Insurance Earnings So Far 1Q07 — VII

Things are slowing down, but not much.  Here’s my summary of Thursday’s earnings:


RAM Holdings beats handily, and Assured Guaranty beats.  I used to own RAM Holdings, but I kicked it out because of the negative macro view of the firm that I work for.  Absent the negative macro view, I would have loaded the boat in the twelves and hung on.  I like the management team and the strategy.


Nationawide and Phoenix both beat.  Big beat for Phoenix, and the stock price was up 5%.  Both are heavily levered to equity prices, so the beat should not be so surprising.
Manulife met estimates and the price fell a little.  Manulife is a company where I don’t get the valuation; it seems too high.  As pointed out yesterday, American Equity missed and fell hard today.  UnumProvident rose as it demonstrated its turnaround through beating earnings on Wednesday after the close.


Aon reports and beats on higher revenues.  It seems like the big brokers are beating, while the smaller brokers are missing.  They are different business models.

Primary Commercial

PMA Capital and Tower Group beat, while Specialty Underwriters Alliance missed.  Revenues grew at all of them, and generally continued a 1Q07 theme: so long as earnings are decent enough, the market prefers companies that are growing the top line.


First American misses. They foresee a slowdown in their business and will be looking to reduce expenses.  A writedown here, a writedown there.  FAF is well-managed in my opinion, so if the stock falls tomorrow, it won’t stay there for long.

Personal Lines

Kingsway and Twenty First Century Holdings both miss.  Kingsway is has a high loss ratio from a troublesome acquisition, and the stock goes down 11%.  TCHC cuts earnings giuidance in half because of the onerous nature of Florida personal lines regulation.  The stock falls 45% in the aftermarket on Thursday.  My guess is it finishes up from there, but running a personal lines company with a large Florida exposure is risky; that should not be news to anyone.

The Bermudans

Odyssey Re beats, continuing the pattern of strong earnings on low cats.  They wrote less business, so perhaps gains tomorrow will be muted.  The earnings of Endurance Specialty were pretty good, but their conservatism in new writings was not appreciated by investors, and the stock was down more than 2%.

In summary: Great quarter for primary commercial and the Bermudans.  Good quarter for Life insurance and Financial insurance.  So-so quarter for brokers, personal lines and title.  Poor quarter for mortgage insurers.  Conservatism is not appreciated at present.  Absent catastrophes, I would be inclined to see these trends continue into the next quarter.

Full disclosure: long ENH (take heart, Ken LeStrange!)