Published: August 14, 2009
The
correct answer is 
(B.) KBW Insurance Index (KIX)
The KBW Insurance Index (KIX)
covers 75% of the market
capitalization of U.S. insurance
stocks across the industry. It
includes household names such as
AFLAC (NYSE: AFL), Allstate
(NYSE: ALL) and Chubb (NYSE:
CB). The index peaked at just
over 150 in May 2008. When it hit
its low of around 42 this past
March, it had fallen more than -70%
-- far worse than the roughly -50%
decline in the S&P 500. Since then,
however, the S&P has recovered about
+40% of its value off its lows, but
insurance stocks have rebounded more
than +90%!
Though this may seem like the time
to get back in the ring, you can't
just throw all caution to the winds
in picking insurance stocks. Many
former blue chip firms are still
struggling and may underperform
long-term, even during a stock
market recovery. As Nigel Dally, a
top-rated insurance analyst for
Morgan Stanley (NYSE: MS) has
said, "The industry used to be very
stable, very predictable. Now it's
about who can weather the storm."
However, even though the best of the
breed saw large investment income
declines last year as interest rates
and the stock market plummeted, the
strongest insurers remained
profitable and are now poised for
continued gains as the economy
starts to stabilize. That's why
these stalwarts are part of
StreetAuthority editor Carla
Pasternak's short list this month in
her High-Yield Investing newsletter.
Carla's high-yield picks range from
preferred stock to exchange-traded
debt, and to boot, all are
investment-grade, offer secure
income, and enjoy a positive
return
on equity (ROE). In fact, the
average ROE for the group is
8.63%--far stronger than the barely
profitable 0.86% returns of the
insurance industry as measured by
the KBW Insurance Index!
Getting back in the game can be
daunting, but StreetAuthority has
you covered. The securities she's
identified not only carry a bargain
price tag, they provide stable,
above-average income with yields of
up to 11%. To learn the names of
Carla's picks, and to learn more
about High-Yield Investing,
please visit this link.
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