Investment Notes
By CUSTOS
MARKETS have been unsettled by the rise in the American bank rate—a forerunner usually of a setback in Wall Street—and by events in Africa, although the threat by some African states to break off relations with Great Britain has been read as a `bull' point for sterling. Little support came from the mainten- ance of dividends by souru DURHAM, UNITED STEEL and JOHN SUMMERS for when the new taxation has to be applied the cover for these dividends will mostly disappear. The dividend yields of 10 per cent or more which are now offered on these steel shares (12.4 per cent on South Durham) are a sign that the market is not feeling bullish about the steel outlook. The Rhodesian crisis has caused yields on the Rhodesian copper mines to rise to 16.4 per cent for NCHANGA, 171 per cent- for ZAMBIA ANGLO- AMERICAN and 18.1 per cent for RHOKANA. The crisis has also caused a sharp fall in TURNER AND NEWALL, whiCh at 36s. now yields 6.1 per cent. This company 'mines asbestos in Rhodesia and it was thought that it would be unable to export to Great Britain. But the embargo does not appar- ently affect manufacturing operations. Mining in Rhodesia is proceeding normally.
Composite Insurance Shares A leading firm of brokers which specialises in insurance shares has made a report on the half-yearly results of the composite companies. While the premium accounts show a higher rate of growth than the recent average and while the underwriting results in fire and accident reveal an overall improvement there are big differences in the profit out-turn for individual companies. For example, ROYAL will have lciWer profits due to its losses in the US, which out- weighed improvements elsewhere (notably in the UK and Canada). In the case of SUN ALLIANCE loss claims from the Los Angeles riots and the `Betsy' hurricane, will be heavy, although that hurricane did not appear to have caused as much trouble as was feared at one time. GENERAL JICCIDENT, on the other hand, has had substan- tially better results in the US and elsewhere al- though is still underwriting at a loss in the US. COMMERCIAL UNION also showed an improvement, but is still losing money in the US. EAGLE STAR has been .badly lilt by the hurricane 'Betsy.' (These `Betsy' losses fall in the second half.) NORTHERN AND EMPLOYERS greatly reduced its losses, showing a marked improvement in the US, the UK and Canada, and its losses from `Betsy' are unlikely to exceed those suffered on the 1964 hurricanes. The YORKSHIRE (with no business in the US) reports 'continued expan- sion' and improved underwriting results.
Northern and Employers I still think that it is too early—with Ameri- can losses not yet eliminated--to go into the market in composite insurance shares, but this report would incline me to favour Yorkshire, Northern and Employers and possibly General Accident if I were a buyer.
1965 Present Yield High Low Price Div. %
General Accident 5/- 50/- 40/3 45/9 1'/10} 4..0 Northern & Employers 126/6 97/6 112/6 4/9.6 4.2
Yorkshire 51- .. 49/3 35/3 49/3 1/8 3.3
Northern and Employers at 112s. 6d. is only 13 per cent above its recent 'low' and about 40 per cent below its all-time 'high.' Its gross investment income has increased this year by 8 per cent. At the current price the shares are valued at only 8.2 times their estimated gross investment income plus life assurance profits—a lower multiple than any other major composite in- surance company. When underwriting losses stop in the US the market will surely be valuing these shares on a higher basis.
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