July Was One Of The Worst Months Ever

NU Stock Analyst

A month ago, a discouraged investor asked my opinion regardingthe market in general, and insurance stocks in particular. My replywas, “Dont worry, nothing will be alright.” Little did I know howcorrect my prediction would turn out to be!

July 2002 was one of the worst, if not the worst,months for insurance stocks, and for the general market, that I canrecall. A look at the price statistics for the month documents thefalling market, and indicates that our battered specialty did evenworse.

Of the 114 issues priced, there were 101 declines and only 13advances. Simple visual inspection indicates a win/lose ratio wehave not seen before, and hope not to see again. All of theinsurance groups–except the property-casualty stocks–weredouble-digit losers.

The reinsurers were worst after collapsing 13.35 percent. Notmuch better were the multilines (down 10.94 percent). The brokersfollowed with a 10.82 percent decline, while the life and healthsector ended off 10.37 percent.

The p-c stocks were off 6.90 percent. In most months that wouldhave made p-c stocks one of the worst, if not the worstperforming group. But that was not the case in July 2002, when ninep-c issues actually advanced.

Erie Insurance Company led the way with an almost double-digitgain, up 9.85 percent to $44.50. White Mountain Insurance Group,captained by Jack Byrne, once head of GEICOs rescue squad, moved up7.42 percent to $340. And wouldnt you know, Warren BuffettsBerkshire Hathaway did well in the shadow of the miserable generalmarket, creeping up 2.25 percent to $68,300.

Allstate edged up 2.79 percent to $38.01, while Markel moved up2.79 percent to $202.50, and SAFECO Corp. moved ahead 2.75 percentto $31.74.

The buying in the stocks of the major p-c companies wasinstitutional, and from both here and abroad. It was heartening toindividual owners of insurance stocks to hear that professionalinvestors and money managers were the buyers of the stocks theyheld.

Beyond the p-c group, there were just a few stocks that wouldhave grabbed anyones attention. Among the multilines, down 10.94percent as a group, there was Old Republic of Chicago, which brokeeven (off 0.06 percent).

Twenty-six life and health stocks were down, while only onestock was up–that was ALFA Corp., which moved up 6.92 percent to$12.51.

We have sloshed through a couple of very wet, though not verywindy, tropical storms out of the Gulf of Mexico. But the tropicshave remained quiet–so far–to the great relief of p-c insurers andtheir stockholders.

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, August 26, 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.