Buy Reinsurers Before Peak Storm Month, Barclays Says

RenaissanceRe Holdings Ltd., PartnerRe Ltd. and Everest Re Group Ltd. may beat the Standard & Poor’s 500 Index next month, based on past returns of reinsurers at the height of the Atlantic storm season, Barclays Plc said.

“The stocks historically outperform once the peak of hurricane season has been reached,” Jay Gelb, an analyst at Barclays, said in a note to investors today. “This trade has delivered positive returns in six of the past eight years.”

Reinsurers backstop primary carriers such as American International Group Inc. and Travelers Cos. to protect against larger-than-usual claims. A basket of property-casualty reinsurers has had an average 3 percent return in September compared with a decline of 1 percent for the S&P in the past eight years, Gelb said.

The only two times reinsurers underperformed the index in that span were 2005, when two of the stocks faltered because of Hurricanes Katrina and Rita, and 2009, he said. Everest gained 15 cents to $80.30 at 4:15 p.m. in New York Stock Exchange composite trading. RenaissanceRe climbed 71 cents, or 1.3 percent, to $56.59 and PartnerRe advanced 54 cents to $73.62. All three of the companies are based in Bermuda.

The U.S. Climate Prediction Center cut its forecast on Aug. 5 for the hurricane period to a range of 14 to 20 named storms, down from the 14 to 23 it predicted in May. The forecast was lowered on slower-than-expected activity in the first two months of the season, which runs from June through November.