Insurance stock ranking in July: Leaders and laggards

July was a month of correction on the stock exchange, and the insurance sector benefited from the positive trend. The insurance index rose by 6.15%, returning some color to an industry that suffered one of the hardest hits in the market in June, a decline of almost 14%. But unlike bank stocks, which wiped out the entire June drop this month, insurance companies recovered only part of the loss. This gap teaches something important about the nature of the sector.

At the top of the ranking was Ayalon with a jump of 13.76%, followed by Harel with an increase of 12.20%. These are exactly the two stocks that led the declines in June: Ayalon plummeted then by 27.83%, and Harel lost more than 11%.

Again, we are seeing the "mean reversion" phenomenon, where stocks that fell sharply due to panic recover more strongly when the atmosphere turns around. The rest of the gains were concentrated in Menora Mivtachim (7.21%), Bituch Yashir (5.08%), Migdal (5.01%), Phoenix (4.50%), and Clal, which closed the ranking with a modest increase of only 1.49%.

To understand the trend, it is worth remembering the mechanism that makes insurance stocks unique. A significant portion of the companies' profits does not come from insurance premiums, but from the huge investment portfolios they manage. When the stock market rises, they reap investment profits and higher variable management fees, and when it falls, the engine works in reverse.

In this sense, insurance stocks behave like a leveraged bet on the capital market: they react with increased intensity to any movement in the indices. Therefore, in a positive month like July, they benefited from the market recovery, and in the background, a certain devaluation of the shekel against the dollar also contributed, which added value to the companies' holdings.

And yet, why was the recovery only partial?

1. The June drop was so sharp that one green month was simply not enough to cover it.

2. Unlike banks, which were supported by improvements in the economy's growth forecasts, the insurance sector is more sensitive to the volatility of the capital market itself, and a one-month correction does not erase the remaining uncertainty. The fact that Clal, which plummeted in June, barely moved in July, illustrates that investors are selective.

The general background was supportive. The ceasefire with Iran held, energy prices remained low, and the Bank of Israel lowered the interest rate to 3.5% while raising the growth forecast to 4%. For insurance companies, the interest rate environment is a double-edged sword: on one hand, a lower interest rate erodes the yield they achieve on their bond portfolios, but on the other hand, a recovering stock market directly supports their profits. In the past month, the recovery in the stock market had the upper hand.

The major insurance companies, Harel, Migdal, Phoenix, Menora, and Clal, are among the central entities that manage the pension funds, provident funds, and advanced study funds of millions of Israelis. When their stocks rise, not only do shareholders profit, but the return on your long-term savings is also affected by the market recovery. The green July returned some of the value erased in June, but also reminded us how much this sector depends on the mood of the stock exchange.