Insurance Earnings So Far 2Q07 ? Part II – The Aleph Blog

Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control

Posted on 24 July 2007 by David Merkel

What an ugly day for insurance stocks, falling more than the market as a whole, and for no good reason.? No good reason?? Well, I can think of two things: First, insurance gets tossed out with financials, even though aside from the financial insurers, they don’t typically share in the subprime mortgage or systemic risk concerns.? Second, listen to the first seven or so minutes of the Brown and Brown earnings call.? Pricing is falling apart almost everywhere in P&C insurance, with primary commercial weakening the most, and personal lines and reinsurance lagging.

Here’s the earnings summary file.? I added a field for movement in the main insurance index, to help point out movements in stock prices relative to the industry.? What are the trends?

Personal lines are doing badly, both bottom and top lines, aside from specialty areas.
Commercial lines are still winning, even with premium rates weakening.? When do premiums finally get below technical pricing levels?
Mortgage and financial insurers are weak, but how much can they really get whacked when they are so near book value?? (Perhaps down to 80% of book?)
Life lines are doing adequately.
Expectations have caught up with reality with the Bermudans.? Property looks weak;? maybe? Tony Taylor can seek advice from Michael Price on how to shrink a company profitably and conservatively…? (just kidding? :)? , but good job, PTP.)

David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures. Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions. Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.