Insurance Stocks Outperforming Market
NU Stock Analyst
June 2002 was the month of a selloff in the general market, which left investors biting off their fingernails and dumping stocks. There were awesome displays of panic selling, spiced with a number of short but memorable rallies.
For the record, the Dow Jones Industrial Average ended down 6.87 percent, the S&P 500 was off 7.24 percent, and the tech-heavy NASDAQ plunged 9.33 percent.
Insurance stocks could not avoid being caught in the June swoon in the general market. But they made a good try. The 114 stocks priced here recorded a loss of 3.49 percent for the month. Unlike the general market, which went from bad to worse in June, our specialty had a few more advancers than in that ugly month of May.
Perhaps the best that can be said for insurance stocks in June 2002 is that they outperformed the general market!
All of the groups ended in the minus column. But two sectors–the brokers and the specialists–were off less than 1 percent. The rest made a mixed showing.
The life stocks were down a modest 1.23 percent. The property-casualty stocks declined 3.95 percent. The reinsurers fell 4.97 percent. The multilines and the financial services stocks were each down 5.61 percent. Our smallest sector, the service companies, took an 11.73 percent markdown.
There was a scarcity of individual issues to get excited about. But there were a few, all of them the stocks of smaller companies.
In the life and health group, Citizens of Austin stood out with a stunning 44.22 percent surge to $12.98, from $9. This price explosion was the second since earlier this year. I dont believe there is an impending takeover bid about to be unfurled. Rather, the company has been prowling the hustings with stockholder information, which has stimulated interest in the stock. Investors have liked what they have heard.
UICI, the health insurer from Dallas, generated a good advance in a bad month. The stock has been subject to periodic surges and retreats. This latest 14.38 percent spurt to $20.20 was at least another good surge. Im listening and hearing nothing.
United Fire & Casualty, a quality regional insurer from Iowa, perked up 12.31 percent to $37.78, from $33.64. That was as good as p-c stocks got in June.
Penn-America Group joined the very small cadre of double-digit winners. The commercial property writer (et al) moved up 10.84 percent to $10.53, from $9.53. (In last month's listing, the percentage change figure presented on the stock price of this insurer was misleading due to the effects of a May 9 three-for-two stock split. Adjusting for the split, the percentage change came out to a drop of 16 percent, rather than the 44 percent shown. Our humble apologies.)
Hilb, Rogal & Hamilton, the Richmond-based broker, almost made it to a double-digit gain. Hilb shares advanced 9.8 percent to end June at $45.25.
Among the largest widely-held companies, there was only one that stood out by being in the plus column. That was the biggest of all, American International Group, which edged up 1.88 percent to close at 68.23.
Early July is a good time to look both backward at the first six months of the year, and forward to the summer and fall.
The first half of the year is history. It has been a turbulent time in financial markets, which has generated the worst performance for the major averages since the early 1970s. However, the "good" news is that insurance stocks have outperformed the general market for the first six months of 2002.
Looking forward, insurers have most of the dreaded hurricane season still ahead of them. I have heard some grim predictions. Last year I ventured the prediction a major storm would hit the East Coast of the United States and cause catastrophic insured property damage. For this year, Ill make no such predictions!
However, there is a wild card named "terrorism" out there. It is a risk that cant be quantified. President George W. Bush is in favor of a U.S. government-backed reinsurance-type facility. A bill dealing with this is stalled in Congress.
Unfortunately, it could turn out that unless there is another disaster of Sept. 11′s magnitude, this bill might not be enacted into law. If Congress fails to act, and the industry takes another terrorism hit that kills and injures thousands, it would be devastating, not only for the victims, but for the economy in general and the property-casualty industry in particular. Call and write your U.S. senators and representatives in Congress and urge them to act before it's too late. Do it now!
In the meanwhile, wouldnt it be nice to have a substantial summer rally? We are overdue!
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, July 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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