Bill Wexler's Dog Pound Message Board

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Non-Tech : Bill Wexler's Dog Pound

REFR 1.820

+5.2%

3:58 PM EST

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To: Dale Baker who wrote (5800)	12/30/1999 3:41:00 AM
From: Bill Wexler	Read Replies (2) of 10293

Insurance is really not that hard to understand. You collect premiums. You invest premiums. You hope your rate of return far exceeds loss payout. The accounting can be arcane and convoluted, but the basic business is fairly straightforward. Insurance companies have been under a lot of pressure because of stiff competition in underwriting which has led to pressure on premiums, and large losses due to an unusually high number of natural disasters. Much like banks, insurance companies will increase loss reserves during times of crisis. The bet I am making is that the stock prices of a lot of insurance companies have fallen so far below book (stated book and "hidden" book - many insurers carry all sorts of interesting assets on their books, including tons of real estate which may not be valued anywhere near the current market!), and loss reserves are so hefty - that we are reaching an inflection point. One big clue is to watch the bond market. I think it is going to rally. If so, insurers will follow - since they tend to invest heavily in bonds.

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