Our heart never fails to leap up when we behold a group long dormant, if not moribund, showing signs of life.
For what it's worth, we view the casualty insurers as among the few pockets of opportunity in this market. The industry, of course, has been on its tail forever, and its famed underwriting cycle came to a grinding halt about eight or nine years ago at the very bottom of the downswing. Its Street following is extremely thin and the opposite of robust.
All of which makes the casualty sector irresistible.
Which leads inevitably to the question of which of these drowsy, shaggy stocks looks intriguing. .... our old pal Archie MacAllaster of Barron's Roundtable fame, who has a great gut feel for insurance stocks, we decided to slyly extract a recommendation from him.
Actually we got two: Old Republic International and Safeco, both of which he had plugged on occasion over the years in the pages of this magazine. He thinks they're both fine companies whose stocks have been unjustly and irrationally driven way down from their highs.
Old Republic's Chicago-based, and it has a heavily commerical book of business, as they say in the trade. It has been consistently profitable, and those profits most years have been higher than the year before. The stock has come down from above 32 last summer. Its current price is 18 and change, which is only a touch above book value.
Archie says the shares are a raging bargain, selling for slightly over nine times what he figures the company will earn this year.