The Aleph Blog » Blog Archive » On Insurance Investing, Part 3

On Insurance Investing, Part 3

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:

companytickerimg_desc

mktcap

prchg_52w
Radian Group Inc.RDN0715 – Insurance (Property & Casualty)               882.0

155%

Homeowners Choice, Inc.HCI0715 – Insurance (Property & Casualty)               241.1

146%

Stewart Information Services CSTC0715 – Insurance (Property & Casualty)               528.1

100%

Imperial Holdings, Inc.IFT0712 – Insurance (Miscellaneous)                 89.7

86%

Kingsway Financial Services InKFS0715 – Insurance (Property & Casualty)                 54.0

68%

Atlantic American CorporationAAME0709 – Insurance (Life)                 69.7

63%

eHealth, Inc.EHTH0712 – Insurance (Miscellaneous)               506.9

59%

Investors Title CompanyITIC0715 – Insurance (Property & Casualty)               135.2

59%

First American Financial CorpFAF0715 – Insurance (Property & Casualty)           2,522.8

58%

Coventry Health Care, Inc.CVH0706 – Insurance (Accident & Health)           6,239.6

57%

Hilltop Holdings Inc.HTH0715 – Insurance (Property & Casualty)               753.0

55%

CNO Financial Group IncCNO0709 – Insurance (Life)           2,315.5

52%

Allstate Corporation, TheALL0715 – Insurance (Property & Casualty)         21,154.9

51%

Symetra Financial CorporationSYA0709 – Insurance (Life)           1,629.6

50%

American International Group,AIG0715 – Insurance (Property & Casualty)         54,180.4

46%

Sun Life Financial Inc. (USA)SLF0709 – Insurance (Life)         17,505.2

46%

Platinum Underwriters HoldingsPTP0715 – Insurance (Property & Casualty)           1,595.2

43%

Hartford Financial Services GrHIG0715 – Insurance (Property & Casualty)         10,829.2

41%

Lincoln National CorporationLNC0709 – Insurance (Life)           8,005.7

41%

Amtrust Financial Services, InAFSI0715 – Insurance (Property & Casualty)           2,232.4

40%

HCC Insurance Holdings, Inc.HCC0715 – Insurance (Property & Casualty)           3,989.2

39%

Fidelity National Financial InFNF0715 – Insurance (Property & Casualty)           5,669.5

38%

Horace Mann Educators CorporatHMN0715 – Insurance (Property & Casualty)               847.4

38%

Montpelier Re Holdings Ltd.MRH0715 – Insurance (Property & Casualty)           1,341.4

37%

Seabright Holdings IncSBX0715 – Insurance (Property & Casualty)               249.3

37%

Verisk Analytics, Inc.VRSK0712 – Insurance (Miscellaneous)           9,172.3

37%

AEGON N.V. (ADR)AEG0709 – Insurance (Life)         13,026.1

36%

Fortegra Financial CorpFRF0712 – Insurance (Miscellaneous)               179.3

35%

XL Group plcXL0715 – Insurance (Property & Casualty)           8,353.8

35%

Primerica, Inc.PRI0709 – Insurance (Life)           1,877.3

34%

Allied World Assurance Co HoldAWH0715 – Insurance (Property & Casualty)           2,946.7

34%

Travelers Companies, Inc., TheTRV0715 – Insurance (Property & Casualty)         29,569.3

33%

Everest Re Group LtdRE0715 – Insurance (Property & Casualty)           5,944.0

33%

Prudential Public Limited CompPUK0709 – Insurance (Life)         38,254.3

33%

CIGNA CorporationCI0706 – Insurance (Accident & Health)         16,718.9

33%

United Insurance Holdings CorpUIHC0715 – Insurance (Property & Casualty)                 91.9

32%

Partnerre LtdPRE0715 – Insurance (Property & Casualty)           5,236.2

32%

Cincinnati Financial CorporatiCINF0715 – Insurance (Property & Casualty)           6,959.7

29%

Protective Life Corp.PL0709 – Insurance (Life)           2,500.8

29%

Argo Group International HoldiAGII0715 – Insurance (Property & Casualty)               926.7

29%

Hallmark Financial Services, IHALL0715 – Insurance (Property & Casualty)               171.6

26%

Aspen Insurance Holdings LimitAHL0715 – Insurance (Property & Casualty)           2,380.3

