Fear and confusion about the possible effects of the new coronavirus pneumonia on the world economy led to concern this week for just about everyone new follows the news.
Many people in China are sick. Quarantines have shut down most stores in many parts of China, and they are limiting the ability of tens of millions of people to leave their homes to make purchases, or to work.
The quarantines are disrupting some Chinese factories’ ability to meet production deadlines for everything from pharmaceutical ingredients, to medical equipment, to clothes and shoes.
Medical labs have confirmed hundreds of cases of the new coronavirus illness, or Covid-19 pneumonia, outside of China, and governments outside of China are starting to impose travel restrictions and quarantines.
In the United States, federal officials have said they believe they can manage the situation, but state officials are reporting that they are having trouble getting the kits needed to test for severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), the virus that causes Covid-19 pneumonia.
California Gov. Gavin Newsom said Thursday, for example, that California has only about 200 SARS-CoV-2 test kits.
Some U.S. companies are starting to say that sales disruptions in China, production-related problems in China, or other Covid-19 effects seem likely to hurt their earnings this year.
Some investors have responded by rushing to convert a portion of their stock holdings into cash.
Individual investors and money managers may also be selling stock in an effort to keep the big stock market gains recorded in 2019, when conditions looked sunnier, from causing portfolios having more than the desired percentage of assets in stock.
Here’s what some of the publicly traded life, health and annuity issuers’ stocks have done this week, with a comparison at the bottom to the performance of the S&P 500 stock index. The S&P 500 Index is managed by S&P Global. The index shows how the stocks of all kinds of big, publicly traded U.S. companies are doing.
COMPANY: Today’s Closing Price (Performance This Week)
- American Equity Investment Life Holding Company: $25.28 (-19.59%)
- Aflac Inc: $42.85 (-13.77%)
- American International Group Inc.: $42.16 (-12.83%)
- Ameriprise Financial Inc.: $141.3 (-18.66%)
- Anthem Inc.: $257.09 (-12.27%)
- Brighthouse Financial Inc.: $35.53 (-19.97%)
- Centene Corp.: $53.09 (-19.95%)
- Cigna Corp.: $182.94 (-17.46%)
- CNO Financial Group Inc.: $15.99 (-15.45%)
- CVS Health Corp. (Aetna): $59.18 (-17.53%)
- Equitable Holdings Inc.: $21.4 (-20.99%)
- FBL Financial Group Inc.: $47.76 (-15.43%)
- Genworth Financial Inc: $3.90 (-9.95%)
- Globe Life Inc.: $92.66 (-14.11%)
- Humana Inc.: $319.68 (-15.27%)
- Lincoln National Corp.: $45.39 (-21.79%)
- MetLife Inc.: $42.72 (-16.05%)
- Molina Healthcare Inc.: $122.55 (-17.48%)
- Primerica Inc.: $109.86 (-15.85%)
- Principal Financial Group Inc: $44.39 (-16.38%)
- Prudential Financial Inc.: $75.45 (-17.34%)
- Reinsurance Group of America Inc.: $122.03 (-16.09%)
- UnitedHealth Group Inc.: $258 (-15.96%)
- Unum Group: $23.31 (-20.58%)
- S&P 500: 2,954.22 (-9.31%)
What Falling Stock Prices Mean
Some big mutual life insurers, including New York Life Insurance Company and Massachusetts Mutual Life Insurance Company, are owned by some of their customers. Those companies’ managers have to worry about what Covid-19 pneumonia will do to their claims costs and their sales, but they don’t have to worry about the immediate effect of Covid-19 worries on the performance of their stock, because they don’t have shares of stock trading on the stock market.
Some other big insurers have sold many shares of stock to members of the general public. Everyone can see what the prices of those shares are doing, all of the time.
When a publicly traded insurer’s share price falls, that does not normally have a direct effect on how much money the insurer has. The insurer has already sold its stock to investors, through a public offering, and collected its money, at some point in the past. Ups and downs in the current price mostly affect investors who bought stock later.
The investors buying and selling shares of insurers’ stock this week were like baseball card collectors who buy and sell baseball cards that were actually purchased from the manufacturers 20 years ago.
But a drop in stock prices may hurt an insurer that wants to use its stock to pay to buy another company.
Falling stock prices can also hurt insurers that were hoping to raise money by selling completely new shares of stock to investors, through public offerings.
Some publicly traded life insurers have had more cash than they want on hand and have been struggling to find what they see as good investments. For those insurers, falling stock prices might be creating a chance for managers to use the excess cash to buy back stock at what the managers see as an attractive price.
— Read Warren Probes Biggest Banks on Coronavirus Exposure, on ThinkAdvisor.