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February 02, 2003 at 07:00 PM
ByThomas K. Meakin
NU Stock Analyst
2002 was a dismal year in Insurance Stocks–but with a silver lining!
Even a cursory analysis of year 2002 price movements in our portfolio reveals a startling statistic–that is, more than half the issues suffered double-digit losses. Sixty of the 117 stocks qualified as double-digit downers! Further counting of losers and gainers brought the total to 81 losers and only 36 gainers.
Seven of the eight industry sectors went from bad to worse. Only the Broker group stayed in the black with a 5.34% gain. As often said, and worth repeating, the brokers are prime beneficiaries of a hardening property-casualty market. Rate increases benefit brokers first and then the results of property-casualty insurers. In particular, companies with high percentages of commission income are beneficiaries.
Property-casualty stocks, possibly helped from going lower by investors hopes for the hardening markets effect on p-c stocks, were down 9.13%.
A few big p-c stocks ended ahead for the year. Allstate was up and down and ended up almost 10% at $36.99. W.R. Berkeley Corp. advanced 10.64% to end at $39.61. SAFECO Corp. recorded a comeback gain and ended up 11.3% at 34.67.
The second largest group, the life-health stocks, was a major loser after falling 16% for the year. In a field of 26 stocks, there were only seven advances against 19 declines. But two of the advances were in large well-known stocks.
Aetna Life, now Aetna Inc., a major health care provider, restructured and added to reserves. Institutional investors liked what they saw happening and bought the stock. AET was ahead 24.64% for the year.
Aflacs now well-known duck quacked its way into the statistics with a 22.64% gain. Both sales and earnings for the company outpaced projections, here and in Japan. Aflac president, Dan Amos, gives his quacking prodigy much credit for the increased recognition the name Aflac has enjoyed.
The seven financial services stocks were off 10.89%. Only Leucadia National did well. LUK soared 29.23% to close at $37.31, up from $28.87 when the year began. The stocks of the four largest financial services providers had similar records, all bad. Citigroup was off 30.29%; Morgan Stanley, Dean Witter followed suit with a 28.64% decline. Merrill Lynch crumbled 27.19%, while Goldman Sachs fell 26.58%.
The Reinsurers boasted five winners, and remarkably, one stock that broke even for the year. Odyssey Re Holdings Corp. started 2002 at $17.70, and ended at that price. There was one huge winner, Montpellier Re, which began at $20 and closed at $28.80,up 44%.
Note that two reinsurers, Annuity & Life Re and Trenwick Group, have clobbered the performance of the reinsurers as a whole. On their way out of business and out of coverage in this column, they have subtracted 90.76% and 92.92% respectively for Annuity Re and Trenwick Group. No need to worry further. They are gone, if not forgotten.
