Shares of property insurers was up Monday august 29 2011 ; Shares of property insurers were rallying Monday on hopes that the damages from Hurricane Irene might be less than feared.
Allstate(ALL) was gaining 7.6% to $26.08, Chubb(CB) was up 4% at $61.79 and Travelers(TRV) was surging nearly 5% to $50.62. All three insurance companies are considered heavily-exposed to potential damages, given their significant market shares in the tri-state area.
Industry analysts are still trying to assess the damage from the hurricane. While the storm lost intensity as it moved northwards, sparing New York city from potentially catastrophic damages, its impact was far-reaching.
Analysts at Moody's expect that initial loss estimates will likely have wide ranges. "The simple logistics of reporting claims and sending in insurance adjustors to assess losses in the most severely affected areas, which will likely have damaged infrastructure and limited access, creates numerous challenges in developing more accurate loss estimates at this stage."
However, initial reports suggest that a significant amount of the damage was caused by flooding, which is typically not covered by insurance companies. That fueled optimism in the insurance majors, whose shares have been beaten down in the run up to Irene.
Other analysts also expected that the latest hurricane will lead insurers to raise prices on policies in certain commercial lines.
Moody's expects State Farm, Nationwide, Allstate, Liberty Mutual and Travelers to bear significant losses. That would be in addition to high weather-related losses already sustained by insurers year-to-date.
However, as large national writers, "these companies have strong capital bases able to withstand a fair degree of catastrophe volatility," Moody's noted.
Sandler O'Neill argued last week investors use the short-term declines in insurance company stock prices linked to fears on weather-related claims to accumulate stocks that they think are attractive and have good fundamentals.
On Monday, the brokerage house upgraded Allstate to a buy from a hold rating, citing attractive valuations. "There is understandable concern in the market over the impact that Hurricane Irene may have upon property-casualty insurers and in particular Allstate as it has an approximately 10% market share in the New York City tri-state area. However, that being said, any damage from Hurricane Irene should serve to simply move us further towards a hard market in commercial lines pricing," the analysts said in a note.
Showing posts with label Insurance. Show all posts
Showing posts with label Insurance. Show all posts
Monday, August 29, 2011
Sunday, August 28, 2011
how will hurricane irene affect on insurance stocks
how will hurricane irene affect on insurance stocks ; As Hurricane Irene barrels toward the East Coast, there is a lot of discussion about what the impact will be on insurance stocks. There are some names that will be in the eye of the storm and have potentially the greatest exposure.
In the property and casualty (P&C) sector, these include: Allstate (ALL), Travelers (TRV) and Chubb (CB) with, in descending order, an estimated $800 million, $600 million and $400 million for a $1.8 billion of the estimated $4 billion insurance cost. In the reinsurance (RE) sector, names include Arch Capital (ACGL) Aspen (AHL) and Transatlantic (TRH), all with about $300 million in estimated exposure. The economic cost is estimated at around $13 billion, which will place as the second (albeit distant) costliest storm in U.S. histo.
Sell Any Volatile or Risky Positions Today: If the hurricane disrupts infrastructure significantly — including urban areas losing power for long periods, ports and airports crippled or other damages — the market could see a sharp move down Monday when it digests a weekend’s worth of bad news in one day. Again, long-term investors who buy and hold shouldn’t sweat a few days of volatility. But if you have a risky play or a trade you need to close out soon, it might be prudent to exit that position today before the market closes to be on the safe side.
Sell Insurance Stocks: If you own Allstate (NYSE:ALL) or Travelers (NYSE:TRV) and are planning on holding the insurers for years to come, there’s no need to panic. But if you are trading these stocks or looking to exit a position in the next year or so, today might be the day to sell. That’s because insurers are prepping for up to $11 billion in damages from Hurricane Irene. Yes, that’s nowhere near the nearly $44 billion in estimated claims after the havoc wreaked by Hurricane Katrina. But it’s a huge chunk of change.
There’s talk of insurers raising prices in the wake of the hurricane to cover costs, but that won’t change the fact that premiums won’t come close to liabilities paid in the weeks ahead if things are as bad as some say. Allstate and Travelers have significantly underperformed the market in the last week as Irene has gathered steam, with TRV losing almost 4% as of the closing bell Thursday despite a 1.4% gain for the Dow since last Friday, while Allstate stock is flat. And as with the previous mention of a broad sell-off as the market prices in a whole weekend’s worth of bad news on Monday after the opening bell, it could get ugly even for mega-cap insurers like Allstate and Travelers with decent dividends.
