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Four analysts and top management from fifteen sector firms examine the Property & Casualty/Insurance Brokers sector in this special 72-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info412.htm

TWST: Jay, what’s your view of the performance of the P&C stocks compared to the life insurance stocks and other financial services? And which companies would you say were disappointments and which provided some pleasant surprises?

Mr. Cohen: I’d just highlight the fact that this group had a tremendous move up right through the year-end of 2000, and so the year-to-date performance hasn’t been too bad relative to the market. According to our numbers, it’s actually tracked the S&P 500 fairly closely. In fact, our group has outperformed by about 100 basis points. I think there’s a tug of war going on with this group. There are many different factors at play. The group is having trouble finding some momentum. On the positive side, there is still clear evidence that fundamentals are improving from a top-line standpoint — not only are prices going up, but we’re actually seeing it in the premium growth of these companies. At the same time, the earnings have been disappointing. I think, by this point, we would have expected to see the talk of better fundamentals show up on the bottom line. I think there are some good reasons why it hasn’t, but overall this has been disappointing. However, people are not giving up on this group. Because the prices are still going up, people still expect these better fundamentals to show up on the bottom line at some point, and that, indeed, could be a catalyst for the group. Secondarily, from an economic standpoint, this group is somewhat defensive. For the most part, premiums are not economically sensitive. So there is a tug of war going on: people are not willing to give up the group, but they’re not willing to necessarily back it entirely. From our standpoint, looking at the first half earnings, particularly the second quarter earnings, in general, they were disappointing. I think there were three issues that caused the disappointments for both personal and commercial lines companies. First was weather. That was a very obvious issue with Tropical Storm Allison causing significant losses for the industry. Second would be claims inflation. While prices are going up, people are paying more for claims — in particular areas, not across the board, but certainly in the homeowners’ business or medical malpractice insurance.

TWST: What’s the timing of the recommendation on XL?

Mr. Cohen: XL (NYSE:XL) is both a near-term buy and a long-term buy. We happen to like the name quite a bit. Reinsurance got some play last year. People talked about a cycle turn last year. Honestly, not much happened last year in reinsurance. I think this year we’re clearly starting to see the pace of improvement accelerate. The results for the reinsurance industry for this year will likely still be under pressure. We certainly saw that in the first half of the year, and that’s fuel for more pricing increases. This is just the beginning of a cyclical turn. XL is probably 45% reinsurance, and a good quality reinsurance company as well.

This special issue includes:

1) Property & Casualty/Insurance Brokers - In an in-depth (13,300 words) Analyst Roundtable, Jay Cohen, First Vice President at Merrill Lynch, Craig Elkind, Vice President at Credit Suisse Asset Management, Clifford Gallant, Vice President at Keefe, Bruyette & Woods, Inc. and Kenneth Zuckerberg, Vice President at Dresdner Kleinwort Wasserstein, examine the outlook for the sector including, condition of Lloyd's, cyclicality changes and share specific stock recommendations.

2) CEO interviews (average 2,500 words). Top management of fifteen sector firms examine the outlook for their firm and the sector.