Seeking Alpha: Aspen Insurance Building Tomorrow's Growth At The Cost Of Today's Margins

Few bargains remain in the insurance sector, what with these companies having recovered significantly from the post-credit crisis lows. Valuations have moved up in conjunction with higher pricing across multiple sectors, but it is now starting to look like pricing is topping out in many (if not most) markets. Couple that with a still-weak investment environment and growing loss severity and I'm not surprised that many sell-side analysts are pulling back a bit from their bullish calls on the sector.

Aspen Insurance (AHL) finds itself in an interesting position amidst these changes. The company has followed a clear and stepwise transition towards becoming more of a primary insurance underwriter (versus a balanced insurance/reinsurance company), and the management believes that the insurance platform has matured to a point where it can retain more risk. Margins and returns have taken a hit in the course of building out the primary insurance business, and the Street is quite skeptical about Aspen's near-term ROE prospects, but the shares do seem modestly undervalued and could offer growth-driven upside.

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Aspen Insurance Building Tomorrow's Growth At The Cost Of Today's Margins

Seeking Alpha: Confusing Tower Group Offers Potential Value And Near-Certain Risk

By and large, I'm a big advocate of the KISS rule in investing (Keep It Simple, Stupid). More often than not, if an investment idea takes a lot of explanation, it's not worth the trouble. While Tower Group (TWGP) was once a relatively straightforward P&C insurance play, the company's proposed merger with Canopius makes this a much more complicated investment idea. While the reasons for the merger are sound and the potential value here is high, investors need to weigh that carefully against the risks and increasing complexity of the company.

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Confusing Tower Group Offers Potential Value And Near-Certain Risk

Investopedia: ACE And Arch Capital - Can Investors Look To These A-List Insurers?

Hardly anyone seems to have noticed, but 2012 has been a pretty good year for some of the large corporate insurers. True, there have been natural disasters this year and the rate environment isn't great, but many of the top players like ACE (NYSE:ACE), Arch Capital Group (Nasdaq:ACGL) and Renaissance RE (NYSE:RNR) have seen their stocks solidly beat the market this year. Of course, it's not all perfect in P&C and reinsurance - companies like XL Group (NYSE: XL) and PartnerRe (NYSE:PRE) have seen their stocks sell off this year. (For additional reading, see When Things Go Awry, Insurers Get Reinsured.)

The question for investors, though, is whether the recovery in 2011 has taken away the value in top-notch names like ACE and Arch Capital.


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http://stocks.investopedia.com/stock-analysis/2011/ACE-And-Arch-Capital---Can-Investors-Look-To-These-A-List-Insurers--ACGL-ACE-RNR-XL-PRE-WSH-AON1229.aspx

Investopedia: Tempest-Tossed Berkley

Storms both real and figurative have been buffeting the insurance industry for some time now. Loose underwriting standards and a drive for market share have kept a lid on premium price increases, storms and natural disasters have been whacking the loss ratios and a low interest rate environment - combined with default worries at national and local levels - has hampered investment income. 

In times like these, W.R. Berkley (NYSE:WRB) is a relatively safe harbor.

A Mix of News For Q2
In one very big respect, the second quarter was a bad one, but in many other ways it was a confirmation of real progress. Operating income was down about one-third from last year and that's the big negative take-away for investors.



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Investopedia: Berkley Looking Unloved

Insurance companies have largely missed out on a lot of the recent stock market rally. True, reinsurance companies like Arch Capital (Nasdaq:ACGL) and RenRe (NYSE:RNR) have done well as these markets have started to harden and company-specific risk and capital models have shown their quality. But in the P&C and specialty insurance markets, times have been tougher and that has kept a lid on W.R. Berkley's (NYSE:WRB) stock.

There is nothing in the numbers from Berkley's first quarter to promise an immediate turnaround, but patient investors should give this name a long look. This is not Berkshire Hathaway (NYSE:BRK.A), but insurance companies that consistently earn better than their cost of capital are valuable wealth-building enterprises, and Berkley has a very good track record on that score. (For more, see Intro To Insurance: Property And Casulty Insurance.)


