July Was One Of The Worst Months Ever

NU Stock Analyst

A month ago, a discouraged investor asked my opinion regarding the market in general, and insurance stocks in particular. My reply was, “Dont worry, nothing will be alright.” Little did I know how correct 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 can recall. A look at the price statistics for the month documents the falling market, and indicates that our battered specialty did even worse.

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

The reinsurers were worst after collapsing 13.35 percent. Not much better were the multilines (down 10.94 percent). The brokers followed with a 10.82 percent decline, while the life and health sector ended off 10.37 percent.

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

Erie Insurance Company led the way with an almost double-digit gain, up 9.85 percent to $44.50. White Mountain Insurance Group, captained by Jack Byrne, once head of GEICOs rescue squad, moved up 7.42 percent to $340. And wouldnt you know, Warren Buffetts Berkshire Hathaway did well in the shadow of the miserable general market, creeping up 2.25 percent to $68,300.

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

The buying in the stocks of the major p-c companies was institutional, and from both here and abroad. It was heartening to individual owners of insurance stocks to hear that professional investors and money managers were the buyers of the stocks they held.

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

Twenty-six life and health stocks were down, while only one stock 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 very windy, tropical storms out of the Gulf of Mexico. But the tropics have remained quiet–so far–to the great relief of p-c insurers and their stockholders.

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, August 26, 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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July Was One Of The Worst Months Ever

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