While remaining mired in a soft market, U.S. insurers can at least take solace in rising stock prices and valuations.
This trend was reflected in the S&P 500 Insurance Index which began 2010 trading at $167.84 and finished the year at the $188.22. As the aggregate of many of the largest publicly traded insurance companies including Newark, N.J.-based Prudential Financial, Omaha, Neb.-based Berkshire Hathaway and New York-based Metlife Inc., the index is an interesting metric of the industry financial strength as a whole. Yet, some of the underlying characteristics affecting individual valuations are notable in their own light.
Nowhere is this more so than in the case of New York-based American International Group, which saw its share price more than double in 2010 to $57 by year’s end. The surge in AIG shares comes as the company looks to compete a financial turn around and repays the U.S. Treasury and Federal Reserve Bank of New York for the assistance it received under the Troubled Asset and Relief Program during the financial crisis. In December 2010 the company said that it had struck a deal to repay a $20 billion credit line from the Fed and later announced deals to replace government funds with private capital. The company also completed major disbursements of assets, such as Asia-based units American International Assurance and the American Life Insurance Co., in an effort to improve its balance sheet.
AIG’s comeback, while the most dramatic, was not unique. Berkshire Hathaway shares rose 22% in 2010 and Prudential shares gained 20%.
