Profiting from Non-Hurricanes

Includes: AXS, BRK.A, ENH, MRH, RNR
by: Evelyn Rubin

Excerpt from our One-Page WSJ Summary:

Hot Investment: Calm Weather

Summary: September has historically been the worst month for hurricanes in the U.S., and only 16 Category-3 or higher storms have hit in October since 1851. So while it may still be a little early for reinsurers that bet on a calm summer to start counting their profits, as there are formally two months left to hurricane season, a number of players including Berkshire Hathaway (NYSE:BRK.A) and RenaissanceRe Holdings (NYSE:RNR) appear to have done very well in this non-catastrophe year. After last year's stormy season, reinsurance premiums have skyrocketed 76% in the U.S. Two BRK.A divisions in the hurricane reinsurance business recorded underwriting losses of $2.02 billion in Q3 last year; if the weather holds, Glenn Tongue of hedge-fund T2Partners LLC predicts that they will record underwriting gains of $400 million in the comparable quarter this year. RNR had revenues of $886.5 million for U.S. hurricane policies last year, and a net loss of $246.8 million in the year. This year, catastrophe premiums are projected to grow more than 40% as the risk doesn't change. A Deutsche Bank analyst projects that the company's after-tax operating income this year will be $612 million.
Related links: Full WSJ articleStocks Hurt By Katrina Doing Well One Year LaterRamifications of a Quiet Hurricane SeasonFive Small Cap Hurricane Plays
Potentially impacted stocks and ETFs: Other insurers: Endurance Specialty Holdings (NYSE:ENH), Axis Capital Holdings (NYSE:AXS), Monpellier Re (NYSE:MRH).

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