The Aleph Blog

The Aleph Blog http://alephblog.com Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Thu May 23 3:42:17 2013 / +0000 GMT Universal Post Manager 1.1.2 [ www.ProfProjects.com ] On Insurance Investing, Part 3 http://alephblog.com/?p=5809 Thu May 23 3:42:17 2013 / +0000 GMT http://alephblog.com/?p=5809

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.

5809

2013-01-26 23:09:33

2013-01-27 04:09:33