Low Rates Should Create Big Profits In The Insurance ETF (KIE)

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April 1, 2010 1:39pm NYSE:KIE

“Regional banks, investment bankers and insurance companies will be key winners in the next phase of an advance that will be characterized by very lukewarm participation by the average

¬†private investor. Most investors will be surprised by this turnabout – and especially by the insurance-sector rebound. The bottom line is that insurance companies profit by investing their customers’ premiums in long-dated assets – such as credit and real estate – and earning dividend payments at rates higher than the total amount they need to pay out to cover expenses and to settle claims,” Jon D. Markman Reports From Money Morning.

Markman goes on to say, “The cheaper they buy the credit, the more it yields and the more they profit. They are now enjoying a virtuous cycle of gains – a cycle that should take hold. The reason: the risks that they took last year ought to pay off for years to come. This is why I think insurers will generate better-than-average performance over the next few years – as long as inflation remains at bay, since an escalation in price levels would eat away at the gains from the bonds.”

“My main recommended play on this is the SPDR KBW Insurance Fund (NYSE: KIE), an exchange-traded fund (ETF), and I would recommend adding to it when it flat-lines or dips in the coming years. Many of the smaller insurance companies, such as The Progressive Corp. (NYSE: PGR), and reinsurers, such as XL Capital Ltd. (NYSE: XL), will also likely perform well,” Markman Reports.

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Here are some details for you to take a look at on the SPDR KBW Insurance ETF (KIE):

The investment ETF (KIE) seeks to replicate the performance of the KBW Insurance index. The fund uses a passive management strategy designed to track the total return performance of the Insurance index. It is nondiversified.

Company Symbol % Assets
AFLAC Incorporated Common Stock (AFL) 7.64
Chubb Corporation (The) Common (CB) 7.00
MetLife, Inc. Common Stock (MET) 6.99
The Travelers Companies, Inc. C (TRV) 6.95
Prudential Financial Inc Pruden (PRU) 6.63
Genworth Financial Inc Common S (GNW) 6.27
Allstate Corporation (The) Comm (ALL) 4.09
Lincoln National Corporation Co (LNC) 4.04
Unum Group Common Stock (UNM) 3.96
Hartford Financial Services Gro (HIG) 3.93

Chart for SPDR KBW Insurance (KIE)

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