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An Insurer Even A Bear Can Love

Inside Wall Street


Property-and-casualty insurers are currently out of favor, reflecting the tough earnings environment facing this highly competitive sector. So why is investment manager Ed Wachenheim III, while bearish on the industry, buying shares of Hanover Insurance, which specializes in auto and homeowners' policies?

Wachenheim is the chairman of Greenhaven Associates, which manages $300 million. He says a number of reasons have prompted him to accumulate more than 400,000 shares of Hanover. Wachenheim notes that it has recovered smartly from the big surge in damage claims from Hurricane Hugo and the freezing weather of December, 1989. He is also impressed with management, which has kept assets away from housing mortgages and junk bonds. Most important, Wachenheim thinks there's a good chance that Hanover will be acquired before long. State Mutual Life Assurance owns 55% of the stock, he notes. And in recent weeks, State has bought more shares. The betting is that State will either make an acquisition move or sell its block to an interested buyer--possibly a big financial-service company. Hanover, now at 27, is worth $50 a share by one pro's count--nearly twice its current price. Its book value is estimated at $37 a share. A State spokesman declined to say how many more shares the company will buy.GENE G. MARCIAL

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