Insurer Stocks Outperform General Mkt.

NU Stock Analyst

The Christmas season, the season to be jolly, produced aninvestor-pleasing “Santa Claus rally” in insurance stocks. Evenbetter, it was a year-end surge that enabled insurance issues tooutperform the general market in December.

The 117 stocks we follow advanced almost 5 percent. That beatsthe general market, as the Dow Jones moved up only 1.73 percent andthe S&P 500 edged ahead 0.76 percent, while the NASDAQComposite gained 1.03 percent.

There were 84 advances and 33 declines, which works out to awin/lose ratio of 2.5/1.0. There were 18 double-digit advances. Alleight industry sectors moved up.

The reinsurers were statistically the best performers afterlogging a 6.79 percent gain. Vesta Insurance Group (Novembers bigloser after falling 54.08 percent), came roaring back to register a35.75 percent gain. It appears investors overacted to a bad-newsthird-quarter earnings announcement, then reassessed and changedtheir minds.

Odyssey Re surged 14.94 percent to $17.70, Trenwick Group gained13.76 percent to $10.17, and IPC Holdings was better by 13.41percent at $29.60. There are a number of takeover rumors, all ofwhich sound reasonable. I recall a fund manager telling me, “Buythem all, and then just be patient!”

Property and casualty stocks were solid, though not excitingperformers. As a group they advanced 4.88 percent, with 28 winnersand 14 losers.

Workers' compensation writers Fremont General and Argonaut Groupwere up 32.30 percent and 13.10 percent, respectively. There weresimilar surges in malpractice specialists, as SCPIE Holdings soared45.89 percent, and ProAssurance Corp. tacked on an 18.70 percentgain. Investors are betting on substantial rate increases.

Top workers' comp analysts believe that improvements in resultswill be slow in coming, but remain cautiously optimistic.Meanwhile, the departure of St. Paul Companies from the medicalmalpractice field could provide opportunities for smallercompetitors.

The life and health contingent stood out with a 6.10 percentadvance. There were 24 winners and only four losers, whichgenerated a not often seen win/lose ratio of 6/1.

Life and health issues produced by the recently demutualizedlife company stocks have acted like a subgroup within the sectorand have been top performers.

The giant Prudential came to market as Prudential FinancialServices, and was immediately listed on the New York Stock Exchange(symbol: PRU). The offering price of the stock was $27.50. PRUopened at a premium and has moved up to the $33.00 area.Recognizing the company's numerous insurance and financial servicesactivities, the stock is listed as a multiline.

Thomas K. Meakin is affiliated with LIM SystemsInternational in Voorhees, N.J. Stock results are supplied by TheFiremark Group in Morristown, N.J.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, January 21, 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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