Tornadoes in Texas serve as a reminder that earth-shattering natural disasters are now the rule, not the exception. (STAY AHEAD OF THE CURVE: Follow Kapitall on Twitter)
We have long spoke about the increasing rate of natural disasters and the impact it's having on the insurance industry. Indeed, it's only a matter of time before we see "the big one," a storm capable of inflicting overs trillion dollars in damage. In fact, we narrowly avoided one a few months ago when Hurricane Irene was slated to wipe out Lower Manhattan.
Speculative Storm Damage
Let's face it, a day will come when a hurricane actually hits the Northeast coast with the force expected of Irene. It will be a monetary disaster, and the rarity of the event means the extent of the damage will be more speculation than expectation. And, unlike the seasoned veterans down in Florida, NE coasters are a bit out of their element, and likely less prepared, leaving more for insurance companies to clean up.
Consider: The freak Halloween snow storm in the Northeast also left behind a substantial amount of damage, and home/yard contractors expect that particular storm to increase work for years to come thanks to all the fallen and dying trees still gracing backyards along the cost.
Texas
The tornadoes in the Dallas-Fort Worth area are another example of the lack of prejudice natural disasters have on where they strike – heavily populated or not, business epicenter or no, here they come.
Videos are already circulating of tornadoes ripping through populated Texas towns and tossing semi-trucks all willy-nilly into surrounding buildings (now rubble). Death toll still unknown. Financial toll?: Expect a lot of zeroes.
Business Section: Investing Ideas
Property & casualty insurers are increasingly aware of the likelihood that a single storm can bankrupt the industry. So, how can you spot insurance companies that might be in trouble?
One way is to look at insurance companies that are already profitable and identify which ones are expected to see a reversal of fortune.
For this list, we started with a universe of property & casualty insurance companies. We collected profitability data, and identified the most profitable insurance companies (by comparing profit margins to competitors).
We also created a second list from the universe of property & casualty insurance companies, this time screening for net institutional buying in the current quarter and insider buying in the past six months. Sophisticated investors seem to think these insurance profits are unsustainable–do you agree?
Use these lists as a starting point for your own analysis.
Use the Turbo Chart to Compare the Performance of the First Two Companies in the List to the S&P 500:
Most profitable insurance companies:
1. Arch Capital Group Ltd. (ACGL, Earnings, Analysts, Financials): Provides insurance and reinsurance products worldwide. TTM gross margin at 14.67% vs. industry average at 14.16%. TTM operating margin at 14.67% vs. industry average at 11.27%. TTM pretax margin at 13.9% vs. industry average at 8.58%.
2. American Financial Group Inc. (AFG, Earnings, Analysts, Financials): Engages in property and casualty insurance business in the United States. TTM gross margin at 17.62% vs. industry average at 14.16%. TTM operating margin at 13.58% vs. industry average at 11.27%. TTM pretax margin at 11.79% vs. industry average at 8.58%.
3. AmTrust Financial Services, Inc. (AFSI, Earnings, Analysts, Financials): Operates as a multinational specialty property and casualty insurance company in the United States and internationally. TTM gross margin at 20.74% vs. industry average at 14.16%. TTM operating margin at 17.18% vs. industry average at 11.27%. TTM pretax margin at 16.84% vs. industry average at 8.58%.
4. The Chubb Corporation (CB, Earnings, Analysts, Financials): Provides property and casualty insurance to businesses and individuals. TTM gross margin at 18.35% vs. industry average at 14.16%. TTM operating margin at 16.23% vs. industry average at 11.27%. TTM pretax margin at 16.23% vs. industry average at 8.58%.
5. HCC Insurance Holdings Inc. (HCC, Earnings, Analysts, Financials): Provides property and casualty, surety, group life, accident, and health insurance coverage, as well as related agency and reinsurance brokerage services to commercial customers and individuals worldwide. TTM gross margin at 16.71% vs. industry average at 14.16%. TTM operating margin at 15.93% vs. industry average at 11.27%. TTM pretax margin at 14.95% vs. industry average at 8.58%.
6. Loews Corporation (L, Earnings, Analysts, Financials): Operates primarily as a commercial property and casualty insurance company in the United States. TTM gross margin at 19.7% vs. industry average at 14.16%. TTM operating margin at 19.7% vs. industry average at 11.27%. TTM pretax margin at 15.8% vs. industry average at 8.58%.
Insurers with net institutional buying in the current quarter and insider buying in the past six months:
1. CNA Financial Corporation (CNA, Earnings, Analysts, Financials): Provides property and casualty insurance products to small, middle-market, and large businesses and organizations primarily in the United States, Europe, Canada, and Hawaii. Net institutional purchases in the current quarter at 835.0K shares, which represents about 3.18% of the company's float of 26.27M shares. Over the last six months, insiders were net buyers of 40,000 shares, which represents about 0.15% of the company's 26.27M share float.
2. Maiden Holdings, Ltd. (MHLD, Earnings, Analysts, Financials): Provides non-catastrophe inland marine and property coverage reinsurance solutions to the regional and specialty insurers in the United States and Europe. Net institutional purchases in the current quarter at 2.8M shares, which represents about 5.49% of the company's float of 51.04M shares. Over the last six months, insiders were net buyers of 141,488 shares, which represents about 0.28% of the company's 51.04M share float.
3. MGIC Investment Corp. (MTG, Earnings, Analysts, Financials): Provides private mortgage insurance to the home mortgage lending industry in the United States. Net institutional purchases in the current quarter at 28.7M shares, which represents about 14.47% of the company's float of 198.32M shares. Over the last six months, insiders were net buyers of 232,500 shares, which represents about 0.12% of the company's 198.32M share float.
(Written by Rebecca Lipman. Profitability and institutional data sourced from Fidelity, insider data from Yahoo! Finance.)
Use Kapitall's Tools: Looking for ways to analyze this list?
Use this article snapshot as a launch pad (click here for help): Simply click on the links, and use Kapitall's tab navigation to browse through the data…
Analyze These Ideas: Getting Started
Dig Deeper: Access Company Snapshots, Charts, Filings
- Arch Capital Group Ltd. (ACGL, Chart, Download SEC Filings)
- American Financial Group Inc. (AFG, Chart, Download SEC Filings)
- AmTrust Financial Services, Inc. (AFSI, Chart, Download SEC Filings)
- The Chubb Corporation (CB, Chart, Download SEC Filings)
- HCC Insurance Holdings Inc. (HCC, Chart, Download SEC Filings)
- Loews Corporation (L, Chart, Download SEC Filings)
- CNA Financial Corporation (CNA, Chart, Download SEC Filings)
- Maiden Holdings, Ltd. (MHLD, Chart, Download SEC Filings)
- MGIC Investment Corp. (MTG, Chart, Download SEC Filings)
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