Summer Heats Up For Insurance Stocks
NU Stock Analyst
June busted out all over for pleased owners of insurance stocks. The 115 stocks priced for this column moved up 3.7 percent. Seven of the eight industry groups ended in the plus column. There were 79 advances and 33 declines, which works out to a win/lose ratio of 2.4 to 1.0.
Perhaps what most pleased veteran insurance stock watchers was that June turned out to be a much better month than expected. After a near record-breaking advance in May, the odds favored June being a break-even or sell-off month. Instead, June was a rewarding upside surprise.
Junes biggest insurance news was the successful trips to market of three initial public offerings–Phoenix Companies Inc., Willis Group Holdings Ltd., and Odyssey Re Holding Corp.
In the spotlight was big blue chip Phoenix Mutual, which became Phoenix Companies Inc. and began trading on the New York Stock Exchange (symbol PNX). The stock came at $17 and closed the month at $18.60, up close to 10 percent. All Phoenix policyholders, which include this analyst, are receiving at least small amounts of Phoenix stock.
The shares of London broker Willis Group Holdings Ltd. have been the clear winner in the market thus far. Willis Group (symbol WSH) came at $13.50 and closed out the month of June at $17.75. Thats a fast gain of 31 percent. (Just imagine, a hot insurance stock!)
Willis Group management has been talking about an aggressive acquisition program. As yet there have been no details to talk about. Its safe to say there could be increased takeover within the broker group during the months ahead.
Odyssey Re Holding Corp. brought its IPO at $18 a share. The stock (symbol ORH) has stayed at issue price, closing the month of June at $18.07. Odyssey has a highly respected management. As management is the essential ingredient in stock performance over time, this stock could be the sleeper in the group.
While we are on the subject of IPOs, big Principal Financial has just announced that it is planning to demutualize via the IPO route. Principal is a fine company, and Ill just observe that fine companies most often have stocks that do well.
Thats all for now. Just a reminder that we are heading into the heart of the hurricane season. So far the tropics have been very calm. However, the experts have been wrong for too long. This year I have the gut feeling a really bad storm or two will clobber the mainland! Mention ANDREW to someone. If they do not recall, we really are due!
And what about the traditional summer rally in insurance stocks? After a great May and a good June for the industry's issues, the prospects for a vigorous rally are diminished. (It just works that way.) However, insurance stocks are "interest sensitive." Thus I have to stay positive!
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 6, 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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