Barron's Article Comments on Property-and-Casualty Insurers Stocks; Sees 20% Upside Excluding Dividends

September 28, 2009 11:18 AM EDT

Barron's article comments on Property-and-casualty insurers stocks.

Some Positive Points Include:

1) Property-and-casualty insurers probably are the safest major part of the financial sector, thanks to their strong balance sheets and ample earnings.

2) The P&C stocks look attractive; most trade for single digit multiples of estimated 2009 profits while commanding little or no premium to book value.

3) Keefe, Bruyette & Woods analyst making positive comments on the sector, favoring Chubb, Ace, and Bermuda-based reinsurers Everest Re (NYSE: RE) and PartnerRe (NYSE: PRE).

4) These companies should see modest catastrophe losses this quarter because of a quiet Atlantic hurricane season.

5) Bulls argue that soft pricing and reserve releases already are reflected in depressed P&C stock prices.

6) Excluding dividends, upside in P&C stocks could be about 20% in the next year. If insurance rates harden, the upside could be even higher.


Some Negative Points Include:

1) Hasn't been a great year for Property-and-casualty insurers stocks because aggressive investors have bet on turnaround candidates and those that may benefit directly from a recovering economy.

2) Several major P&C stocks are down in 2009, including Allstate (NYSE: ALL), Ace (NYSE: ACE), Chubb (NYSE: CB) and W.R. Berkley (NYSE: WRB).

3) Main investor concern is that pricing remains weak in many commercial insurance sectors -- including property, workers compensation, and directors and officers -- and that a much-anticipated "hard market" of rising premiums might not arrive in 2010.

4) Many insurers see an opportunity to take business from a wounded American International Group (NYSE: AIG), once one of the globe's largest P&C insurers. The downside from AIG's woes is that it has been said to be cutting rates, undermining rivals' efforts to lift pricing.

5) CEO of W.R. Berkley thinks the industry is underpricing 2009 business and that much of it ultimately will prove unprofitable, although the recognition of potential losses will take time because reserves often are established long before claims come in.

Related Categories

Analyst Comments

Stocks Mentioned

Related Entities

• Keefe, Bruyette & Woods
• Barron's
• Dividend

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?