the day higher up 10%, 10%, and 12%, respectively.

So what

Insurance stocks had been hammered all week in the market downturn. For one, the coronavirus pandemic itself could result in an uptick in insurance claims, especially if it gets significantly worse from here.

Man cheering with money falling around him.

Image source: Getty Images.

Second, it's important to point out that as the stock market climbed on Friday, so did Treasury yields. A primary driver of insurance company profits is investment income -- that is, insurers collect premiums from their customers, and invest that money until it needs to be paid out. Most insurers invest the bulk of their money in high-grade fixed-income investments such as Treasury securities, so lower yields were a big factor in the underperformance of insurance stocks. Since Treasury yields spiked on Friday, it was a welcome sign that the ultra-low yields that we saw earlier in the week could be over.

Now what

It remains to be seen how the coronavirus outbreak will play out, and its magnitude will certainly have an effect on the insurance industry. Furthermore, keep your eye on bond yields (the 10-year Treasury is a good benchmark), as higher yields are generally a positive catalyst for insurance company profits.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Aflac Incorporated Stock Quote
Aflac Incorporated
$56.24 (1.65%) $0.91
Markel Corporation Stock Quote
Markel Corporation
$1,321.87 (2.21%) $28.62
Safety Insurance Group, Inc. Stock Quote
Safety Insurance Group, Inc.
$99.49 (2.46%) $2.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.