In the property and casualty (P&C) sector, these include: Allstate (ALL), Travelers (TRV) and Chubb (CB) with, in descending order, an estimated $800 million, $600 million and $400 million for a $1.8 billion of the estimated $4 billion insurance cost. In the reinsurance (RE) sector, names include Arch Capital (ACGL) Aspen (AHL) and Transatlantic (TRH), all with about $300 million in estimated exposure. The economic cost is estimated at around $13 billion, which will place as the second (albeit distant) costliest storm in U.S. histo.
Sell Any Volatile or Risky Positions Today: If the hurricane disrupts infrastructure significantly — including urban areas losing power for long periods, ports and airports crippled or other damages — the market could see a sharp move down Monday when it digests a weekend’s worth of bad news in one day. Again, long-term investors who buy and hold shouldn’t sweat a few days of volatility. But if you have a risky play or a trade you need to close out soon, it might be prudent to exit that position today before the market closes to be on the safe side.
Sell Insurance Stocks: If you own Allstate (NYSE:ALL) or Travelers (NYSE:TRV) and are planning on holding the insurers for years to come, there’s no need to panic. But if you are trading these stocks or looking to exit a position in the next year or so, today might be the day to sell. That’s because insurers are prepping for up to $11 billion in damages from Hurricane Irene. Yes, that’s nowhere near the nearly $44 billion in estimated claims after the havoc wreaked by Hurricane Katrina. But it’s a huge chunk of change.
There’s talk of insurers raising prices in the wake of the hurricane to cover costs, but that won’t change the fact that premiums won’t come close to liabilities paid in the weeks ahead if things are as bad as some say. Allstate and Travelers have significantly underperformed the market in the last week as Irene has gathered steam, with TRV losing almost 4% as of the closing bell Thursday despite a 1.4% gain for the Dow since last Friday, while Allstate stock is flat. And as with the previous mention of a broad sell-off as the market prices in a whole weekend’s worth of bad news on Monday after the opening bell, it could get ugly even for mega-cap insurers like Allstate and Travelers with decent dividends.
Friday, August 26, 2011
Metlife, Inc (MET) stock prices forecast 2011-2012
Metlife, Inc (MET) stock prices forecast 2011-2012 ; Metlife, Inc. (MET) provides a wide range of insurance products including: annuities, group life insurance, supplemental life products, individual life insurance products, etc. Only about two weeks ago this stock was regularly trading for $40 per share and looks oversold at only $33 per share. Stock Price Forecast
The 17 analysts offering 12-month price forecasts for Metlife Inc have a median target of 53.00, with a high estimate of 60.00 and a low estimate of 39.00. The median estimate represents a +66.93% increase from the last price of 31.75.
key points for MET:
Current share price: $31.53
The 52-week range is $30.12 to $48.72
Earnings estimates for 2011: $5.22 per share
Earnings estimates for 2012: $5.84 per share
Annual dividend: 74 cents per share, which yields 2.2%
Book value: $50.42 per share
Analyst Recommendations
The current consensus among 20 polled investment analysts is to Buy stock in Metlife Inc. This rating has held steady since August, when it was unchanged from a Buy rating.
Hartford Financial Services (HIG) stock prices forecast 2011-2012
Hartford Financial Services (HIG) stock prices forecast 2011- 2012 : Hartford Financial Services (HIG) is a leading insurance company and also offers other financial products both in the USA and globally. Recently, Hartford announced that 2nd quarter profits would be well below expectations due to asbestos litigation and losses from major storms.This lower-than-expected profit and a major market correction caused the shares to drop and created a great buying opportunity for longer term investors.
Stock Price Forecast
The 12 analysts offering 12-month price forecasts for Hartford Financial Services Group Inc have a median target of 30.00, with a high estimate of 42.00 and a low estimate of 23.00. The median estimate represents a +75.54% increase from the last price of 17.09.
