For Stormy Days: IPC

Tired of the turbulent market? Then you might look at IPC Holdings (IPCR ): The stock of this property-catastrophe reinsurer has held up nicely through the storm. It rebounded from 18 in mid-April to 23 on Aug. 29. "This is the kind of stock true-blue value investors love," says Scott Black, president of Delphi Management, which steers some $1.5 billion. IPC is a Warren Buffett type of stock, notes Black: It trades at book value, its price-earnings ratio is a depressed 7, and it beat the Street's second-quarter estimates with earnings of 77 cents a share--better than the consensus 64 cents. And with its outlook looking rosier--despite having to make provision for destructive weather, such as Hurricane Allison--IPC has decided to pay a quarterly dividend of 16 cents a share, or a 2.8% yield, starting in September. While second-quarter calamities dampened results at primary insurance carriers, IPC was unscathed, notes Jay Cohen of Merrill Lynch, because of its tightened underwriting discipline.

Delphi's Black argues that IPC, like its peers, deserves a p-e of 10 or 11. With 2002 earnings expected to hit $2.90 a share, that translates to a stock price of 30 to 33. For 2001, Black sees earnings of $2.60, up from 2000's $1.71.

Based in Bermuda, IPC spreads its operations--and risks--around the globe. Formed in 1993 to take advantage of the crunch in reinsurance capacity after Hurricane Andrew, the company went public in 1966 and is 24%-owned by global insurer American International Group, one of the original backers. Another big stakeholder: Fidelity Management, which owns 10%.

By Gene G. Marcial

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