26%

Alterra Capital Holdings LtdALTE0715 – Insurance (Property & Casualty)           2,911.1

25%

Torchmark CorporationTMK0709 – Insurance (Life)           5,314.2

24%

Alleghany CorporationY0715 – Insurance (Property & Casualty)           6,048.5

24%

Eastern Insurance Holdings IncEIHI0709 – Insurance (Life)               135.2

24%

Berkshire Hathaway Inc.BRK.A0715 – Insurance (Property & Casualty)      242,512.2

23%

Manulife Financial CorporationMFC0709 – Insurance (Life)         26,899.6

23%

Arch Capital Group Ltd.ACGL0715 – Insurance (Property & Casualty)           6,188.5

22%

Enstar Group Ltd.ESGR0715 – Insurance (Property & Casualty)           2,006.2

22%

Axis Capital Holdings LimitedAXS0715 – Insurance (Property & Casualty)           4,664.5

22%

Genworth Financial  IncGNW0709 – Insurance (Life)           4,647.8

21%

Aon PLCAON0712 – Insurance (Miscellaneous)         18,361.6

21%

American Equity Investment LifAEL0709 – Insurance (Life)               862.9

20%

White Mountains Insurance GrouWTM0715 – Insurance (Property & Casualty)           3,585.0

20%

ACE LimitedACE0715 – Insurance (Property & Casualty)         28,999.2

20%

Markel CorporationMKL0715 – Insurance (Property & Casualty)           4,581.2

19%

United Fire Group, Inc.UFCS0715 – Insurance (Property & Casualty)               595.0

19%

Employers Holdings, Inc.EIG0715 – Insurance (Property & Casualty)               658.7

18%

W.R. Berkley CorporationWRB0715 – Insurance (Property & Casualty)           5,643.1

18%

Amerisafe, Inc.AMSF0715 – Insurance (Property & Casualty)               517.4

18%

National Interstate CorporatioNATL0715 – Insurance (Property & Casualty)               592.7

18%

Old Republic International CorORI0715 – Insurance (Property & Casualty)           2,906.0

17%

Kansas City Life Insurance CoKCLI0709 – Insurance (Life)               418.7

17%

Brown & Brown, Inc.BRO0712 – Insurance (Miscellaneous)           3,901.8

17%

Aetna Inc.AET0706 – Insurance (Accident & Health)         16,644.7

17%

Crawford & CompanyCRD.B0712 – Insurance (Miscellaneous)               305.5

16%

Universal Insurance Holdings,UVE0715 – Insurance (Property & Casualty)               182.4

16%

Chubb Corporation, TheCB0715 – Insurance (Property & Casualty)         21,220.1

15%

National Western Life InsurancNWLI0709 – Insurance (Life)               593.0

15%

American Financial GroupAFG0715 – Insurance (Property & Casualty)           3,862.0

15%

Loews CorporationL0715 – Insurance (Property & Casualty)         17,109.9

15%

Endurance Specialty Holdings LENH0715 – Insurance (Property & Casualty)           1,839.7

14%

China Life Insurance Company LLFC0709 – Insurance (Life)         91,295.3

14%

State Auto FinancialSTFC0715 – Insurance (Property & Casualty)               602.7

14%

Principal Financial Group IncPFG0706 – Insurance (Accident & Health)           9,036.6

13%

EMC Insurance Group Inc.EMCI0715 – Insurance (Property & Casualty)               324.6

13%

Maiden Holdings, Ltd.MHLD0715 – Insurance (Property & Casualty)               758.2

13%

RenaissanceRe Holdings Ltd.RNR0715 – Insurance (Property & Casualty)           3,982.5

13%

Validus Holdings, Ltd.VR0709 – Insurance (Life)           3,340.1

12%

Selective Insurance GroupSIGI0715 – Insurance (Property & Casualty)           1,106.6

12%

UnitedHealth Group Inc.UNH0706 – Insurance (Accident & Health)         57,244.5

11%

Hanover Insurance Group, Inc.,THG0715 – Insurance (Property & Casualty)           1,821.7

11%

Cna Financial CorpCNA0715 – Insurance (Property & Casualty)           8,351.3

11%

ProAssurance CorporationPRA0715 – Insurance (Property & Casualty)           2,752.6

