Printer Friendly

A.M. Best indices: health insurance stocks led the way in 2006.

Stories about rising health-care costs may have dominated the headlines in 2005, but they appear not to have scared investors off of the health insurance sector, as stocks in the A.M. Best Health & HMO Index saw a whopping 41.96% rise from their position at year-end 2004.

Perhaps buoyed by the planned roll-out of Medicare's universal prescription-drug benefit programs, from which some health plans anticipate billions of dollars in new revenue, health insurance stocks outpaced all other sectors of the industry, including four of the top 10 slots among individual performers.

Humana Inc, Health Net Inc., Coventry Health Care Inc. and Aetna Inc.--all major players in the Medicare Part D program that launched Jan. 1--saw their shares improve more than 50% in 2005, with Humana up 82.99% to post the third-largest percentage increase among all insurance stocks.

At the opposite end of the performance scale were property/casualty stocks, with many hampered by record losses from hurricanes Katrina, Rita, and Wilma. The Property/Casualty Index still saw gains on the whole, rising 7.07% from year-end 2004, but it contributed nine of the bottom 10 individual performers. Hit particularly hard was Montpelier Re Holdings Ltd., with shares down 50.85% on the year after suffering a third quarter that saw the company post a net loss of $875.1 million anda combined ratio--losses and expenses as a percentage of premiums--of 422.6.

However, some individual P/C companies managed to shine through. Among the brightest was medical-malpractice writer SCPIE Holdings Inc., which saw its shares more than double--up 109.26%, more than any other insurer--on vastly improved fundamentals, both at the company level and in the underlying medical-malpractice market.

The brokerage sector likewise saw more modest growth, up 9.31%, as many firms sought to completely remake their business models after New York state Attorney General Eliot Spitzer's probe of bid-rigging allegations at Marsh & McLennan Cos. In the wake of the Spitzer investigations, most of the largest brokers announced they would henceforth eschew contingent commissions and placement service fees, while several sold off their interests in ancillary operations--such as wholesale brokerages, reinsurance intermediaries, and underwriters--that were criticized as presenting the potential for monopolistic "tying" arrangements.

The life sector straddled a middle ground between the "go-go" performance of health insurers and the more modest returns seen by property insurers. On the year, A.M. Best's Life Index rose a healthy 22.17%, combining with the health stocks to push the aggregate Life/Health & HMO Index up 31.89%.
COPYRIGHT 2006 A.M. Best Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2006, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

 Reader Opinion

Title:

Comment:



 

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Briefing
Author:Lehmann, R.J.
Publication:Best's Review
Geographic Code:1USA
Date:Feb 1, 2006
Words:420
Previous Article:Best's year-end stock summary.
Next Article:Henrikson looks forward to leading MetLife in New Era.
Topics:


Related Articles
Keeping the promise.
New rules and new features.
Best's Review now features insurance stock indices.
BestWeek: Consolidation, Medicare Drug Plan Shaped Health Market in 2005.
A.M. Best Downgrades Rating of Health Insurance Plans of Greater New York and Affirms Rating of ConnectiCare; Assigns Negative Outlook.
A.M. best stock indices, first quarter 2006.
A.M. Best stock indices, second quarter 2006.
A.M. Best launches 15 global stock indexes.
Europe and reinsurance lead as A.M. Best Stock Indexes show a double-digit gain for 2006.
A.M. Best composite index shows virtually no gain in first-quarter 2007.

Terms of use | Copyright © 2014 Farlex, Inc. | Feedback | For webmasters