Travelers Sets Stage For Further IPOs

Travelers, welcome back! Investors in insurance stocks have missed the opportunity to own and trade in the shares of this venerable Connecticut Yankee, established in 1863, since Citigroup took the company private two years ago.

Last month, Travelers distributed 210 million shares via an initial public offering at $18.50 a share. This works out to be the biggest U.S. insurance IPO ever, with a value close to $4 billion.

The huge offering was a solid success, with the stock staying above issue price and then moving up to the $21 level. This should work out for everyone. Given that Travelers is in a volatile and relatively slow-growth business, Citigroup sans Travelers should command a higher market multiple.

Sources on Wall Street indicate there was a great deal of institutional demand for Travelers, both in the United States and abroad. It is pleasing for us long-time followers of insurance stocks to see such demand for our returning household name. It has given an across-the-board boost to insurance stocks.

That is interesting news. There could be more IPOs and possibly a wave of takeovers triggered by the success of the Travelers IPO.

Now back to the blustery month of March, which was a period of frantic ups and downs for the general market, with insurance stocks going along for the ride. When it was over, our specialty was ahead 4.14 percent, which was better than the Dow Jones Industrial Average (up 2.95 percent) and the S&P 500 (up 3.67 percent), but not as good as the volatile NASDAQ Composite (up 6.58 percent). The NASDAQ Insurance Index was on target with a 4.39 percent gain.

In the portfolio of 116 stocks priced here, there were 78 advances and 38 declines, for a win/lose ratio of better than 2-to-1. Seven groups moved up, and only the brokers, encountering profit taking, sold off a modest 1.37 percent.

Financial services stocks came in first by a wide margin, up a remarkable 13.14 percent.

Some good analysts conclude that concerns over possible Enron fallout affected investor attitudes in January and February, when the financial services groups ended in the loss column. The March snapback reflects lessened investor concerns and appreciation of the basic strength and attractiveness of the financial services companies we follow.

Property-casualty stocks gained a respectable 3.62 percent. Selective Insurance Group stood out with a 19.26 percent run to close the month at $26.70.

One of the specialists, Navigators Group, was an attention-getter with a 25.12 percent gain to $25.40. (Some pinpoint Navigators as a takeover candidate. As yet I have heard no rumors.)

I sense that insurance stocks are at last benefiting from a rising tide of investor interest. Stay tuned. I am hoping for a really profitable “spring tide.”

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, April 29, 2002. Copyright 2002 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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Travelers Sets Stage For Further IPOs

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