Shares of Lincoln National rose by 4.3%, whereas MetLife Insurance witnessed a whopping 4.9%, closing the week up at 10.5%. Prudential Financial shares’ touched 2.4%, where it finished the week up at 8.4% and Lincoln gaining a 10.7% to close the week. Market experts are attributing this growth in life insurance stocks to a recent payroll report published by the U.S. Department of Labor, showing the unemployment rate reduced to 7.7%, the lowest ever since December 2008, from a rate of 7.9% last month.
According to the report published by the Bureau of Labor Statistics, the U.S economy has gained almost 236,000 jobs during last month. As stated by Alan Krueger, chairman, Council of Economic Advisors, there is more action to be taken to improve the rate of employment in the country, but the employment report published today clearly confirms recovery actions that started during the mid-2009, is rapidly witnessing a growth, contributing to a significant reduction in unemployment.
The growing unemployment rate, as a result of recession, has caused the yields on United States Treasury notes and bonds to rise significantly rise. The total yield on benchmarked 10-year note is up from five basis points to 2% by the close of the market. Higher yields have often been reported to affect the life insurers significantly because they have huge amount of fixed income securities in their portfolio of investments. Lower interest rates, as a result of economic recession, have further worsened the life insurers’ investment capabilities.
According to Adrian Miller, Director, GMP Securities, director of Fixed-Income Strategies, growing yields tend to be increasingly lucrative for life insurance companies, pension fund providers, and others who need duration. The market shares of the leading life insurer in the United States have already grown this year, much ahead of any immaculate stock market gains. Last week’s closing rally in life insurance stocks clearly showed that how sensitive are insurance companies’ market shares to the increasing rate of interests. Followed by this, the market S&P 500 Index grew only 0.5% of market closing on Friday.
However, it is expected that further boost in employment will positively affect the shares of leading life insurance companies in the United States.
