Insurance, be it health, home, auto or life, is not a product
most folks are apt to forget about. It is easy to remember the
need for health insurance in the face of soaring health care
costs in the U.S. Additionally, many Americans are reminded every
month that they have auto and/or home insurance when the bill
arrives in the mail.
To that end, it is somewhat odd that ETFs tracking insurance
providers lead anonymous existences relative to those funds
following other firms in the financial services sector. Despite
all the emphasis on ETFs that are heavy on bank stocks, investors
might want to have a look at an insurance ETF or two. A recent
courtesy of S&P Capital IQ says as much
In terms of the property and casualty insurers, those firms
have rebounded from major catastrophic losses and have reported
price increases on premiums, but there are opportunities
throughout the insurance universe.
Here are some of the insurance ETFs brokers are not talking
SPDR S&P Insurance ETF (NYSE:
The SPDR S&P Insurance ETF is one of the larger members of
the insurance ETF group with almost $108 million in assets under
management. KIE differs from some of its rivals in that none of
its 46 holdings receive an allocation greater than 2.57 percent.
KIE's top-10 holdings range in weight from 2.36 percent to 2.57
percent, so it is fair to say this fund is not excessively weight
to just one or two big insurance names.
In fact, KIE does not focus on the most familiar insurance
providers such as American International Group (NYSE:
) or Prudential (NYSE:
). That is to say the fund spreads its weight around over large-,
mid- and small-cap names.
KIE is up 14 percent year-to-date, but the fund, like its
rivals has significantly lagged bank stock ETFs such as the
Financial Services Select Sector SPDR (NYSE:
iShares Dow Jones U.S. Insurance Index Fund (NYSE:
The iShares Dow Jones U.S. Insurance Index Fund is one of the
ETFs rated Overweight by S&P Capital IQ in the aforementioned
research note and this fund does business a little bit
differently than does KIE. For example, IAK's top-two holdings,
AIG and MetLife (NYSE:
), combine for over 17 percent of IAK's weight. It takes seven
KIE constituents to exceed 17 percent of that fund's weight.
IAK is also 12 basis points costlier with an expense ratio of
0.47 percent. The fund is about 55 percent allocated to
property/casualty firms with another 32.5 percent going to life
insurance providers. The differences between IAK and KIE are
worth noting if for no other reason than that there is a
performance gap between the two. Year-to-date, IAK trails its
SPDR rival by about 150 basis points.
iShares Dow Jones U.S. Healthcare Providers Index Fund
Obviously, the iShares Dow Jones U.S. Healthcare Providers
Index Fund does not provide for an apples-to-apples comparison to
the other ETFs mentioned here. It is also far larger with $226.1
million in AUM.
Differences aside, IHF cannot be forgotten about. Not with a
presidential election with potentially deep consequences for the
health care-related companies barely more than a month away.
Pharmaceuticals stocks and ETFs
have been highlighted as election plays
, but a fund like IHF must be included.
If there is debate regarding the impact of Obamacare on health
insurance providers, IHF's performance might put that debate to
bed. The fund is up 17.5 percent year-to-date and 34.2 percent
over the past year. New Dow component UnitedHealth (NYSE:
) and Express Scripts (NASDAQ:
) combine for over 27 percent of IHF's weight.
PowerShares Dynamic Insurance Portfolio (NYSE:
With average daily volume of less than 1,340 shares, the
PowerShares Dynamic Insurance Portfolio is not particularly
voluminous. However, a 13.5 percent year-to-date gain shows PIC
is yet another example of an ETF not needing large volume to
deliver large returns. The $7.6 million fund focuses primarily on
life and property/casualty providers. Top holdings include
), Aflac (NYSE:
) and MetLife.
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