Subtitle: The Value of Momentum and Mean-Reversion
In the extreme short-run, mean-reversion dominates.? Over a year, momentum dominates.? Over a four year period mean-reversion returns.
The same applies to insurance stocks.? This is perhaps more true of insurance stocks, because the accounting is so opaque.? When accounting is opaque, it takes a longer period of time for market prices to catch up with the underlying reality.
I do not trust momentum naively.? I compare it to fundamentals and ask if it has more room to run or fall.? Remember, insurance is a mature industry… there are few sustainable competitive advantages here.? Near turning points, valuations are stretched or in the dumps.
That said, here is my table of momentum for the insurance industry:
| company | ticker | img_desc |
mktcap |
prchg_52w |
| Radian Group Inc. | RDN | 0715 – Insurance (Property & Casualty) | ?????????????? 882.0 |
155% |
| Homeowners Choice, Inc. | HCI | 0715 – Insurance (Property & Casualty) | ?????????????? 241.1 |
146% |
| Stewart Information Services C | STC | 0715 – Insurance (Property & Casualty) | ?????????????? 528.1 |
100% |
| Imperial Holdings, Inc. | IFT | 0712 – Insurance (Miscellaneous) | ???????????????? 89.7 |
86% |
| Kingsway Financial Services In | KFS | 0715 – Insurance (Property & Casualty) | ???????????????? 54.0 |
68% |
| Atlantic American Corporation | AAME | 0709 – Insurance (Life) | ???????????????? 69.7 |
63% |
| eHealth, Inc. | EHTH | 0712 – Insurance (Miscellaneous) | ?????????????? 506.9 |
59% |
| Investors Title Company | ITIC | 0715 – Insurance (Property & Casualty) | ?????????????? 135.2 |
59% |
| First American Financial Corp | FAF | 0715 – Insurance (Property & Casualty) | ?????????? 2,522.8 |
58% |
| Coventry Health Care, Inc. | CVH | 0706 – Insurance (Accident & Health) | ?????????? 6,239.6 |
57% |
| Hilltop Holdings Inc. | HTH | 0715 – Insurance (Property & Casualty) | ?????????????? 753.0 |
55% |
| CNO Financial Group Inc | CNO | 0709 – Insurance (Life) | ?????????? 2,315.5 |
52% |
| Allstate Corporation, The | ALL | 0715 – Insurance (Property & Casualty) | ???????? 21,154.9 |
51% |
| Symetra Financial Corporation | SYA | 0709 – Insurance (Life) | ?????????? 1,629.6 |
50% |
| American International Group, | AIG | 0715 – Insurance (Property & Casualty) | ???????? 54,180.4 |
46% |
| Sun Life Financial Inc. (USA) | SLF | 0709 – Insurance (Life) | ???????? 17,505.2 |
46% |
| Platinum Underwriters Holdings | PTP | 0715 – Insurance (Property & Casualty) | ?????????? 1,595.2 |
43% |
| Hartford Financial Services Gr | HIG | 0715 – Insurance (Property & Casualty) | ???????? 10,829.2 |
41% |
| Lincoln National Corporation | LNC | 0709 – Insurance (Life) | ?????????? 8,005.7 |
41% |
| Amtrust Financial Services, In | AFSI | 0715 – Insurance (Property & Casualty) | ?????????? 2,232.4 |
40% |
| HCC Insurance Holdings, Inc. | HCC | 0715 – Insurance (Property & Casualty) | ?????????? 3,989.2 |
39% |
| Fidelity National Financial In | FNF | 0715 – Insurance (Property & Casualty) | ?????????? 5,669.5 |
38% |
| Horace Mann Educators Corporat | HMN | 0715 – Insurance (Property & Casualty) | ?????????????? 847.4 |
38% |
| Montpelier Re Holdings Ltd. | MRH | 0715 – Insurance (Property & Casualty) | ?????????? 1,341.4 |
37% |
| Seabright Holdings Inc | SBX | 0715 – Insurance (Property & Casualty) | ?????????????? 249.3 |
37% |
| Verisk Analytics, Inc. | VRSK | 0712 – Insurance (Miscellaneous) | ?????????? 9,172.3 |
37% |
| AEGON N.V. (ADR) | AEG | 0709 – Insurance (Life) | ??? ?????13,026.1 |
36% |
