Storm, War Fears Hurt Insurer Stocks
NU Stock Analyst
September 2002 was not as horrendous a month for insurance stocks as was July, which etched red ink into our record books, but it came close. Lets consider some July/September comparisons before dissecting September.
There were 114 stocks priced in both July and September. In July, a record breaking 101 issues declined, and only 13 advanced. For September we recorded 95 losers, and a slightly more palatable 19 winners. In July, these stocks collapsed almost 9 percent. In September the same stocks were off a painful, but not as painful 6.52 percent.
Part of the problem is that the 2002 hurricane season was particularly anxious for insurance investors, though so far we have seen storms with less wind and more rainfall than would normally be the case.
So it's no surprise that all groups were down in September. But the reinsurers almost made it into plus territory, thanks to a 22.35 percent surge in Trenwick Group. The reinsurers ended down only 1.05 percent, while the other sectors came nowhere near recording a positive performance.
The best of the rest were the property-casualty stocks and the brokers, which were down 4.04 percent and 4.89 percent, respectively. After that came the service companies and the specialists, off 6.66 percent and 6.37 percent, respectively.
After that, the remaining sector losses get pretty grim. The life and health stocks were down 10.68 percent, the financial services group deteriorated 11.57 percent, and the multilines slumped 13.24 percent.
Saving the worst for last, let's ponder the September performances of the stocks of the even dozen major foreign insurance and financial services giants. They were down an awesome 21.72 percent in the month of September. Even worse, this same group of senior foreign stocks plunged 21 percent in July, before stabilizing in August.
In looking for a cause, European investors point to incredible flood damage in Central Europe over the summer. (I was only vaguely aware that, unlike in the United States, flood damage is covered by insurance in Europe. Think that one over!)
Beyond that, foreign investors have reacted more negatively than U.S. investors to the possibility of war in the Middle East. As a result, gold and gold-mining stocks have been winners. Other stocks, including insurance, have been trashed.
Well, at least the hurricane season now appears to be moving toward a quiet conclusion. For that we are thankful!
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, October 28, 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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