Buys more shares than any other U.S. insurer
By Terry LeoneSNL Financial
While many investors have been disappointed in the performance of Facebook Inc. stock, and not many insurance companies took the plunge early, State Farm Mutual Automobile Insurance Co. bought more shares of the social media company than other U.S. insurers.
P&C subsidiaries of the auto and home insurance giant purchased $8.0 million of Facebook stock during the second quarter, and affiliated life insurance subsidiaries also purchased $1.7 million. In total, State Farm purchases of Facebook stock represented 46% of the U.S. insurance industry’s investment in the company.
SNL reviewed common stock transactions reported in recently filed quarterly statutory financial statements. Transactions for individual companies during the second quarter are available for more than 97% of all companies in each of the three sectors: life, health and P&C. The information presented in this article filters all transactions listed for Facebook common stock. The information presented applies only to transactions through June 30. Information for subsequent transactions will not be reported until October.
State Farm was not among those that purchased the IPO immediately. State Farm first purchased 57,900 shares on May 23. The purchases were split among State Farm Life Insurance Co. and State Farm Fire & Casualty Co., which purchased 46,200 shares and 11,700 shares respectively for a combined value of $2.2 million. A couple of days later, State Farm invested much more heavily, purchasing 201,200 shares on May 25. The stock closed at $31.91 that day and appeared to have stabilized after the initial drop from its IPO. However, starting May 29, the price of the stock began a steady drop. The closing price on May 29 was $28.84, and over the next couple of weeks the price would close as low as $25.87 on June 5. State Farm remained patient over this time, holding onto all of its shares until June 25, when it sold 24,800 shares for $801,000. State Farm subsidiaries reported losing approximately $242,000 of the initial investment of $1.0 million.
Industrywide, the bulk of the purchases were made within the first couple of weeks of the IPO. Insurers bought 137,449 shares for $5.3 million during the first two days while selling 59,507 shares for $2.4 million in that same period. By the end of May, insurers had purchased $15.8 million, and by the end of June that total rose to $21.2 million overall. Meanwhile insurers sold similar amounts of stock in May and June, $2.7 million compared to $2.9 million. From the time of the IPO to the end of June, insurers had purchased 580,610 shares while selling 158,288 shares, or 27.3% of the purchases.
After State Farm, the next largest insurance purchaser of Facebook stock is Erie Indemnity Co. The Pennsylvania-based company purchased 70,070 shares for $2.5 million on June 29. The only other company purchasing more than $1 million was Northwestern Mutual Life Insurance Co., which purchased 30,600 shares for $1.2 million on May 18. However, Northwestern Mutual did not wait for Facebook to right the ship, selling all of its shares on June 25, for $984,000. It recorded a loss of $213,000, or 17%.
While many insurers and other investors have so far lost money in their Facebook investments, a few insurers can brag otherwise. Nine of the 49 insurers who purchased Facebook stock reported modest gains on the shares they sold. The largest of these were Global Indemnity plc, Charter Management Co. Inc. and GUARD Insurance Group. All three companies flipped the stock early, making hefty purchases on the opening day of trading and then fully selling their positions the next day. The most profitable of the three was GUARD, which purchased 10,300 shares for $391,000 and sold all of its shares for $432,000, realizing a one-day return of 10.4%.
As stated earlier, the statutory information used to compile this review reflects activity through June 30. Since then, Facebook’s stock price has continued a steep slide to less than $20 per share.