Here’s Why Insurance Company Stocks Are Selling Off Hard

Aflac (NYSE:AFL), the largest provider of supplemental health insurance in the U.S. and one of the most widely recognized brands, is expected to issue as much as $1.24 billion in debt after recording losses from investments in banks in Greece, Ireland, and Portugal. Second quarter losses alone could total $610 million. Aflac’s losses will total about $165 for Greece and Ireland, while they have projected about $445 of impairment losses on investments in Portugal banks. The insurer has already lost $72 million from investments in financial-firm securities in Ireland and Greece.

Jean-Claude Trichet, president of the European Central Bank, has warned that the euro is in real danger as the debt crisis threatens to topple heavily invested banks. Aflac does the majority of its business, and takes the majority of its revenue, from outside the U.S., and has previously lost bank holdings in Iceland and the Republic of Tunisia. The insurer is now working to “de-risk” their portfolio, adding investments in Japan where the yen is strong, especially against the euro. Aflac’s complete second quarter results will be reported July 27.

Aflac shares are down 1.76% today and 20.96% for the year. The news that Europe’s economic woes have the potential to negatively impact a U.S.-based insurer, and to such an extent, has investors scared, and has pushed down shares prices for Aflac’s competitors as well.

AIG (NYSE:AIG) shares are down 1.28% today, Lincoln National Corp. (NYSE:LNC) shares are down 2.78%, MetLife (NYSE:MET) is down 1.85%, Primerica is down 1.16%, Prudential Financial (NYSE:PRU) is down 1.28%, and Torchmark Corp. (NYSE:TMK) is down 0.83%.