While AIG dove deep into a risky market, other insurers stuck to conservative strategies, helping them weather the weak economy. Among them is Travelers (TRV), which has plotted a steady course during the past two years and might be the best option for those looking for a stable insurance pick.
Insurers take premiums from clients and invest them in stocks and bonds to provide the growth necessary to meet future obligations. In the best cases, insurers reap large enough returns to invest the surplus and enhance underwriting profits. However, during times of volatile interest rates and stock prices, both activities become more difficult.As stocks plunged in 2008, Hartford Financial (HIG) and Progressive (PGR) suffered large losses from investments on their income statements. Progressive lost $807 million while Harford lost $6 billion, which led to a net loss of $2.7 billion in 2008. These losses are substantial for shareholders and those insured by these companies because they eat into funds that cover the future obligations of policies they write. Travelers prudent investment strategy helped it avoid much of this mess. Chief Executive Officer Jay Fishman and Chief Investment Officer William Heyman oversee a portfolio that's heavily weighted toward fixed income, with only a small fraction invested in equities. The benefits of this strategy are twofold. First, it allows the company to adjust its bond portfolio based on its liabilities, reducing risk. Second, it allows the majority of investment losses to bypass the income statement.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV