Performance, Outlook for Key Stock Sectors
Facing claims linked to the terrorist attacks that could exceed $30 billion, several insurance companies saw their market values fall 10% or more Monday. Other financial services companies also were hit.
Still, many insurance stocks held up surprisingly well, losing less ground than the overall market or even posting gains.
The reason: Insurance brokers and commercial insurance companies stand to gain from the premium price increases that inevitably follow disasters. What’s more, many of the big insurers are considered financially healthy enough to absorb the cost of the pending claims without suffering severe blows.
“As long as you’re not financially impaired and can take part in the better rate environment, that’s a positive,” said Mark Lane, an insurance industry analyst for William Blair & Co.
David A. Wyss, chief economist at Standard & Poor’s, added, “People understand it’s expensive for them [insurers] but it won’t kill them. The risks are well spread.”
American International Group, the biggest commercial insurer, closed at $71, off $3.26, or 4.4%. Another big commercial insurance company, Chubb Corp., was down 5.1%, losing $3.42 to $63.05.
Many insurance brokers, which unlike insurance and reinsurance companies generally don’t have many assets at risk, enjoyed gains. Leading the way was broker Arthur J. Gallagher & Co., which closed at $30.35, up $4.09, or 15.6%.
On the other hand, insurance companies that face big claims and lack a substantial financial cushion were stung. That also was the case for reinsurance companies large and small. General Electric, whose reinsurance unit provided coverage on the World Trade Center and the four hijacked jetliners, fell $4.20 to $35.15. Reinsurers provide insurance that backs up the assets of insurance companies.
Elsewhere in the financial services field, there was more bad news. Wall Street brokerages, which thrived during the stock market boom, now are seen as coming into tougher times. One of Wall Street’s leading names, Morgan Stanley Dean Witter, also was shaken by virtue of being the biggest tenant in the World Trade Center. Its stock fell $6.40 to close at $42.50.
Commercial banks also were down, as were companies with interests spread across various financial services fields. Financial services industry giant Citigroup Inc., which said its third-quarter earnings could be reduced $100 million to $200 million by the disaster, fell $2.85, or 6.7%, to $39.60.
