By Carlos Pallordet

Jan 13 - The North American insurance composite compiled by investment banks Stonybrook Capital and Weild & Co lost 3.0 percent for the week, with all industry groups except brokers ending in negative territory.

Wall Street posted a downbeat performance last week, with the S&P 500, Dow Jones and Russell 2000 all sliding 1.9 percent, while the tech-focused Nasdaq-100 dropped 2.2 percent.

The market operated on a shortened schedule as Thursday was observed as a national day of mourning for former US President Jimmy Carter.

The week's downturn was fuelled by a wave of labour market and inflation data that spurred a significant reassessment of potential Federal Reserve interest rate cuts expected this year.

“The stock market sold off this week on a surprisingly strong jobs report, striking fear into market watchers that interest rates will stay higher longer. As a result, Treasury Bonds sold off,” explained Stonybrook-Weild.

A total of 256,000 jobs were added in December, exceeding expectations, while the unemployment rate fell to 4.1 percent from 4.2 percent in November.

Meanwhile inflation persists, with November's headline CPI rising to 2.7 percent year-over-year, a 0.3 percent increase. Core CPI – which excludes food and energy – held steady at 3.2 percent.

“Traders now see a less than 5 percent chance that the Federal Reserve Board will cut interest rates at its market meeting later this month, causing the 10-year Treasury to surge to 4.76 percent and the 30-year Treasury to 4.95 percent. We are joining a wider global trend of rising long-term rates, kicked off by UK deficit news earlier in the week,” they added.

In the North American insurance composite, decliners led advancers by 99 to 11. Only one of the twelve industry groups – global brokers – ended in positive territory.

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The two worst-performing groups in the composite were the title group, down 5.6 percent, and personal lines insurers, down 4.1 percent.

Among the latter, Mercury General fell the the most, with shares down 26 percent for the week, as the Los Angeles-based personal lines insurer – which is the fifth-largest homeowners carrier in the state of California – revealed on Friday that losses were expected to exceed their reinsurance retention level of $150m on their $1.29bn cat program.

Porch Group was down 15.2 percent for the week while Lemonade declined 14.9 percent.

Among the largest companies in the sector, Allstate ended the week down 5.5 percent, while Progressive – the leader in the cohort by market capitalisation – lost 2.7 percent.

“The California wildfires continue to raise concerns about escalating insured losses and their potential impact on the profitability of Homeowners insurers,” said Stonybrook-Weild.

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Meanwhile, standard commercial insurers were down 3.8 percent in the week to Friday,

United Fire Group saw the largest decline in the cohort, with shares down 9.0 percent.

This was followed by Cincinnati Financial with a decline of 4.6 percent, while leader Travelers and CNA Financial were both down 4.1 percent.

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Meanwhile, the group of specialty commercial insurers was down 3.4 percent on average for the week.

Ambac and Trupanion topped the losses with a fall of 11.8 percent and 11.4 percent, respectively.

Skyward Specialty and RLI were also among those with the largest falls in the cohort, shedding 8.5 percent and 8.2 percent respectively.

In a report published yesterday, JMP analysts Matthew Carletti and Karol Chmiel suggested that last week’s stock reactions were – in many cases – overdone, with Skyward Specialty standing out as the most notable example.

“We simply do not see the potential for any meaningful exposure, and even if there were, its reinsurance retention is only $12m,” they explained.

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The group of reinsurers was down 2.1 percent on average on the week, with all constituents in negative territory, but still making it the second-best group performance in the composite, behind global brokers.

SiriusPoint fell the most in the group, with a decline of 8.2 percent, while shares in Conduit Holdings and Everest Group lost 4.9 percent and 3.2 percent respectively.

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The Stonybrook–Weild North American Insurance composite is down 3.0 percent on a year-to-date basis.

In this article, we have included a selection of industry comp tables published in full by Stonybrook and Weild & Co in their weekly update.