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WSJ's McDonald On Re-Insurer Stocks

Wednesday, 6 Dec 2006 | 2:13 PM ET

Bermuda based re-insurers were crushed by massive claims during last year's record hurricane season. But they've apparently bounced back to record billions in profits--thanks to almost no disaster claims this year. That's good news for share prices--but investors might what to look before they leap. In today's Stock Screener on "Power Lunch"--Ian McDonald from The Wall Street Journal gave a couple of his "picks."

Here they are:

Arch Capital Group

Renaissance Re

Both companies have had good growth this year. Arch does not pay a dividend.

FYI--McDonald says it's important to remember that when insurance companies have extra cash on hand--there is a tendency for them to make risky deals and/or diversify into non-core businesses. He also says the extra cash usually forces premiums down--and that could turn into an eventual loss for any insurance company. The bottom line--when it comes to these type of stocks--investor beware according to McDonald.

Spotlight on Reinsurers
There's good news for the share price of Bermuda-based reinsurers, but investors might want to look before they leap, with Ian McDonald, Wall Street Journal Reporter, and CNBC's Sue Herera.
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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • Tyler Mathisen co-anchors CNBC's "Power Lunch." Mathisen also co-anchors "Nightly Business Report produced by CNBC."

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Kenny Polcari