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Forget Merry, It Was A Lusty Month Of May

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By Thomas K. Meakin

It was more than a merry month of May–it was a lusty month. Investors turned their backs on already battered tech issues and literally lusted after insurance stocks! It was great fun for a change.

The 117 stocks we priced surged a remarkable 7.47%. All eight of our industry groups moved up. That eclipsed last year’s noteworthy May advance of 4.97%.

We recorded 91 advances and 25 losses, a win/lose ratio of better than 3.6-to-1.

The Broker group led the way with an advance of 11.63%. Best by far was Clark Bardes, which encored an April fast-forward of 51.76% to $12.90, with a May jump of 57.75% to $20.35.

One analyst says this provider of pension plans to financial institutions is set for a period of rapid earnings growth. That could be behind the move in the stock. However, the recent explosive price action could indicate pre-takeover bid accumulations are behind the surge. Ill keep listening and report.

The Reinsurers, ahead 11.56%, were almost a carbon copy of the Brokers performance-wise. All 10 of the reinsurer stocks advanced.

The largest group, the Property & Casualty stocks, was also the winningest group. Among the 45 stocks there were 36 gainers and only 9 losers. There were 15 double-digit winners.

As a group the P&C sector gained a remarkable 8.43%.

The stellar performance of p&c stocks in May indicates investors have recognized what we have been talking about here for quite some time. That is, earning results for a broad range of underwriters are improving as rate increases flow down to insurers bottom lines.

Life & Health stocks registered a gain of 5.70%, which in many other months would make it the best-performing group. There were 18 winners and 9 losers.

It sometimes happens that a substantial surge or drop in a low priced stock distorts the performance of the entire group. In May low-priced Penn Treaty was the culprit, after soaring from $2.20 to $4.20 to record a 90.91% gain. If Penn Treatys gain were dropped from the Life & Health group, the percentage gain for the group would be about 3.40% less.

The Multi-lines and the Financial Services groups moved up 3.18% and 4.1%, respectively. Over the years some insurance stock analysts (myself included) have compared the performances of these sectors with the performance of the 30 stocks in the Dow Jones Industrial Average. The Multi-lines and the Financial Services stocks handily outperformed not only the DJIA, but also the S&P 500 and the NASDAQ Composite in the month of May just ended!

From my reviewing stand the month of May 2001 wasnt perfect. But it was an enjoyable and lusty month for most holders of insurance stocks.

Reproduced from National Underwriter Life & Health/Financial Services Edition, July 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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