| Fortegra Financial Corp | FRF | 0712 – Insurance (Miscellaneous) | ?????????????? 179.3 |
35% |
| XL Group plc | XL | 0715 – Insurance (Property & Casualty) | ?????????? 8,353.8 |
35% |
| Primerica, Inc. | PRI | 0709 – Insurance (Life) | ?????????? 1,877.3 |
34% |
| Allied World Assurance Co Hold | AWH | 0715 – Insurance (Property & Casualty) | ?????????? 2,946.7 |
34% |
| Travelers Companies, Inc., The | TRV | 0715 – Insurance (Property & Casualty) | ???????? 29,569.3 |
33% |
| Everest Re Group Ltd | RE | 0715 – Insurance (Property & Casualty) | ?????????? 5,944.0 |
33% |
| Prudential Public Limited Comp | PUK | 0709 – Insurance (Life) | ???????? 38,254.3 |
33% |
| CIGNA Corporation | CI | 0706 – Insurance (Accident & Health) | ???????? 16,718.9 |
33% |
| United Insurance Holdings Corp | UIHC | 0715 – Insurance (Property & Casualty) | ???????????????? 91.9 |
32% |
| Partnerre Ltd | PRE | 0715 – Insurance (Property & Casualty) | ?????????? 5,236.2 |
32% |
| Cincinnati Financial Corporati | CINF | 0715 – Insurance (Property & Casualty) | ?????????? 6,959.7 |
29% |
| Protective Life Corp. | PL | 0709 – Insurance (Life) | ?????????? 2,500.8 |
29% |
| Argo Group International Holdi | AGII | 0715 – Insurance (Property & Casualty) | ?????????????? 926.7 |
29% |
| Hallmark Financial Services, I | HALL | 0715 – Insurance (Property & Casualty) | ?????????????? 171.6 |
26% |
| Aspen Insurance Holdings Limit | AHL | 0715 – Insurance (Property & Casualty) | ?????????? 2,380.3 |
26% |
| Alterra Capital Holdings Ltd | ALTE | 0715 – Insurance (Property & Casualty) | ?????????? 2,911.1 |
25% |
| Torchmark Corporation | TMK | 0709 – Insurance (Life) | ?????????? 5,314.2 |
24% |
| Alleghany Corporation | Y | 0715 – Insurance (Property & Casualty) | ?????????? 6,048.5 |
24% |
| Eastern Insurance Holdings Inc | EIHI | 0709 – Insurance (Life) | ?????????????? 135.2 |
24% |
| Berkshire Hathaway Inc. | BRK.A | 0715 – Insurance (Property & Casualty) | ????? 242,512.2 |
23% |
| Manulife Financial Corporation | MFC | 0709 – Insurance (Life) | ???????? 26,899.6 |
23% |
| Arch Capital Group Ltd. | ACGL | 0715 – Insurance (Property & Casualty) | ?????????? 6,188.5 |
22% |
| Enstar Group Ltd. | ESGR | 0715 – Insurance (Property & Casualty) | ?????????? 2,006.2 |
22% |
| Axis Capital Holdings Limited | AXS | 0715 – Insurance (Property & Casualty) | ?????????? 4,664.5 |
22% |
| Genworth Financial? Inc | GNW | 0709 – Insurance (Life) | ?????????? 4,647.8 |
21% |
| Aon PLC | AON | 0712 – Insurance (Miscellaneous) | ???????? 18,361.6 |
21% |
| American Equity Investment Lif | AEL | 0709 – Insurance (Life) | ?????????????? 862.9 |
20% |
| White Mountains Insurance Grou | WTM | 0715 – Insurance (Property & Casualty) | ?????????? 3,585.0 |
20% |
| ACE Limited | ACE | 0715 – Insurance (Property & Casualty) | ???????? 28,999.2 |
20% |
| Markel Corporation | MKL | 0715 – Insurance (Property & Casualty) | ?????????? 4,581.2 |
19% |
| United Fire Group, Inc. | UFCS | 0715 – Insurance (Property & Casualty) | ?????????????? 595.0 |
19% |
| Employers Holdings, Inc. | EIG | 0715 – Insurance (Property & Casualty) | ?????????????? 658.7 |
18% |
| W.R. Berkley Corporation | WRB | 0715 – Insurance (Property & Casualty) | ?????????? 5,643.1 |
18% |
| Amerisafe, Inc. | AMSF | 0715 – Insurance (Property & Casualty) | ?????????????? 517.4 |
18% |
| National Interstate Corporatio | NATL | 0715 – Insurance (Property & Casualty) | ???????? ??????592.7 |
18% |
| Old Republic International Cor | ORI | 0715 – Insurance (Property & Casualty) | ?????????? 2,906.0 |
17% |
