Fund of the week: Picking stocks that can weather the weather

published 6 December 2005

Bad weather, hurricanes and earthquakes have made 2005 a turbulent year for the insurance market.

Indeed, it is likely to be the most expensive year ever for claims relating to natural disasters.

But Alec Foster, manager of Hiscox Insurance Portfolio fund, is not unduly worried. "Claims for disasters don't fall evenly," he tells the FT, "some firms are better at underwriting than others."

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Foster's aim is to invest in the ones who are better. A vital indicator is how diversified the firm's risk is: "One sector should not destroy the whole book. A balanced book of underwriting should mean they can weather the weather," he says. He's keen on firms whose management have "significant personal stakes in the business", as well as those with clear potential for growth.

Historically, the fund has had about 80% of its investments in the US, with a bias towards small and mid-cap insurers. Foster is currently focusing on the UK, which now represents 23% of the fund recently buying Aviva at a "good price". But his original aim was to make money from stocks outside the UK, which "investors would otherwise not know about" or invest in. It's working: the fund is up 32% in the last 12 months, compared to 5.7% for the overall index and 6.1% for its fund category, according to Morningstar.com. In the US, Foster likes Progressive Corporation, a motor insurer, and Philadelphia Consolidates, which both have decent size stakes owned by the founding families.

Contact: 020-7448 6021, https://him.hiscox.com

Hiscox Insurance Portfolio fund top ten holdings

Name of holding % of assets

Berkley WR Corp 7.2%

Philadelphia Consolidated 6.8%

MBIA Incorporated 5.5%

Atrium Underwriting 5.5%

Amlin Plc 5.5%

Berkshire Hathaway B 4.2%

Kiln Plc 4.1%

Old Republic 4.1%

Partner Re 4.1%

Ambac 4.0%

Annunziata was a deputy editor at MoneyWeek, covering financial markets, politics, economics and comment pieces. She then went on to the Daily Telegraph as a lead writer where Annunziata wrote a column on young women’s financial issues. Since then, she has been a member of the European Parliament for the East Midlands region in the UK as part of the Conservative Party and Annunziata continues to write for titles as a freelance journalist.