Analyst Recommendations
The current consensus among 16 polled investment analysts is to Hold stock in Hartford Financial Services Group Inc. This rating has held steady since August, when it was unchanged from a Hold rating.
key points for HIG:
Current share price: $16.95
The 52-week range is $16.26 to $31.08
Earnings estimates for 2011: $3.04 per share
Earnings estimates for 2012: $4.01 per share
Annual dividend: 40 cents per share, which yields 1.6%
Book value: $45.93 per share
Hartford Financial Services (HIG) stock prices predictions 2011-2012, Hartford Financial Services (HIG) shares prices predictions 2012, HIG stock prices 2011-2012
American International Group (AIG) shares prices predictions 2011-2012
American International Group (AIG) shares prices predictions 2011-2012 ; American International Group (AIG) offers insurance products in the United States and globally. This company is facing some challenges but the stock has dropped from about $30 in just a few weeks so a lot of negativity is priced in.
The 13 analysts offering 12-month price forecasts for American International Group Inc have a median target of 32.00, with a high estimate of 38.00 and a low estimate of 24.00. The median estimate represents a +38.17% increase from the last price of 23.16.
The current consensus among 15 polled investment analysts is to Hold stock in American International Group Inc. This rating has held steady since August, when it was unchanged from a Hold rating.
Here are some key points for AIG:
Current share price: $23
The 52-week range is $21.46 to $62.87
Earnings estimates for 2011: $3.37 per share
Earnings estimates for 2012: $3.09 per share
Book value: $47.32 per share
Financial AIG
American International Group (AIG) shares prices forecast 2011-2012, AIG stock prices predictions 2012,
The 13 analysts offering 12-month price forecasts for American International Group Inc have a median target of 32.00, with a high estimate of 38.00 and a low estimate of 24.00. The median estimate represents a +38.17% increase from the last price of 23.16.
The current consensus among 15 polled investment analysts is to Hold stock in American International Group Inc. This rating has held steady since August, when it was unchanged from a Hold rating.
Here are some key points for AIG:
Current share price: $23
The 52-week range is $21.46 to $62.87
Earnings estimates for 2011: $3.37 per share
Earnings estimates for 2012: $3.09 per share
Book value: $47.32 per share
Financial AIG
American International Group (AIG) shares prices forecast 2011-2012, AIG stock prices predictions 2012,
Prudential Financial (PRU) stock prices predictions 2011 - 2012
Prudential Financial (PRU) stock prices predictions 2011 - 2012 : Prudential Financial (PRU) offers a variety of insurance products including annuities, life insurance, dental insurance and more. Prudential shares were trading around $60 to $64 per share and have come down close to 52-week lows recently. Now the stock trades for about 7 times earnings and well below book value.The 15 analysts offering 12-month price forecasts for Prudential Financial Inc have a median target of 74.00, with a high estimate of 81.00 and a low estimate of 55.00. The median estimate represents a +56.55% increase from the last price of 47.27.
The current consensus among 18 polled investment analysts is to Buy stock in Prudential Financial Inc. This rating has held steady since August, when it was unchanged from a Buy rating.
Here are some key points for PRU:
Current share price: $47.17
The 52-week range is $45.34 to $67.52
Earnings estimates for 2011: $6.84 per share
Earnings estimates for 2012: $7.82 per share
Annual dividend: $1.15 per share, which yields 2.3%
Book value: $71.79 per share.
Prudential Financial (PRU) shares prices forecast 2012, Prudential Financial (PRU) shares prices predictions 2011, PRU stock prices outlook 2011-2012.
Saturday, July 16, 2011
Financial Planning Tips for Working Caregivers
Financial Planning Tips for Working Caregivers ; Research Shows Working American Caregivers Lose Lifetime Average of $304,000 in Wages, Pensions and Social Security Benefits -- Free Resource Helps Americans Navigate Work and Caregiving Responsibilities
The MetLife Mature Market Institute has released a publication, "Planning Tips: Financial Considerations for Family Caregivers," to help the many Americans who lose a considerable amount of money when they take time from their jobs to care for their aging parents and also spend a good deal of their own funds to do so. A recent study, "The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents," found that the 10 million employed caregivers in the U.S. lose an estimated $3 trillion in wages, pensions and social security benefits over a lifetime if they leave the workforce prematurely; the average losses are $304,000 per person. That does not include additional out-of-pocket expenses related to caregiving, such as travel costs, contributing to the parents' household and purchasing items needed by the care recipient.
