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Life Health > Health Insurance

March Saw The Biggest Insurance IPO

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By Thomas K. Meakin

Travelers, welcome back!

Investors in insurance stocks have missed the opportunity to own and trade in shares of this venerable Connecticut Yankee, established in 1863, since Citigroup took it private two years ago.

For the record, Travelers made Marchs biggest insurance news. The company distributed 210 million shares via an Initial Public Offering at $18.50 a share. This worked out to be the biggest U.S. insurance IPO ever, with a value close to $4 billion. After Travelers, the second and third largest IPOs were Prudential Financial’s raising $3.5 billion last year, and MetLife’s gathering close to $3 billion the year before.

The huge offering was a solid success. The stock of Travelers Property Casualty Corp. was immediately listed on the NYSE. Citigroup plans to distribute most of the shares it still owns to its shareholders before year-end.

There are followers of insurance stocks who believe Citigroup CEO, Sandy Weill, must have hidden reasons for not only reducing his holdings in Travelers, but planning to eliminate them entirely.

That is possible. But I dont believe it. So. Ill go with the major published reasons for Citigroup to jettison Travelers.

Primarily, it is a matter of market valuations. Given that Travelers is in a volatile and relatively slow growth business, Citigroup sans Travelers should command a higher market multiple. I agree. And considering market prices and the number of shares involved, we are talking about a lot of money!

Weill is also reportedly on record that he wants his Citigroup to concentrate more on consumer banking, financial services, credit cards, etc., which sounds good, but shouldnt impart any near term strength to Citigroup shares.

Sources on Wall Street indicate there was a great deal of institutional demand for Travelers, both in the U.S. and abroad, with buyers paying up to fill positions.

On the whole, March was a period of frantic ups and downs for the general market, with insurance stocks going along for the ride. When it was over our specialty was ahead 4.14%, better than the DJIA (up 2.95%) and the S&P 500 (up 3.67%), but not as good as the volatile NASDAQ Composite (up 6.58%). The NASDAQ Insurance Index was on target with a 4.39% gain.

In the portfolio of 116 stocks priced, there were 78 advances and 38 declines, for a win/lose ratio of better than 2/1. Seven groups moved up and only the Brokers, encountering profit taking, sold off a modest 1.37%.

The Life & Health sector with 20 ups and only 7 downs shone with a 5.79% gain.

Reproduced from National Underwriter Life & Health/Financial Services Edition, May 13, 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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