First Quarter Results a Mixed Bag
Top line results should offer some encouragement. Net premiums grew about 10% this quarter, and the company reported that pricing improved by about 1%, while renewal retention rose to about 80%. There was a fair bit of turbulence on the individual unit level, but four of the five units showed net premium growth. The alternative markets unit was the lone decliner (down almost 5%), while specialty grew almost 19% and international jumped almost 38%.

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Investopedia: The Japanese Earthquake's Effects On Insurers

Although it is still far too early to fully assess the scale and impact of the severe earthquake that struck northeastern Japan, and all of us at Investopedia wish our friends and readers in Japan the best, the fact remains that markets have to digest this information and move forward. To that end, it seems quite likely that major reinsurance companies are going to face large claims in the wake of this disaster. 

The Scale of the Disaster 

As of this writing, which is only hours after the quake struck, it is all but impossible to get a firm sense of the damage in the Tohoku region of Japan. While the reported magnitude of this quake is considerably higher than that of Great Hanshin quake that struck Kobe in 1995, it does not automatically follow that this quake will surpass the fatality (over 6,000 dead) or economic damage (roughly $100 billion) of that prior disaster. Let us all hope it does not.

Nevertheless, there are many major manufacturing facilities in this region owned by companies like Sony (NYSE:SNE), Toyota (NYSE:TM),and Nissan (Nasdaq:NSANY) to name a few. What's more, given the reports of infrastructure damage that have already come in (roads, bridges, and the like), it seems probable that there has been significant economic damage.

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http://stocks.investopedia.com/stock-analysis/2011/The-Japanese-Earthquakes-Effects-On-Insurers-BRK.A-RNR-SWCEY-ACGL-ACE-XL-RE0311.aspx

Weird Insurance Bets Worth Millions

Prior to the meltdowns in credit default swaps, mortgage bonds and various derivatives, most people regarded insurance as a fairly sedate business. The actuarial analysis that goes into predicting when people will die, crash their cars or have a fire requires exceptional statistical skills, but most people's eyes glaze over at the thought. So why not take a little look at the wilder side of insurance? (Learn all the essentials of this industry in our Insurance Tutorial.)


Specialty Lines - A Quiet Name for a Wilder Segment
 Some of the most interesting (and amusing) policies in the insurance world are grouped under what the industry calls "specialty lines". While terms like life insurance, car insurance, and flood insurance pretty much mean exactly what they sound like, specialty lines is more like industry code for "a large disorganized jumble of weird, idiosyncratic and yet still lucrative insurance policies".

Sell 'em for Parts
One of the most famous sub-categories of specialty lines insurance is body part insurance. Plenty of people have heard the stories of singers like Bruce Springsteen or Celine Dion ensuring their voices (or vocal chords) or actresses like Heidi Klum, Tina Turner and Betty Grable insuring their legs. Sometimes the performer takes the initiative, while in other cases it may be a company doing so - in the case of Heidi Klum, Braun - now part of Procter & Gamble (NYSE:PG) - took out the policy when Ms. Klum signed on as a celebrity promoter.

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http://financialedge.investopedia.com/financial-edge/0710/Weird-Insurance-Bets-Worth-Millions.aspx

Insurers Caught In The Spill

Cleaning up the mess left in the wake of the explosion and sinking of the Deepwater Horizon is going to be a multi-part process. BP is doing its part, trying to stop the shattered well from dumping even more oil into the Gulf and cleaning up what has already come out. Looking ahead, though, there will also be a major role for the insurance industry to play, as it is often insurance companies that bear the brunt of the financial ramifications of accidents like Deepwater Horizon. 

Cost Estimates Are Starting To Come Ashore
All told, the most common estimates floating out there for total insurance industry exposure to the Deepwater Horizon event range from about $1.5 billion to $3.5 billion. Should the bulk of the spill stay at sea, the losses will probably be on the lower end of the range. Should the oil come ashore in large quantities, though, it is likely that various business interruption policies will be triggered, pushing up the costs to the industry.


So far, a host of companies have come forward with their initial assessments of liability.

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