11%

Assured Guaranty Ltd.AGO0715 – Insurance (Property & Casualty)           3,264.4

11%

Marsh & McLennan Companies, InMMC0712 – Insurance (Miscellaneous)         19,053.5

10%

Safety Insurance Group, Inc.SAFT0715 – Insurance (Property & Casualty)               728.8

10%

Unico American CorporationUNAM0715 – Insurance (Property & Casualty)                 68.2

10%

Progressive Corporation, ThePGR0715 – Insurance (Property & Casualty)         13,682.1

10%

Independence Holding CompanyIHC0709 – Insurance (Life)               167.3

10%

AFLAC IncorporatedAFL0706 – Insurance (Accident & Health)         25,077.1

10%

Navigators Group, Inc, TheNAVG0715 – Insurance (Property & Casualty)               751.0

10%

Metlife IncMET0709 – Insurance (Life)         41,077.8

9%

Kemper CorpKMPR0715 – Insurance (Property & Casualty)           1,874.3

8%

ING Groep N.V. (ADR)ING0709 – Insurance (Life)         37,707.5

7%

Arthur J. Gallagher & Co.AJG0712 – Insurance (Miscellaneous)           4,502.5

7%

American National Insurance CoANAT0715 – Insurance (Property & Casualty)           2,070.2

7%

Prudential Financial IncPRU0709 – Insurance (Life)         27,417.8

6%

StanCorp Financial Group, Inc.SFG0706 – Insurance (Accident & Health)           1,776.7

4%

Global Indemnity plcGBLI0715 – Insurance (Property & Casualty)               535.1

4%

WellPoint, Inc.WLP0706 – Insurance (Accident & Health)         20,092.9

3%

FBL Financial GroupFFG0709 – Insurance (Life)               902.6

2%

Unum GroupUNM0709 – Insurance (Life)           6,407.6

2%

Infinity Property and CasualtyIPCC0715 – Insurance (Property & Casualty)               684.9

2%

Baldwin & Lyons, Inc.BWINB0715 – Insurance (Property & Casualty)               340.7

1%

Molina Healthcare, Inc.MOH0706 – Insurance (Accident & Health)           1,357.9

-2%

Reinsurance Group of America IRGA0706 – Insurance (Accident & Health)           4,098.1

-2%

Assurant, Inc.AIZ0709 – Insurance (Life)           3,039.7

-3%

RLI Corp.RLI0715 – Insurance (Property & Casualty)           1,439.5

-6%

Erie Indemnity CompanyERIE0715 – Insurance (Property & Casualty)           3,283.2

-7%

Citizens, Inc.CIA0709 – Insurance (Life)               459.8

-8%

American Safety Insurance HoldASI0715 – Insurance (Property & Casualty)               196.8

-8%

Tower Group IncTWGP0715 – Insurance (Property & Casualty)               740.9

-10%

Willis Group Holdings PLCWSH0712 – Insurance (Miscellaneous)           6,032.0

-10%

Mercury General CorporationMCY0715 – Insurance (Property & Casualty)           2,183.3

-11%

OneBeacon Insurance Group, LtdOB0715 – Insurance (Property & Casualty)           1,308.7

-12%

Greenlight Capital Re, Ltd.GLRE0715 – Insurance (Property & Casualty)               835.9

-12%

Donegal Group Inc.DGICA0715 – Insurance (Property & Casualty)               371.4

-12%

Universal American CorporationUAM0706 – Insurance (Accident & Health)               801.3

-13%

Humana Inc.HUM0706 – Insurance (Accident & Health)         11,855.7

-14%

CNinsure Inc. (ADR)CISG0712 – Insurance (Miscellaneous)               330.1

-17%

Health Net, Inc.HNT0706 – Insurance (Accident & Health)           2,204.9

-24%

MGIC Investment Corp.MTG0715 – Insurance (Property & Casualty)               581.9

-26%

MBIA Inc.MBI0715 – Insurance (Property & Casualty)           1,631.2

-30%

Meadowbrook Insurance Group, IMIG0715 – Insurance (Property & Casualty)               318.1

-36%

Phoenix Companies, Inc., ThePNX0709 – Insurance (Life)               156.1

-36%

Life Partners Holdings, Inc.LPHI0712 – 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.






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2 Responses to On Insurance Investing, Part 3

  1. dan says:

    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.

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