Here is a synopsis of the tips:
-- Think twice about leaving your job to provide care, as it will impact your lifetime wealth and future employment prospects -- In addition to losing a paycheck, you could also be missing out on years of service required to become vested in a defined benefits pension plan, to receive matching 401(k) funds or to build Social Security benefits.
Check with your employer to determine what benefits are offered, and how you would replace them, should you curtail your employment
Your employer may be able to provide workplace accommodations--such as flex-time or family and medical leave (FMLA)--so you can stay in the workplace while caring for your relative.
Take stock of what you have and your expenses for caregiving
Consider your current costs for travel, home care and any other items that you cover. Add up all your current out-of-pocket costs for caregiving and create a budget for these expenses.
Look into public benefits
Community services may be available for low cost or no cost and can offset out-of-pocket expenses. The Web site, www.BenefitsCheckup.org , offers free, confidential service that can help older adults find programs to help pay for some of the costs associated with prescription drugs, health care, utilities and other essentials.
Become knowledgeable about Medicare and Medicaid
Medicare is not all-inclusive and you will want to be aware of costs for premiums and deductibles. Some enrolled in Medicare may also qualify for Medicaid which covers a range of health and long-term care services.
Calculate what it would cost to keep your loved one at home
There are many resources to enable an older person to age in place with additional services such as meals-on-wheels, adult day services and home modification.
Consider enlisting a geriatric care manager
Geriatric care managers are usually social workers or nurses who assist with evaluation, referral and monitoring a plan of care for older persons.
Be aware of possible elder financial abuse
Older individuals, especially those with physical or cognitive impairments can be vulnerable to exploitation which may deplete one's savings.
Discuss your loved one's legal, financial, and medical wishes
Investigate Power of Attorney, Durable Power of Attorney and a Living Will.
Create a budget for your own future retirement expenses
Consider what portion of your income you'll need to maintain your current lifestyle after retirement; experts typically place it at about 80% of current income.
The Planning Tips publication also contains an annotated list of resources for caregivers to find help, including: BenefitsCheckUp.org, Administration on Aging (AOA), the Internal Revenue Service, the U.S. Department of Labor, Employee Benefits Security Administration (EBSA), Women’s Institute for a Secure Retirement (WISER) and the Insurance Information Institute.
metlife mature market, financial planning, financial planning software, financial planning association, financial planning worksheet, axa advisors financial planning software,
The MetLife Mature Market Institute has released a publication, "Planning Tips: Financial Considerations for Family Caregivers," to help the many Americans who lose a considerable amount of money when they take time from their jobs to care for their aging parents and also spend a good deal of their own funds to do so. A recent study, "The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents," found that the 10 million employed caregivers in the U.S. lose an estimated $3 trillion in wages, pensions and social security benefits over a lifetime if they leave the workforce prematurely; the average losses are $304,000 per person. That does not include additional out-of-pocket expenses related to caregiving, such as travel costs, contributing to the parents' household and purchasing items needed by the care recipient.
Here is a synopsis of the tips:
-- Think twice about leaving your job to provide care, as it will impact your lifetime wealth and future employment prospects -- In addition to losing a paycheck, you could also be missing out on years of service required to become vested in a defined benefits pension plan, to receive matching 401(k) funds or to build Social Security benefits.
Check with your employer to determine what benefits are offered, and how you would replace them, should you curtail your employment
Your employer may be able to provide workplace accommodations--such as flex-time or family and medical leave (FMLA)--so you can stay in the workplace while caring for your relative.
Take stock of what you have and your expenses for caregiving
Consider your current costs for travel, home care and any other items that you cover. Add up all your current out-of-pocket costs for caregiving and create a budget for these expenses.
Look into public benefits
Community services may be available for low cost or no cost and can offset out-of-pocket expenses. The Web site, www.BenefitsCheckup.org , offers free, confidential service that can help older adults find programs to help pay for some of the costs associated with prescription drugs, health care, utilities and other essentials.
Become knowledgeable about Medicare and Medicaid
Medicare is not all-inclusive and you will want to be aware of costs for premiums and deductibles. Some enrolled in Medicare may also qualify for Medicaid which covers a range of health and long-term care services.
