Investor Interest Returns to Insurance After Hurricane Season While M&A Activity Heats Up the Sector: Amit Kumar, Analyst at Macquarie Group Limited, Shares His Outlook for the Space with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - June 25, 2014 - The Wall Street Transcript has just published its Insurance Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Low Profitability and Low Interest Rates - Commercial Line Brokers and Underwriters - Consolidation Trends - Emerging Market Expansion - Analysis Of Personal, Commercial & Reinsurance Subsectors

Companies include: American International Group, (AIG), The Travelers Companies, Inc. (TRV), The Chubb Corporation (CB), Validus Holdings, Ltd. (VR), Citizens Inc. (CIA), Aspen Insurance Holdings Ltd. (AHL), Endurance Specialty Holdings L (ENH) and many more.

In the following excerpt from the Insurance Report, an expert analyst discusses the outlook for the sector for investors:

TWST: What's the level of investor interest in insurance at this stage, and do you think that investor sentiment is largely in line with your view, or where does it diverge?

Mr. Kumar: I would say that the investor interest has increased, and what we've seen is that typically the investor interest diminishes at the start of the year and then it slowly picks up as we approach the hurricane season. Now that the hurricane season is underway, in my mind you'll see more interest pick up. I think the Aspen, Endurance news has definitely increased some investor interest.

The one thing I would add is that there is always this talk about "sell in May and go away," not just for the broader equity market but for the reinsurers around the hurricane season. We have done some proprietary research, and in fact our research indicates that August and September tend to be the best months for the reinsurers relative to the S&P over the past 10 or so years.

So the point I'm trying to make is that the interest is coming back, but again, if you look at how strong 2013 was, I think that definitely is impacting the interest in the space for 2014. I think if you look at 2013, most of the stocks outperformed the S&P and other indices which in themselves posted a strong year.

So right now if you look at the stocks, many of them are trading at meaningful premiums to book. On the commercial side many are trading at some premium to book, which I think that definitely creates a headwind when compared to the reinsurers that are a bit cheaper. I think people are asking themselves, in the absence of any clear-cut catalyst, what is the compelling reason to own? We agree with that perception. There might not be a compelling reason to own the space, but at the same time we feel...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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