On Dec 26, Zacks Investment Research downgraded Endurance Specialty Holdings Ltd. (ENH) to a Zacks Rank #4 (Sell).
Why the Downgrade?
Endurance Specialty witnessed declining earnings estimates following weaker-than-expected third-quarter 2014 results.
Operating income of $1.32 per share missed the Zacks Consensus Estimate by 14.8%. The property and casualty insurer had missed the expectation twice in the last four quarters. Also, the bottom line declined year over year. The downside came on the back of a decline in the underwriting results in the reported quarter.
Revenues also missed on both counts following a decline in net premiums earned and investment income.
Lower net premiums written in both the segments – Insurance and Reinsurance attributed to lower overall premiums.
Return on investment portfolio was negative 0.39%, which compared unfavorably with 1.32% in year-ago quarter.
Consolidated combined ratio (a measure of underwriting profitability) deteriorated 250 basis points (bps) year over year to 90.2%. This was because both segments witnessed deterioration in combined ratio.
While Endurance Specialty exited the quarter with cash and cash equivalents 4.7% less than the 2013 end level, the debt level inched up from the same period.
These negatives resulted in a downfall in the Zacks Consensus Estimate for 2014 and 2015 as all the estimates were revised downward in the last 60 days. It declined 5.1% to $6.50 for 2015 and 3.6% to $5.89 for 2015.
Other Stocks to Consider
While we would like to avoid Endurance Specialty at present, better-ranked stocks from the property and casualty industry include AmTrust Financial Services, Inc. (AFSI), Berkshire Hathaway Inc. (BRK.B) and Navigators Group Inc. (NAVG). All these sport a Zacks Rank #1 (Strong Buy).
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