【出版时间及名称】：2010年美国产险行业前景展望
        【作者】：瑞士信贷
        【文件格式】：pdf
        【页数】：40
        【目录或简介】：
Up from the Abyss
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Summary: We maintain our Neutral rating on US P&C (re)insurers but are
warming up to the commercial lines P&C stocks despite fundamentals for
the sector being weak. We believe that P&C (re)insurance stocks will rise
10% in 2010 in line with book value growth. While we aren’t upgrading the
commercial lines stocks as a group due to the lack of any fundamental
catalysts, we would not be underweight the group as the risk/reward trade
on valuation is attractive. We continue to believe personal lines
fundamentals are better than commercial lines and ROEs should remain
reasonable in 2010, though a lot of the good news is in the stocks.
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Our warming up stance toward the commercial insurers appears
counter intuitive since pricing will likely remain weak for the next couple of
years, and EPS will be under pressure as reserve releases come to an end.
Having said that, P&C insurance stocks are trading at 95% of book value,
20% below historical lows that occurred during the 2000 soft cycle. We
believe this discount is not warranted since 1) there has been no material
structural change in required capital and no permanent ROE degradation in
the wake of the financial crises like other financial services stocks that are
trading at large discounts to historical book values, 2) balance sheets are
currently stronger than the trough of the last soft cycle when companies
were significantly under-reserved, 3) Profitability is currently better than the
trough of the last soft market.
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What will get these stocks moving? Without any fundamental catalyst in
sight, we believe a substantial pick up in share repurchase programs should
put a floor underneath stocks if they remain below book value. What
investors are missing is that these stocks could still generate 8-12% BVPS
growth even if ROEs declined to 7-10% in 2011, if valuations fell to 90% of
book value and companies used their earnings to repurchase their stock.
Additionally, if the safety net of buybacks goes away, it will likely mean that a
large industry claims event has occurred, with subsequent price hardening,
a net positive for the stocks.
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Stock recommendations: In line with our warming up thesis, we are
upgrading our rating of commercial lines player CB from Underperform to
Neutral, due to more reasonable valuation and reduced concerns about
D&O losses. Our favorite idea on the commercial side is ACE, while our top
idea in the P&C space is personal lines carrier Allstate. We are lowering our
rating on Progressive to Underperform due to relative valuation and
concerns about top line and earnings growth. While fundamentals in
personal lines insurance are reasonable and should hold steady in 2010,
with the stock trading near its 52 week high, we believe the positives are
fully reflected in the stock price. Please refer to the individual company
notes for details.