| Kansas City Life Insurance Co | KCLI | 0709 – Insurance (Life) | ?????????????? 418.7 |
17% |
| Brown & Brown, Inc. | BRO | 0712 – Insurance (Miscellaneous) | ?????????? 3,901.8 |
17% |
| Aetna Inc. | AET | 0706 – Insurance (Accident & Health) | ???????? 16,644.7 |
17% |
| Crawford & Company | CRD.B | 0712 – Insurance (Miscellaneous) | ?????????????? 305.5 |
16% |
| Universal Insurance Holdings, | UVE | 0715 – Insurance (Property & Casualty) | ?????????????? 182.4 |
16% |
| Chubb Corporation, The | CB | 0715 – Insurance (Property & Casualty) | ???????? 21,220.1 |
15% |
| National Western Life Insuranc | NWLI | 0709 – Insurance (Life) | ?????????????? 593.0 |
15% |
| American Financial Group | AFG | 0715 – Insurance (Property & Casualty) | ?????????? 3,862.0 |
15% |
| Loews Corporation | L | 0715 – Insurance (Property & Casualty) | ???????? 17,109.9 |
15% |
| Endurance Specialty Holdings L | ENH | 0715 – Insurance (Property & Casualty) | ?????????? 1,839.7 |
14% |
| China Life Insurance Company L | LFC | 0709 – Insurance (Life) | ???????? 91,295.3 |
14% |
| State Auto Financial | STFC | 0715 – Insurance (Property & Casualty) | ?????????????? 602.7 |
14% |
| Principal Financial Group Inc | PFG | 0706 – Insurance (Accident & Health) | ?????????? 9,036.6 |
13% |
| EMC Insurance Group Inc. | EMCI | 0715 – Insurance (Property & Casualty) | ?????????????? 324.6 |
13% |
| Maiden Holdings, Ltd. | MHLD | 0715 – Insurance (Property & Casualty) | ?????????????? 758.2 |
13% |
| RenaissanceRe Holdings Ltd. | RNR | 0715 – Insurance (Property & Casualty) | ?????????? 3,982.5 |
13% |
| Validus Holdings, Ltd. | VR | 0709 – Insurance (Life) | ?????????? 3,340.1 |
12% |
| Selective Insurance Group | SIGI | 0715 – Insurance (Property & Casualty) | ?????????? 1,106.6 |
12% |
| UnitedHealth Group Inc. | UNH | 0706 – Insurance (Accident & Health) | ???????? 57,244.5 |
11% |
| Hanover Insurance Group, Inc., | THG | 0715 – Insurance (Property & Casualty) | ?????????? 1,821.7 |
11% |
| Cna Financial Corp | CNA | 0715 – Insurance (Property & Casualty) | ?????????? 8,351.3 |
11% |
| ProAssurance Corporation | PRA | 0715 – Insurance (Property & Casualty) | ?????????? 2,752.6 |
11% |
| Assured Guaranty Ltd. | AGO | 0715 – Insurance (Property & Casualty) | ?????????? 3,264.4 |
11% |
| Marsh & McLennan Companies, In | MMC | 0712 – Insurance (Miscellaneous) | ???????? 19,053.5 |
10% |
| Safety Insurance Group, Inc. | SAFT | 0715 – Insurance (Property & Casualty) | ?????????????? 728.8 |
10% |
| Unico American Corporation | UNAM | 0715 – Insurance (Property & Casualty) | ???????????????? 68.2 |
10% |
| Progressive Corporation, The | PGR | 0715 – Insurance (Property & Casualty) | ???????? 13,682.1 |
10% |
| Independence Holding Company | IHC | 0709 – Insurance (Life) | ?????????????? 167.3 |
10% |
| AFLAC Incorporated | AFL | 0706 – Insurance (Accident & Health) | ???????? 25,077.1 |
10% |
| Navigators Group, Inc, The | NAVG | 0715 – Insurance (Property & Casualty) | ?????????????? 751.0 |
10% |
| Metlife Inc | MET | 0709 – Insurance (Life) | ???????? 41,077.8 |
9% |
| Kemper Corp | KMPR | 0715 – Insurance (Property & Casualty) | ?????????? 1,874.3 |
8% |
| ING Groep N.V. (ADR) | ING | 0709 – Insurance (Life) | ???????? 37,707.5 |
7% |
| Arthur J. Gallagher & Co. | AJG | 0712 – Insurance (Miscellaneous) | ?????????? 4,502.5 |
7% |
| American National Insurance Co | ANAT | 0715 – Insurance (Property & Casualty) | ?????????? 2,070.2 |
7% |
| Prudential Financial Inc | PRU | 0709 – Insurance (Life) | ???????? 27,417.8 |
6% |
