NEW YORK ( TheStreet) -- Insurance company book values are expected to rise by an average of 4.7% following third quarter earnings presentations as a result of strong bond and equity market gains, according to a report published Tuesday by Sandler O'Neill.
A rise in book value is one of the best things that can happen to a stock since companies are often valued on a price-to-book basis. Thus a 5% rise in book value is likely to drive a 5% increase in the stock price at the very least--though likely a bit more, since investors may expect the trend to continue. Rising book values due to investment gains may represent a good selling opportunity however, since there is little to suggest investment gains are likely to be sustainable and they aren't reflective of any great skill on the part of the company's management. Any insurance company portfolio manager can make money when both stocks and bonds are rising in value, as happened during the third quarter.
Here are the five insurance companies Sandler analysts expect to see the biggest surge in book value.
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