On Dec 12, Zacks Investment Research upgraded Allied World Assurance Co. Holdings AG (AWH) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Allied World has been experiencing rising earnings estimates on the back of improved core fundamentals in third-quarter 2013. Moreover, the company’s strong underwriting capabilities and capital position have been impressive.
Additionally, this property-casualty insurer and reinsurer delivered positive earnings surprises in all the last 4 quarters with an average beat of 32.8%. Allied World also outperformed the year-to-date S&P 500, which posted an increase of 25% against the modest return of 37.6% clocked by the company.
On Oct 23, Allied World reported third-quarter operating earnings per share of $2.93, which remarkably surpassed the Zacks Consensus Estimate of $2.13 and the year-ago quarter number of $2.16.
Total expenses climbed 11.3% over the prior-year quarter due to lower underwriting and operating expenses. The top line decreased 8.3% owing to lower net realized investment gains, although premiums earned 15.8% while net investment income remained stable.
Progress in core operating growth was also reflected by improved combined ratio and 52.3% escalation in underwriting income, leading to higher operating net income. Meanwhile, increased book value per share, cash and assets also boosted the balance sheet position.
Allied World’s diversified business mix, sturdy risk-adjusted capitalization and strong enterprise risk management was also validated by rating upgrade from A.M. Best recently. Moreover, the company’s consistent capital deployment activities continue to boost investors’ confidence in the stock.
Based on Allied World’s capital strength and underwriting discipline, the Zacks Consensus Estimate for 2013 moved north by 11.5% to $10.37 per share in the last 60 days. The estimate for 2014 is pegged at $7.61, up 2.0% in the same period.
Meanwhile, the Most Accurate estimate for First American’s 2014 earnings stands at $7.95 a share, resulting in an Earnings ESP of +4.5%. No downward revision in estimates was witnessed for both the years.
Other Insurers Worth a Look
Investors interested in the insurance industry may also consider stocks like HCI Group Inc. (HCI), Endurance Specialty Holdings Ltd. (ENH) and CNA Financial Corp. (CNA). All these stocks sport the same Zacks Rank as Allied World.
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