BULL POINTS:
â– Decent underwriting profits
â– Benign claims environment
â– Reasonable dividend yield
â– Shares rating undemanding for the sector
BEAR POINTS:
â– Uninspiring investment return
â– Currency movements hit profits
An interesting feature of the insurance market is that its fortunes have little to do with the economic cycle. Rather, it's the cycle of disasters, which prompt big payouts, followed by attempts to rebuild capital through hiking premium rates, that drives the market. And since the hefty claims arising from 2008's hurricane season - reinsurance giant Swiss Re estimates that hurricanes Gustav and Ivan cost the insurance industry $24bn (£14.3bn) - insurers have been pushing up their premium rates in order to recover their losses. That process received a further push from losses on insurers' investment portfolios induced by the financial crisis. These factors have hit profits in the short term. Longer term, however, a backdrop of rising premiums is good news for most insurers, Hardy Underwriting included.