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Three analysts and top management from twelve sector firms examine the property & casualty insurance sector in this special 63-page Property & Casualty Insurance issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info479.htm.

TWST: So has supply shrunk and demand increased?

Mr. Cohen: Yes. Supply has shrunk for several reasons. The first is, simply, the amount of money that was lost during the Trade Center disaster. This was a sizable loss for the industry, the largest catastrophe ever. After tax the cost will likely be in the neighborhood of 30 billion. It was taken out of the global insurance industry, but it’s still a considerable amount of money. The second is that there seems to be a voluntary withdrawal of supply or capacity, mainly because companies are more concerned about risk. So we’ve seen companies that are offering lower limits and exiting certain lines of business. Again, I would describe it as a voluntary withdrawal of capacity.

TWST: What’s happening on the demand side?

Mr. Cohen: That’s tougher to measure, but we’re hearing anecdotal evidence about both buyers of insurance and insurance companies buying reinsurance. Many are at least examining or reexamining their insurance or reinsurance coverage. The Trade Center disaster caused a lot of people to ask questions such as, “What type of coverage do we have?” and “How much do we have?” and “How much risk should we take?” That’s a healthy sign, and an indication that demand is probably pretty good.

TWST: Early in September you told us that you were focusing largely on commercial line companies, higher quality companies or diversified names. You emphasized XL and Hartford Financial Services, as well as Mercury General, one company in the personal lines sector.

Mr. Cohen: We probably shifted a bit more toward the pure commercial lines companies where there is really good leverage to what appears to be, again, a significant cyclical upturn in rates. We like Ace (NYSE:ACE), XL (NYSE:XL), Chubb (NYSE:CB) and St. Paul (NYSE:SPC) among the larger cap ideas. Among the smaller cap ideas our favorite names are W.R. Berkley (NYSE:BER) and Philadelphia Consolidated (Nasdaq:PHLY).

TWST: And Philadelphia Consolidated?

Mr. Cohen: They have a really good long-term track record in both good markets and bad. Throughout the 1990s, their growth has consistently been in the double digits. The underwriting margins have consistently been excellent. Now, with the wind at their back, those numbers should only get better. The company is pretty well positioned, given a clean balance sheet and a good focus, again, on mostly specialty lines of business. It has its own distribution. That makes it somewhat unique as well. They have a very targeted marketing approach and pretty good product innovation.

TWST: Who does Philadelphia Consolidated target?

Mr. Cohen: They have various types of programs, anything from selling nonprofit companies D&O insurance to health and fitness centers. Essentially, they come up with a product for a class of business or for a group and try to distinguish that product from others, aggressively selling it and pricing it properly.

This special issue includes:

1) Non-Life Insurance - In an in-depth (2,200 words) Analyst Interview, Kenneth S. Zuckerberg, Vice President/Senior Analyst at Dresdner Kleinwort Wasserstein, examine the outlook for the sector including and share specific stock recommendations.

2) Property Casualty Insurance Companies - In an in-depth (2,000 words) Analyst Interview, Jay A. Cohen, First Vice President of Equity Research at Merrill Lynch, examine the outlook for the sector including and share specific stock recommendations.

3) Outlook for Property Casualty Insurance - In an in-depth (4,800 words) Analyst Interview, Michael G. Paisan, Principal in the equity research department at William Capital Group, examine the outlook for the sector including and share specific stock recommendations.

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