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Some Insurance for Your Stock Portfolio

The SPDR S&P Insurance ETF (KIE) attempts to correspond to the total return performance of an index that tracks the performance of publicly traded companies in the insurance industry.

Its year-to-date performance is up 15% and shares of KIE were trading at around $43.20 as of Monday. That's down a little from the 52-week high of $45.20. It yields around 1.7% and has a three-year average return of a little more than 7%.

Here's a five-year chart that compares it with the S&P 500 SPDR ETF (SPY). KIE Chart KIE data by YCharts

KIE sports an average PE of around 9, which also happens to be the forward (one-year) PE for ALL. TRV's forward PE is around 10. According to Arends' article, "Allstate shares...trades at roughly the net per-share value of the company's assets, and for about 63% of annual per-share revenue. The median for the past 15 years... [is] 93% of revenue."

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

The part of the insurance business that caught my eye and that benefits from the potential of rising insurance rates going forward is the major insurance brokers. The Journal article pointed out the industry is a "global oligopoly, controlled by a handful of companies..."

In reverse alphabetical order they are Willis Group Holdings (WSH), Marsh & McLennan (MMC - Get Report) and Aon (AON - Get Report).

A recent press release by claims that , "... the effects of Hurricane Sandy on the industry appear to be lower than originally expected, and some companies have been able to turn in quarterly earnings that beat Wall Street's expectations."

Analysts and fund managers who own the insurance brokers seem to be favoring AON and WSH. AON soared after it beat expectations on the third-quarter results, partly boosted by the outstanding performance by its human resources division. AON pays a 1.1% dividend and sells for 11.59 times forward earnings.

WSH, which is rebounding back to pre-Sandy levels, pays a more impressive 3.14% dividend based on a share price of $34.40. At that price it's trading approximately at 12.52 times forward earnings. On Oct. 24 it had an intraday low of $31.98, which lifts the yield-to-price to 3.38%.
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KIE $70.34 0.36%
WSH $127.66 0.87%
AON $105.41 -0.53%
MMC $63.45 0.14%
AAPL $93.24 -0.41%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

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