On Jun 1, 2016, shares of Validus Holdings, Ltd VR hit a 52-week high of $48.77, driven by better-than-expected first-quarter 2016 results. About 0.4 million shares exchanged hands in the last trading session and the stock finally closed at $48.69. Year to date, the stock has returned 5.2% comparing favorably with 2.7% return by the S&P.
Validus Holdings’ operating earnings of $1.39 per share in the first quarter surpassed the Zacks Consensus Estimate by 6.9% driven higher premiums and a lower share count resulting from share repurchases during the quarter. This Zacks Rank #3 (Hold) insurance broker delivered positive surprises in the two of the last four quarters, with an average beat of 4.79%.
Gross premiums increased 4.8% in the quarter fueled by higher contributions from the AlphaCat and Western World segments.
With respect to underwriting performance, the company’s property product remains solid while the flood product continues to gain traction and management considers it to be high margin class. Hence, management estimates an expense ratio run rate between 38% and 40% by fourth-quarter 2016.
With respect to balance sheet strength, cash and cash investments improved 1.2% from the 2015 end level. Book value per share increased 4.8%.
Also, riding on the strength of its operational performance, the company deployed capital effectively and in turn enhanced shareholders’ value. Validus Holdings bought back about $60 million worth shares in the first quarter and has $472.3 million remaining under its authorization.
These positives drove the Zacks Consensus Estimate higher on upward revisions in the last 60 days. The Zacks Consensus Estimate increased 1.8% to $4.46 for 2016 and 2.4% to $4.31 for 2017. The expected long-term earnings growth rate is 9%.
Stocks to Consider
Some better-ranked insurers are Hannover Rück SE HVRRY, Marsh & McLennan Companies, Inc. MCC and Trupanion, Inc. TRUP. Each of these stocks carries a Zacks Rank #2 (Buy).
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