Inside Wall Street
THIS INSURANCE COMPANY NEVER WRITES A POLICY
When people talk insurance, hardly anyone mentions Warner Insurance Services. That's probably because Warner (no relation to Time Warner) serves insurers rather than the public. But Warner is fast becoming an indispensable tool for insurers--and that has caught the attention of some Street pros.
Several big investors have bought in, including Fidelity Group, which is said to have taken an 8% stake. The company's Big Board-listed stock, traded at 6 1/2 in early September, hit a high of 13 in November and is now at 10 7/8. What's Warner's appeal?
It offers an array of services to insurers in the high-risk end of auto insurance--unwanted business that state governments usually assign to insurers. Warner processes policies and handles claims for insurers primarily in New Jersey and New York but doesn't assume any risk.
"But there's more to Warner now," says veteran stock picker Jimmy Nissan, a managing director at Ladenburg Thalmann. Warner's recently acquired COVER-ALL Systems unit--which offers a data processing system to nonauto property-and-casualty insurers--will bring Warner "into the huge P&C business in a big way," says Nissan. COVER-ALL's potential, he adds, isn't reflected yet in the stock's price.
Warner Chairman and CEO Harvey Krieger says COVER-ALL should kick in sales of $5 million this year, $15 million next year, and $25 million in 1995. Warner posted revenues of $48 million in the year ended Oct. 31, 1992.
BIG SAVINGS. Some 60 insurers have already signed up for the system. Among them: American International Group, Prudential Insurance, Fireman's Fund, Home Insurance--and a major Japanese insurer.
Analyst Bill Walling at Ray Dirks Research is also bullish on Warner. "There's no question that Warner's COVER-ALL has caught the fancy of the big insurers and should be a tremendous winner," says Walling. COVER-ALL, which runs on personal-computer networks, is a very flexible system that can be used for any kind of property-and-casualty policy product, he notes. It combines in a single system everything that's common to all lines of insurance, including ratings, renewals, and cancellations. The result, he says, is big savings in time and money.
Walling expects Warner to earn 65 a share this year, 90 next year, and $1.20 in 1995, vs. last year's 45 . Based on such fast growth, the stock could double in a year, he says.GENE G. MARCIAL