Calculate what it would cost to keep your loved one at home
There are many resources to enable an older person to age in place with additional services such as meals-on-wheels, adult day services and home modification.
Consider enlisting a geriatric care manager
Geriatric care managers are usually social workers or nurses who assist with evaluation, referral and monitoring a plan of care for older persons.
Be aware of possible elder financial abuse
Older individuals, especially those with physical or cognitive impairments can be vulnerable to exploitation which may deplete one's savings.
Discuss your loved one's legal, financial, and medical wishes
Investigate Power of Attorney, Durable Power of Attorney and a Living Will.
Create a budget for your own future retirement expenses
Consider what portion of your income you'll need to maintain your current lifestyle after retirement; experts typically place it at about 80% of current income.
The Planning Tips publication also contains an annotated list of resources for caregivers to find help, including: BenefitsCheckUp.org, Administration on Aging (AOA), the Internal Revenue Service, the U.S. Department of Labor, Employee Benefits Security Administration (EBSA), Women’s Institute for a Secure Retirement (WISER) and the Insurance Information Institute.
metlife mature market, financial planning, financial planning software, financial planning association, financial planning worksheet, axa advisors financial planning software,
Thursday, July 14, 2011
HDFC Life Insurance , Best Companies to Work in India 2011
HDFC Life Insurance , Best Companies to Work in India 2011 : HDFC Life Insurance has been adjudged as one of the 'Best Companies to Work' in India this year for the second consecutive year in a study conducted by Great Place to Work Institute.
As per the study, HDFC Life Insurance was ranked first in the insurance category for the second consecutive year and was 40th in the Top 50 Best Companies to work in India 2011 list, a company statement here said today
"Best Companies to Work is a prestigious award and I am very proud of what we have achieved. Becoming an employer of choice is one of our objectives...", HDFC Life Human Resources and Administration, Executive Vice-President Rajendra Ghag said.
The study conducted by Great Place to Work Institute is the eighth study in India and more than 470 companies participated in it, the statement said.
As per the study, HDFC Life Insurance was ranked first in the insurance category for the second consecutive year and was 40th in the Top 50 Best Companies to work in India 2011 list, a company statement here said today
"Best Companies to Work is a prestigious award and I am very proud of what we have achieved. Becoming an employer of choice is one of our objectives...", HDFC Life Human Resources and Administration, Executive Vice-President Rajendra Ghag said.
The study conducted by Great Place to Work Institute is the eighth study in India and more than 470 companies participated in it, the statement said.
Tuesday, July 12, 2011
AIG shares prices prediction 2011
AIG shares prices prediction 2011 ; When it sells stock to the public later this year, insurance giant American International Group Inc. is planning to replace one or more of the four investment banks that managed its share offering in May, according to a published report.
AIG's re-IPO in May- which included an offer for sale of 100 million shares by AIG and 200 million shares by the U.S. Treasury- was priced at $29 per share, just above the government's break-even price of $28.73. Shares traded below $29 through most of June and closed on Friday at $29.94, implying a modest 3.6% gain for investors still holding on to the stock.
"The share sale was an utter debacle. This was tremendously, poorly done, badly placed and poorly priced," Scott Sweet of IPO Boutique told TheStreet in May reacting to the poor performance of shares following the offer. "The pricing of the secondary at $29 really had to work for future investors in order to take stock in future tranches. I have never heard clients so mad. They are furious at the underwriters, AIG and the government."
Analysts told TheStreet that Treasury will have a hard time selling its remaining 77% stake as investors still remain skeptical of AIG's prospects.
AIG's first quarter profit fell 85% to $269 million from a profit of $1.78 billion a year ago, as it took $1.7 billion in catastrophe-related losses on the Japanese earthquake and tsunami, earthquake in New Zealand and floods in Australia.
The insurer, however, set out some aggressive goals in the first quarter , outlining plans to raise $25 billion to $30 billion in deployable capital by 2015 and raise its pre-tax operating profit from $4 billion to $5 billion by 2015. It also said it may start share buybacks in 2012.
According to the Wall Street report, Benmosche said the banks handling the first sale did not fully understand AIG and had a hard time explaining the complexities of the business and the shares value to investors.
Benmosche told the newspaper that for the next offer, he wants bankers to show they have "a clear understanding of who AIG is, and our trajectory, and why AIG is a stock that investors should own."
