Allied World: A Strong Buy - Analyst Blog

By Zacks Equity Research,

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Zacks Investment Research upgraded Allied World Assurance Company Holdings, AG ( AWH ) to a Zacks Rank #1 (Strong Buy) on April 15, 2014.

Why the Upgrade?

Allied World has been witnessing upward estimate revisions on the back of consistent capital deployment initiatives by the company and launch of new products. These initiatives drove bullish sentiment leading to a 1.3% increase in the Zacks Consensus Estimate for full-year 2014 to $7.51 per share over the last 7 days.

Allied World has been consistently boosting shareholders value, be it through dividend hikes, share repurchases or even adjusting share price through stock splits. In March 2014, the company hiked its annual dividend by 35% and authorized a new $500 million share repurchase program that would replace the $192 million remaining under the existing authorization.

Banking on its financial strength and solid operational performance, Allied World has increased its dividend at a 5-year CAGR of about 30%. Additionally, over a span of 3 years, the company has returned over $525.3 million to its shareholders, thereby boosting investor confidence.

Concurrently, management declared a three-for-one stock split which will increase the number of shares outstanding threefold. As a result, the stock will be more affordable for potential investors.

In fact, shares of the company also showed significant upward movement since the capital deployment initiatives were announced, increasing 3.1% to $103.52 per share on April 14, 2014. Moreover, the 1-year return from the stock is 11.66%, better than that of other insurers like XL Group plc ( XL ), Platinum Underwriters Holdings Ltd. ( PTP ) and Arch Capital Group Ltd. ( ACGL ) generating returns of (-0.74)%, 7.49% and 8.58%, respectively, over the same period..

Earlier this month, Allied World launched a Specified Response Vendor Solution (SRVS) policy that provides coverage in the event of data frauds. In March, the company also received an approval from Lloyd's, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) to launch its managing agency - Allied World Managing Agency Limited - to manage syndicate 2232.

We expect these product launches to enhance the company's operations and generate growth. The long-term growth rate of this company currently stands at 10%.

Allied World is scheduled to report first-quarter 2014 earnings results on April 23, 2014, after the closing bell. Notably, the Zacks Consensus estimate for the quarter is pegged at $2.05 per share.

Although Allied World's fourth-quarter 2013 results lagged the Zacks Consensus Estimate, it improved year over year. With respect to earnings trend, performance of this property and casualty insurer has been impressive, as it delivered positive earnings surprises in three of the last four quarters, with an average beat of 26.14%.

Investors interested in the property and casualty space may also consider Platinum Underwriters with a Zacks Rank #2 (Buy).

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

ALLIED WORLD AS (AWH): Free Stock Analysis Report

PLATINUM UNDRWT (PTP): Free Stock Analysis Report

XL GROUP PLC (XL): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: PRA , FCA , ACGL , AWH , PTP

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