Stocks defy storm hits

It's been a terrific 12 months for insurance stocks, with shares in the sector surging despite huge losses from the hurricane season.

Royal & SunAlliance (R&SA) was one of the best performers in the FTSE 100, rallying 62.3% partly on the back of bid rumour.

Stephen Pope, head of equity research at Cantor Fitzgerald Europe, likened the insurer's price chart to a 'game of two halves'.

"In the first half of the year, the stock booked a gain of 7.8%. In contrast, during the last six months it witnessed a 50.3% gain in price from 83p to 125p."

He said one driver was strong third-quarter results. "Net income was booked at £378m from just £8m in the year earlier and operating profit doubled. That exceeded the trader's expectations".

But R&SA's performance was topped by Highway, up a staggering 97.8%. The motor insurer began 2005 by revealing it was in bid talks, but an all-share offer from Chaucer at around 45p was rejected in March.

Talk of consolidation in the sector is still supporting the stock - Highway currently stands at 66p.

However, it was a poor year for Goshawk. The former Lloyd's insurer tumbled after its profits were battered by hurricanes, and the group warned it was in breach of certain banking covenants. It ended the year at 6.13p.

' Yvette Essen is stock market reporter and insurance correspondent for The Daily Telegraph