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AIG's re-IPO in May- which included an offer for sale of 100 million shares by AIG and 200 million shares by the U.S. Treasury- was priced at $29 per share, just above the government's break-even price of $28.73. Shares traded below $29 through most of June and closed on Friday at $29.94, implying a modest 3.6% gain for investors still holding on to the stock.
"The share sale was an utter debacle. This was tremendously, poorly done, badly placed and poorly priced," Scott Sweet of IPO Boutique told TheStreet in May reacting to the poor performance of shares following the offer. "The pricing of the secondary at $29 really had to work for future investors in order to take stock in future tranches. I have never heard clients so mad. They are furious at the underwriters, AIG and the government."
Analysts told TheStreet that Treasury will have a hard time selling its remaining 77% stake as investors still remain skeptical of AIG's prospects.
AIG's first quarter profit fell 85% to $269 million from a profit of $1.78 billion a year ago, as it took $1.7 billion in catastrophe-related losses on the Japanese earthquake and tsunami, earthquake in New Zealand and floods in Australia.
The insurer, however, set out some aggressive goals in the first quarter , outlining plans to raise $25 billion to $30 billion in deployable capital by 2015 and raise its pre-tax operating profit from $4 billion to $5 billion by 2015. It also said it may start share buybacks in 2012.
According to the Wall Street report, Benmosche said the banks handling the first sale did not fully understand AIG and had a hard time explaining the complexities of the business and the shares value to investors.
Benmosche told the newspaper that for the next offer, he wants bankers to show they have "a clear understanding of who AIG is, and our trajectory, and why AIG is a stock that investors should own."
tag ; AIG shares prices prediction july 2011, AIG's prospects, aig shares prices prediction 2011, aig shares prices forecast 2011, aig mutual funds, tata aig mutual fund, aig global investment group mutual fund, aig sunamerica mutual funds, aig share prices, aig share price google, aig share price history, aig share price today, aig insurance share price.
Sunday, July 10, 2011
Best Insurance Stocks for july 2011
Best Insurance Stocks for july 2011 ; Many insurance stocks have not given investors much to be happy about since the financial crisis, as many of the more speculative business models out there have outperformed blue chip insurance companies with the onslaught of stimulus measures in the economy. One reason that insurance companies may have underperformed is the increase in inflation expectations since the QE programs began digitally creating more money in bank reserves at the Federal Reserve.
While inflation is certainly a risk with insurance firms because customers pay up front fees for future liabilities which could rise with a lower dollar, many of the stocks in the industry look downright cheap. If hyperinflation doesn't set in, these names make a ton of sense. If hyperinflation is a big risk ahead, investors in these names could buy silver in an amount that will hedge their currency risks. Personally, I think we are headed for a continued stagflationary environment but I think these names should do well given their strong management teams and good core business moat when combined with cheap valuations.
However, the biggest risk for insurance investors over the past year has been large catastrophe losses, and the reinsurance sector has been particularly hard hit. Reinsurance rates were pretty low going into Japan and the New Zealand earthquake. Making matters worse for cat. loss insurers was the huge tornado damage in Alabama and Missouri and the flooding in the Midwest, as well as the fire damage in the Southwest. Allstate (ALL), for example, has reportedly lost over 2 billion from the Alabama and Missouri disasters alone, while Travelers (TRV) is reporting that after tax losses for April and May will be over 1 billion. In other words, it has been a tough time to invest in the insurance industry, but cheap valuations could mean good values in the space for enterprising investors.
Here is a quick review of 6 insurance companies and their valuations:
Berkshire Hathaway (BRK.A)
Though Berkshire Hathaway is not primarily a reinsurance business, it was negatively affected by losses in Japan last quarter. Buffett is also a bull on the stock market, which has been choppy and tough to navigate so far this year. With that said, his investments in Coke (KO) may not have moved up, but his short options positions on the S&P are likely making money now, and once the slew of natural and man made disasters subsides, Berkshire stock will likely get a lift on higher earnings. BRK is trading for a 30% or so premium to book value, which in my view makes this name a bargain at current levels.