| StanCorp Financial Group, Inc. | SFG | 0706 – Insurance (Accident & Health) | ?????????? 1,776.7 |
4% |
| Global Indemnity plc | GBLI | 0715 – Insurance (Property & Casualty) | ?????????????? 535.1 |
4% |
| WellPoint, Inc. | WLP | 0706 – Insurance (Accident & Health) | ???????? 20,092.9 |
3% |
| FBL Financial Group | FFG | 0709 – Insurance (Life) | ?????????????? 902.6 |
2% |
| Unum Group | UNM | 0709 – Insurance (Life) | ?????????? 6,407.6 |
2% |
| Infinity Property and Casualty | IPCC | 0715 – Insurance (Property & Casualty) | ?????????????? 684.9 |
2% |
| Baldwin & Lyons, Inc. | BWINB | 0715 – Insurance (Property & Casualty) | ?????????????? 340.7 |
1% |
| Molina Healthcare, Inc. | MOH | 0706 – Insurance (Accident & Health) | ?????????? 1,357.9 |
-2% |
| Reinsurance Group of America I | RGA | 0706 – Insurance (Accident & Health) | ?????????? 4,098.1 |
-2% |
| Assurant, Inc. | AIZ | 0709 – Insurance (Life) | ?????????? 3,039.7 |
-3% |
| RLI Corp. | RLI | 0715 – Insurance (Property & Casualty) | ?????????? 1,439.5 |
-6% |
| Erie Indemnity Company | ERIE | 0715 – Insurance (Property & Casualty) | ?????????? 3,283.2 |
-7% |
| Citizens, Inc. | CIA | 0709 – Insurance (Life) | ?????????????? 459.8 |
-8% |
| American Safety Insurance Hold | ASI | 0715 – Insurance (Property & Casualty) | ?????????????? 196.8 |
-8% |
| Tower Group Inc | TWGP | 0715 – Insurance (Property & Casualty) | ?????????????? 740.9 |
-10% |
| Willis Group Holdings PLC | WSH | 0712 – Insurance (Miscellaneous) | ?????????? 6,032.0 |
-10% |
| Mercury General Corporation | MCY | 0715 – Insurance (Property & Casualty) | ?????????? 2,183.3 |
-11% |
| OneBeacon Insurance Group, Ltd | OB | 0715 – Insurance (Property & Casualty) | ?????????? 1,308.7 |
-12% |
| Greenlight Capital Re, Ltd. | GLRE | 0715 – Insurance (Property & Casualty) | ?????????????? 835.9 |
-12% |
| Donegal Group Inc. | DGICA | 0715 – Insurance (Property & Casualty) | ?????????????? 371.4 |
-12% |
| Universal American Corporation | UAM | 0706 – Insurance (Accident & Health) | ??? ???????????801.3 |
-13% |
| Humana Inc. | HUM | 0706 – Insurance (Accident & Health) | ???????? 11,855.7 |
-14% |
| CNinsure Inc. (ADR) | CISG | 0712 – Insurance (Miscellaneous) | ?????????????? 330.1 |
-17% |
| Health Net, Inc. | HNT | 0706 – Insurance (Accident & Health) | ?????????? 2,204.9 |
-24% |
| MGIC Investment Corp. | MTG | 0715 – Insurance (Property & Casualty) | ?????????????? 581.9 |
-26% |
| MBIA Inc. | MBI | 0715 – Insurance (Property & Casualty) | ?????????? 1,631.2 |
-30% |
| Meadowbrook Insurance Group, I | MIG | 0715 – Insurance (Property & Casualty) | ?????????????? 318.1 |
-36% |
| Phoenix Companies, Inc., The | PNX | 0709 – Insurance (Life) | ?????????????? 156.1 |
-36% |
| Life Partners Holdings, Inc. | LPHI | 0712 – Insurance (Miscellaneous) | ???????????????? 50.3 |
-40% |
I note that the basement contains a lot of funky companies with issues.? The penthouse contains a lot of credit-sensitive companies that have rallied off of the strong equity market, and moderately strong housing market.
I do not have much trust in the momentum now, because many are trusting in the rosy scenario where losses have been normalized.? I do not think that is the case, and think that there will be additional losses from credit risk coming soon.
What sustainable competitive advantages are there in the insurance industry?
-Underwriting discipline?
–
–
Underwriting discipline
Investment discipline
Asset/Liability Management (matching/liquidity)
Not fancy, but a company that does these things stays in the game, and compounds returns.