INSURANCE SHARE PROSPECTS
So far, insurance shares have proved disappointing to those who bought them as a good holding for peace or war. Since September 4th there have been some very sharp falls, partly because, like bank shares, insurance shares had to take the weight of liquidity selling which could not be put through in the gilt-edged market, but even more because estimates of earnings prospects were revised. It has been recognised, for example, that the net return on insurance companies' investments is adversely affected by the sharp rise in income tax; life business will suffer from heavy claims and a falng off in new business ; that property investments are subject to physical risks, and so on. I feel, however, that the fall in insurance shares has been overdone.
All the big companies have their investments widely spread ; very substantial assets are held in the United States ; the property risk will shortly be reduced by a Government insurance scheme ; marine, fire and motor business should, in the aggregate, escape being seriously affected ; and up to a point the life position is protected by the probability that bonuses to policyholders will be reduced. At current prices representative insurance shares can be bought to yield anything between 4 and 51 per cent., a higher yield basis than has been known for many a long day. Investors willing to take a long view might consider this section.
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