iShares U.S. Insurance ETF (NYSEARCA:IAK)
With AUM of $152.8 million, this product tracks the Dow Jones U.S. Select Insurance Index and charges 45 bps in annual fees. Volume is light, trading in about 28,000 shares per day. In total, the fund holds 66 securities in its basket with the largest allocation to American International at 12.25%, closely followed by Metlife at 9.27%. Other firms do not hold more than 6.39% of assets.
Here again, property and casualty insurance takes the top spot, accounting for half of the asset base. Life insurance and full time insurance take the remaining portion in the basket. The fund moved up nearly 3% over the trailing one month and has a Zacks Rank of 1 or ‘Strong Buy’ rating with Medium risk outlook (read:Should You Buy Insurance ETFs Now?).
PowerShares KBW Property & Casualty Insurance Fund (NYSEARCA:KBWP)
This overlooked ETF provides targeted exposure to the property and casualty insurers by tracking the KBW Property & Casualty Index. Holding 24 securities, the fund has a slight tilt toward Allstate, Travelers and Chubb that collectively make up for 24.19% of total assets.
Though property and casualty insurance accounts for 66% share, reinsurance and multiline insurance also receive double-digit exposure in the basket. The product has amassed just $9.6 million in AUM and trades in small volumes of just 4,000 shares per day on average. The ETF charges an annual fee of 35 bps and returned nearly 4.5% in the last one-month period. KBWP has a Zacks Rank of 2 with Medium risk outlook.
Investors should note that these products have clearly outpaced the broad sector fund (XLF) and the market fund (SPY) by a wide margin. This outperformance is expected to continue in the coming months on concerns over rising interest rates, which would enable them to earn more premium on their investment portfolio.
Further, recovering economic health and an improving labor market are driving higher demand for all types of insurance services, leading to strength in this segment. Moreover, upside to the sector could be confirmed by the Zacks Industry Rank, as four out of five insurance industries have a solid rank (in the top 42%) at the time of writing.
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