Brokers Well-Positioned For Rebound

NU Stock Analyst

Whether the fiery crash of American Airlines Flight 587 with 251passengers and nine crewmembers on board was the work of terroristsor a tragic mechanical failure, the fact that this disaster hit onthe heels of Sept. 11, and the nerve-racking publicity generatedshould be harmful to the market performance of insurancestocks.

Only the brokers and a small number of other non-risk-takingcompanies appear well positioned to increase earnings in the periodahead.

October didnt live up to its reputation for market selloffs.There were no crashes, massacres, panics, wipeouts or the like.Rather, October turned out to be a period of recovery for both thegeneral market, and for this industry.

After three down months in a row, which featured a post-Sept. 11general market meltdown, we almost made it back to even. For therecord book, our list of stocks averaged a minimal decline of 0.50percent. There were 60 advances and 57 declines. And for a change,not a single issue remained unchanged. Within the perimeters of the117 stocks we priced in October, there were unusual variations inmarket performance.

The brokers were best with an advance of 9.26 percent. Hilb,Rogal & Hamilton led the charge with a gain of 27.01 percent to57.93, from 45.61. Brown & Brown made it to a double-digituplift of 10.03 percent, to 57.40 from 52.10. Second best were theservice companies with 7.12 percent escalation.

The reinsurers gained 4.34 percent, with six advances and sixdeclines. Three double-digit winners gave a positive bias to thesector. Arch Capital Group Ltd. soared 40.30 percent to 23.50, upfrom 16.00. IPC Holdings surged 23.25 percent to close at 28.10, upfrom 22.80. Max Re Corp., new to our coverage, advanced from 14.30to 16.50, a gain of 15.38 percent.

Property-casualty stocks, up 1.20 percent, made it five of eightsectors moving to the up side. There were 25 winners and 20 losers.Standing out among the gainers were Meadowbrook, up 29.55 percent;Preserver Group (used to be Motor Club of America), up 28.21percent; ACE Ltd., up 22.10 percent; Ohio Casualty, up 17.14percent; Baldwin & Lyons, up 15.40 percent; PhiladelphiaConsolidated Holdings, up 12.81 percent; St. Paul, up 11.35percent; and W.R. Berkley Corp. ahead 10.85 percent.

The multilines disappointed with a relapse of 6.37 percent.There were only two minimal advances. AIG edged up 0.77 percent to78.60, and Unitrin crept ahead 0.99 percent to 38.60.

The 2001 hurricane season turned out to be very wet and not verywindy. Parts of the East Coast and Florida ended a period ofdrought conditions with a surfeit of moisture. Do you recall that Ipredicted a major hurricane would do huge damage to the U.S.mainland? I was wrong. And it couldnt have been a better year to bewrong!

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, November 26, 2001.Copyright 2001 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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