Insurance stocks have been pummeled by the Covid-19 coronavirus outbreak. Business will be affected, and Wall Street is starting to cut its forecasts for the companies’ performance, but there is a disconnect between how far stocks are down and how much estimates are falling.

That creates an opportunity, according to some on Wall street.

“We’re adjusting EPS estimates and target prices for virtually all of the P&C companies under our coverage,” wrote Keefe, Bruyette & Woods analyst Meyer Shields in a Thursday research report.

The reasons for the cuts? Lower reinvestment rates from falling bond yields, higher reinsurance pricing, lower economic activity, Covid-19 exposure, stock-market volatility, and reduced share-repurchase activity.

It’s an incredible list of things happening all at once.

“Loss experience will worsen for travel, trade credit, event cancellation, surety, accident and health, business interruption, and mortgage and financial guaranty,” adds Shields. But it will “improve for personal auto, commercial auto and workers’ compensation.”

Overall, he lowered 2020 earnings estimates for almost 30 insurance providers and insurance brokers, by about 9%. Stocks in the sector, however, are down about 29% year to date on average.

The share-price declines prompted a couple of upgrades. Shields upgraded shares of Travelers (ticker: TRV) from the equivalent of Sell to Hold on Thursday. And he boosted shares of the reinsurer Everest Re (RE) to Buy from Hold.

Shields points out that high unemployment means fewer claims for workers’ compensation. That’s part of the thinking for upgrading Travelers stock.

Travelers shares are down about 30% year to date, worse than the comparable drops of the Dow Jones Industrial Average and S&P 500.

Recent share-price underperformance is one of the reasons he recommends buying Everest Re. Pricing is another reason. “Despite a markedly worse economic outlook, we expect commercial insurance and reinsurance rate increases to persist,” Shields wrote.

Everest shares are down about 35% year to date.

There is a wide differential in the performance of individual insurance stocks. Shares of the specialty insurer American International Group (AIG) shares, for instance, are down about 60% year to date. Personal-insurance provider Progressive (PGR) stock is up about 3%. Auto insurance—which Progressive offers—is one area of the industry that potentially benefits from Covid-19, given that fewer cars are on the road.

In fact, Shields increased 2020 earnings estimates for Allstate (ALL) and Progressive—two companies with auto-insurance franchises. On Wednesday, Wells Fargo analyst Elyse Greenspan raised her estimates for both companies’ first-quarter earnings.

(Shields and Greenspan both rate Allstate and Progressive the equivalent of Hold. Shields says AIG shares are a Buy.)

The insurance industry looks like it might fare better than most expect through the viral outbreak.

Valuation multiples have fallen too. The Russell 3000 Insurance subindex trades for about 10 times estimated 2020 earnings, down from about 15 times at the start of 2020. The current level is close to the lowest point over the past five years.

The disconnect between fear of damage to insurers from the Covid-19 pandemic and actual changes to earnings estimates creates opportunities for investors. They will just have to tread lightly, differentiating insurers by lines of business and in terms of liquidity.

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