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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (104796)	7/29/2006 10:51:09 PM
From: Shane M	Respond to of 132070

Property is a pretty sorry business overall due to the amount of reserves companies have to put up to cover the exposure and that's along with the catastrophes are behind alot of the big increases in rates in recent years. Also many of the carriers used to subsidize the property lines with auto lines sortof as a package deal, but with auto-only carriers skimming off the auto the property has to now stand on it's own. Geico and Progressive have taken strong advantage of this. Unlike auto, it's tough to get a decent return on equity in property due to the large reserve requirements. (And unlike auto, it's certainly not a business very many companies are trying to get into <g>). In many coastal area companies are pulling out of markets or reducing coverage due to the "risk of ruin" type events that the past couple of years have indicated might be more likely than previously thought (at least on the property side). Reinsurance has gotten crazy expensive, and it's pretty difficult to justify writing in coastal areas without some sort of backstop to protect against the mega-cats. I guess my thinking on ALL is the forward PE is 8.51 to 8.14 which is historically very low for the company. Alot of folks are taking rate cuts now though, so I guess there's concern that it's not sustainable going forward with like-kind response.