Brokers Well-Positioned For Rebound

NU Stock Analyst

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

Only the brokers and a small number of other non-risk-taking companies appear well positioned to increase earnings in the period ahead.

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 the general market, and for this industry.

After three down months in a row, which featured a post-Sept. 11 general market meltdown, we almost made it back to even. For the record book, our list of stocks averaged a minimal decline of 0.50 percent. There were 60 advances and 57 declines. And for a change, not a single issue remained unchanged. Within the perimeters of the 117 stocks we priced in October, there were unusual variations in market 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 to 57.93, from 45.61. Brown & Brown made it to a double-digit uplift of 10.03 percent, to 57.40 from 52.10. Second best were the service companies with 7.12 percent escalation.

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

Property-casualty stocks, up 1.20 percent, made it five of eight sectors 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 28.21 percent; ACE Ltd., up 22.10 percent; Ohio Casualty, up 17.14 percent; Baldwin & Lyons, up 15.40 percent; Philadelphia Consolidated Holdings, up 12.81 percent; St. Paul, up 11.35 percent; 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 to 78.60, and Unitrin crept ahead 0.99 percent to 38.60.

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

Thomas K. Meakin is affiliated with LIM Systems International in Voorhees, N.J. Stock results are supplied by The Firemark 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 serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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