Renaissance Re Holdings (RNR)
Renaissance Re is a cheap reinsurance name that is trading below book value and for just 8.7X forward earnings. Unlike many of its peers, RNR has delivered strong earnings over the past year with a PE of around 13X. Renaissance appears to be well positioned and reinsurance rates have likely gone up after oil spills, earthquakes, floods, tornadoes, and other seemingly Biblical events have punished the company's bottom line. While RNR is pretty cheap here and management is buying back a good deal of stock, investors should note the relatively low ROE and also the higher risk involved with the overall reinsurance industry. One thing we like at RNR is its low debt to equity ratio.
Greenlight Capital Reinsurance (GLRE)
Greenlight Capital Reinsurance is an interesting way to invest alongside investment legend and Mets owner David Einhorn. GLRE is a cheap stock currently at 6.88X forward estimates, but Einhorn is reportedly down 5% YTD and most of GLRE's earnings come from Einhorn's investment results. Overall, I believe GLRE is a good investment anywhere close to book value. Even though the investor has struggled a bit lately, I believe in his long term bottoms up, fundamental analysis approach to investing. Because investors can buy GLRE as a way to invest with Einhorn, I like this name-- even though the price to book value of 1.3X seems a little high at first glance.
Aetna (AET)
Aetna is one of the largest health insurance companies in the country. Ask a healthcare professional and they will tell you that Aetna has a virtual monopoly over the Medicare business and that the company will only grow in the future. AET trades for just 10X trailing earnings and 9.47X forward earnings. While price to book is a little high for us, we like that Aetna is in the red hot medical sector because more and more people will be purchasing health plans from this company in the future, regardless of whether ObamaCare is implemented or not. We also think that ObamaCare will directly help, not hurt, this business-- because people will essentially be forced to purchase plans from the company. Small businesses will be more or less forced to do business with Aetna if our understanding of the bill is correct.
Kansas City Life (KCLI)
Kansas City Life is a company that is a classic deep value stock where management should consider a large share repurchase, or even a sale of the company to reward its current shareholders and unlock value. Trading for just half of book value, this Kansas City based insurance firm is too cheap to ignore. Life insurance is also not as vulnerable to inflation concerns because policies are not affected the way cat losses are with higher prices -- most life insurance premiums provide a fixed payout when someone dies. Like most life insurance companies, KCLI invests in bonds, so the business earns money on the float and has to pay out reserves when customers bite the dust. Because the death benefits are not increased with inflation, KCLI could actually benefit modestly from inflation if the company diversified its investment portfolio into things like equities (although I am not too bullish on index funds here), select commodities, foreign currencies, and hedge funds. Because this company has a large percentage of insider ownership, this stock could tread water for some time, bit over the long haul I think the stock is a bargain and should reward patient investors.
Humana (HUM)
Humana, like Aetna, stands to benefit from an overall healthcare spending market that should rise some 10% per year over the next decade. Because boomers are getting older, Humana's positioning in the health insurance industry should place the company in a strong position for future growth. Luckily for investors, this future growth comes at a reasonable price tag -- even after the stock has almost doubled over the past nine months. HUM trades for just 10.88X forward earnings and just 2.8X EV/EBITDA. Return on equity of 17% and earnings growth of 21% are two additional reasons that HUM is a cheap stock at current prices when they are viewed along with the PE and price to cash flow here. Insiders have been selling some stock here, however I think HUM has pretty strong tailwinds driving in its core businesses. Source : seekingalpha.com
While inflation is certainly a risk with insurance firms because customers pay up front fees for future liabilities which could rise with a lower dollar, many of the stocks in the industry look downright cheap. If hyperinflation doesn't set in, these names make a ton of sense. If hyperinflation is a big risk ahead, investors in these names could buy silver in an amount that will hedge their currency risks. Personally, I think we are headed for a continued stagflationary environment but I think these names should do well given their strong management teams and good core business moat when combined with cheap valuations.
However, the biggest risk for insurance investors over the past year has been large catastrophe losses, and the reinsurance sector has been particularly hard hit. Reinsurance rates were pretty low going into Japan and the New Zealand earthquake. Making matters worse for cat. loss insurers was the huge tornado damage in Alabama and Missouri and the flooding in the Midwest, as well as the fire damage in the Southwest. Allstate (ALL), for example, has reportedly lost over 2 billion from the Alabama and Missouri disasters alone, while Travelers (TRV) is reporting that after tax losses for April and May will be over 1 billion. In other words, it has been a tough time to invest in the insurance industry, but cheap valuations could mean good values in the space for enterprising investors.
