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Should You Invest in the iShares U.S. Insurance ETF (IAK)?

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If you're interested in broad exposure to the Financials - Insurance segment of the equity market, look no further than the iShares U.S. Insurance ETF (IAK - Free Report) , a passively managed exchange traded fund launched on 05/01/2006.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Insurance is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 3, placing it in top 19%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $548.64 million, making it one of the average sized ETFs attempting to match the performance of the Financials - Insurance segment of the equity market. IAK seeks to match the performance of the Dow Jones U.S. Select Insurance Index before fees and expenses.

The Dow Jones U.S. Select Insurance Index includes companies providing a range of specialized financial services, including securities brokers & dealers, online brokers & securities or commodities exchanges.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.39%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.71%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.

Looking at individual holdings, Chubb Ltd (CB - Free Report) accounts for about 11.52% of total assets, followed by Progressive Corp (PGR - Free Report) and Metlife Inc (MET - Free Report) .

The top 10 holdings account for about 58.94% of total assets under management.

Performance and Risk

So far this year, IAK has added about 10.76%, and was up about 13.81% in the last one year (as of 12/12/2022). During this past 52-week period, the fund has traded between $78.22 and $94.36.

The ETF has a beta of 0.85 and standard deviation of 29.75% for the trailing three-year period, making it a medium risk choice in the space. With about 61 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Insurance ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IAK is an excellent option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Invesco KBW Property & Casualty Insurance ETF (KBWP - Free Report) tracks KBW Nasdaq Property & Casualty Index and the SPDR S&P Insurance ETF (KIE - Free Report) tracks S&P Insurance Select Industry Index. Invesco KBW Property & Casualty Insurance ETF has $339.75 million in assets, SPDR S&P Insurance ETF has $522.07 million. KBWP has an expense ratio of 0.35% and KIE charges 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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