Are Property Insurers Seeing the Twilight of the Gods?

(MoneyWatch)  The prevailing wisdom on Wall Street is that when stocks rise on bad news we're in a bull market, and when they fall on good news it's a reversal of fortune.
So it was interesting to see that the day after property insurer Chubb reported third quarter earnings had doubled, its shares dropped $3.15 or nearly six percent. And Travelers, which also reported that day, didn't fare much better. The brief euphoria when Travelers announced that profits had quadrupled didn't carry through to the weekend as its shares fell nearly one percent.

One reason could be that Stifel Nicolaus analyst Michael Paisan lowered his opinion on Chubb to "hold" from "buy," according to Bloomberg News. In analyst lingo, a "hold" used to mean "sell." What it means now depends on the firm and the analyst, but clearly he was urging caution.

Much of what Paisan said was obvious. With all the cost cutting and contraction taking place in the financial industry, it's easy to show profits, particularly as compared to last year's third quarter. And it's especially easy for insurers as they got a bonus: no third quarter hurricanes this year.

But going forward, the issue will be revenue, and in the case of property insurers, building premium volume. It is here that they have a tough road to hoe, as straight-talking Chubb CEO John Finnegan pointed out. Paisan was quick to pick up on this, warning that Chubb's businesses will be under pressure as customers look to cut costs.

Chubb is a 127-year-old company with seasoned executives, and very wily. It will find ways to profit even in the toughest of times - as it showed last year. And its price-to-earnings multiple of only 11.6 makes it look inviting to investors.

But other insurers may not be so attractive, particularly after they report their third quarter earnings and the best is past. We could see a lot of other analysts' shoes drop.