The reinsurance industry appears strong heading into the worst of the hurricane season, and the group should remain solid into 2008, according to an investment bank analysis.
In a research report for Bank of America, analyst Kevin O'Donoghue observed that, historically, catastrophes have not affected the long-term stock performance of reinsurers but have increased the short-term volatility of the companies.
He noted that while losses impede the book-value per-share growth, they also increase growth and “return-on-equity expectations, resulting in higher multiples for the stock.”
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