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Why Insurance Stocks Are Under Pressure

I have been asked repeatedly why insurance stocks are again under pressure today and are underperforming even the other financials. In general, traders and analysts agree that:

1) these insurers have very little short-term debt;

2) do not use much financial leverage;

3) they receive new dollars every day that need to be invested.

So, what's up then? Concerns are very vague, but there are three that pop up:

1) pressure to raise capital (MetLife and Pru have already announced)

2) credit deterioration risks

3) equity market guarantees. These firms sell variable annuities which have equity market guarantees embedded in them. With the S&P 500 down almost 40 percent this year, there are concerns some of the firms will have to pay to cover shortfalls in the guarantees

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