Focus on Insurance Names Which Have Demonstrated Sustainability of Returns: Amit Kumar, Analyst at Macquarie Group Limited, Advises Investors on How to Play the Insurance Space
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: Are there some bright spots in P&C insurance? How do you want to be playing the sector at this stage?
Mr. Kumar: I think that's a good question. I think investors should distinguish between pricing, earned returns and margins. A double-digit decline in pricing does not necessarily mean that the ROEs will decline double digits too. So in my mind, if you're thinking about the marketplace, I think there are several opportunities to play the space.
If you look at 2013, a majority of the insurance and reinsurance stocks outperformed the S&P. Now in 2014, in Q1, both commercial insurers and reinsurers have been out-of-favor versus other financials such as banks or real estate, and we are seeing some renewed interest in the sector, but it's still on the fringes.
My sense is that if you're looking at the stocks, you should be focusing on names which have demonstrated sustainability of returns, or you should be focusing on turnaround stories where there is a very compelling argument to make to own the stock. If you think of those factors, you are essentially doing your due diligence and picking very specific names. I think 2013 was a bit less of an exercise in stock picking, but instead you could have bought a basket of stocks and generally outperformed the marketplace.
TWST: When you look at those criteria, are there some names that come to mind that you would recommend, and can you walk us through your case for each of them?
Mr. Kumar: I mean, if you're looking at some of the specific names on the large-cap side, I would pick AIG (AIG) as one. I think there are a few factors that are working in AIG's favor. Number one is their mix of business between P&C and life. The underlying trends in AIG's P&C book have been stabilizing, and AIG's life and retirement business continues to make strong contributions to earnings, which recently have been more than the P&C...
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.
