Mercury General Corp., the fourth-largest auto insurer in California, fell the most since February after Keefe Bruyette & Woods Inc. cut the stock to underperform.
The insurer slipped or 3.8 percent, to $50.47 at 4:02 p.m. in New York. KBW’s Vincent DeAugustino lowered the rating from market perform on Aug. 15 when the Los Angeles-based company climbed for a sixth straight day, moving further above his $46 price target.
Mercury had climbed 5.5 percent this year through Aug. 15, beating the 1.6 percent fall in the 25-company KBW Insurance Index. The company was helped as investors shifted from commercial insurers that have struggled to raise rates among stiffening competition, he wrote. Mercury’s dividend yield of more than 4 percent a year helped distinguish the company with bond yields near record low, according to the analyst.
“The stock now exceeds our target price by sufficient margin to inspire expectations for underperformance” in the second half of this year, DeAugustino wrote. “If interest rates ever increase, that would likely impair the relative attractiveness of Mercury’s above-peer dividend.”