Here is a quick review of 6 insurance companies and their valuations:
Berkshire Hathaway (BRK.A)
Though Berkshire Hathaway is not primarily a reinsurance business, it was negatively affected by losses in Japan last quarter. Buffett is also a bull on the stock market, which has been choppy and tough to navigate so far this year. With that said, his investments in Coke (KO) may not have moved up, but his short options positions on the S&P are likely making money now, and once the slew of natural and man made disasters subsides, Berkshire stock will likely get a lift on higher earnings. BRK is trading for a 30% or so premium to book value, which in my view makes this name a bargain at current levels.
Renaissance Re Holdings (RNR)
Renaissance Re is a cheap reinsurance name that is trading below book value and for just 8.7X forward earnings. Unlike many of its peers, RNR has delivered strong earnings over the past year with a PE of around 13X. Renaissance appears to be well positioned and reinsurance rates have likely gone up after oil spills, earthquakes, floods, tornadoes, and other seemingly Biblical events have punished the company's bottom line. While RNR is pretty cheap here and management is buying back a good deal of stock, investors should note the relatively low ROE and also the higher risk involved with the overall reinsurance industry. One thing we like at RNR is its low debt to equity ratio.
Greenlight Capital Reinsurance (GLRE)
Greenlight Capital Reinsurance is an interesting way to invest alongside investment legend and Mets owner David Einhorn. GLRE is a cheap stock currently at 6.88X forward estimates, but Einhorn is reportedly down 5% YTD and most of GLRE's earnings come from Einhorn's investment results. Overall, I believe GLRE is a good investment anywhere close to book value. Even though the investor has struggled a bit lately, I believe in his long term bottoms up, fundamental analysis approach to investing. Because investors can buy GLRE as a way to invest with Einhorn, I like this name-- even though the price to book value of 1.3X seems a little high at first glance.
Aetna (AET)
Aetna is one of the largest health insurance companies in the country. Ask a healthcare professional and they will tell you that Aetna has a virtual monopoly over the Medicare business and that the company will only grow in the future. AET trades for just 10X trailing earnings and 9.47X forward earnings. While price to book is a little high for us, we like that Aetna is in the red hot medical sector because more and more people will be purchasing health plans from this company in the future, regardless of whether ObamaCare is implemented or not. We also think that ObamaCare will directly help, not hurt, this business-- because people will essentially be forced to purchase plans from the company. Small businesses will be more or less forced to do business with Aetna if our understanding of the bill is correct.
Kansas City Life (KCLI)
Kansas City Life is a company that is a classic deep value stock where management should consider a large share repurchase, or even a sale of the company to reward its current shareholders and unlock value. Trading for just half of book value, this Kansas City based insurance firm is too cheap to ignore. Life insurance is also not as vulnerable to inflation concerns because policies are not affected the way cat losses are with higher prices -- most life insurance premiums provide a fixed payout when someone dies. Like most life insurance companies, KCLI invests in bonds, so the business earns money on the float and has to pay out reserves when customers bite the dust. Because the death benefits are not increased with inflation, KCLI could actually benefit modestly from inflation if the company diversified its investment portfolio into things like equities (although I am not too bullish on index funds here), select commodities, foreign currencies, and hedge funds. Because this company has a large percentage of insider ownership, this stock could tread water for some time, bit over the long haul I think the stock is a bargain and should reward patient investors.
Humana (HUM)
Humana, like Aetna, stands to benefit from an overall healthcare spending market that should rise some 10% per year over the next decade. Because boomers are getting older, Humana's positioning in the health insurance industry should place the company in a strong position for future growth. Luckily for investors, this future growth comes at a reasonable price tag -- even after the stock has almost doubled over the past nine months. HUM trades for just 10.88X forward earnings and just 2.8X EV/EBITDA. Return on equity of 17% and earnings growth of 21% are two additional reasons that HUM is a cheap stock at current prices when they are viewed along with the PE and price to cash flow here. Insiders have been selling some stock here, however I think HUM has pretty strong tailwinds driving in its core businesses. Source : seekingalpha.com
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