On Dec 17, 2013, Zacks Investment Research downgraded
EMC Insurance Group Inc.
) to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #3
Why the Downgrade?
EMC Insurance has been experiencing declining earnings
estimates on the back of improved third-quarter 2013 results and
a reduced investment portfolio. Additionally, this
property-casualty insurer and reinsurer underperformed the
year-to-date Nasdaq index, which posed a growth of 33.3% against
EMC Insurance's 26.2%.
On Nov 8, EMC Insurance reported third-quarter 2013 operating
earnings per share of 50 cents, which is at par with the Zacks
Consensus Estimate. However, earnings lagged the prior-year
quarter figure of 65 cents.
Top-line growth of 7.8% year over year was more than offset by
10.4% hike in total expenses. While premiums earned drove the top
line, investment income faltered. Higher-than-expected expenses
also reflected deteriorated combined ratio of 100.8% from 99.3%
in the year-ago period.
While raised earnings guidance for 2013 and the latest
dividend hike reflect some optimism, the low interest rate
environment is likely to weigh on the underwriting margins and
Subsequently, EMC Insurance expects combined ratio of 98.4%
along with a decline in investment income in mid-single-digit
range in 2013. Additionally, weakening reserves have taken a toll
on the financials, thereby raising caution for the upcoming
Meanwhile, the Zacks Consensus Estimate for 2013 dipped 6.7%
to $2.80 per share in the last 60 days. Moreover, the same for
2014 plummeted 18.3% to $2.45 during the same period. Even on a
year-over-year basis, the earnings per share for 2014 are
projected to decline by 12.5%. No upward revision in
estimates was witnessed for both the years.
Other Stocks to Consider
While we prefer to avoid EMC Insurance Group for the time
being, some better-ranked insurers in the industry include
HCI Group Inc.
The Hanover Insurance Group Inc.
Hallmark Financial Services Ltd.
). All these stocks sport a Zacks Rank #1 (Strong Buy).
EMC INSURANCE (EMCI): Free Stock Analysis
HALLMARK FINL (HALL): Free Stock Analysis
HCI GROUP INC (HCI): Free Stock Analysis
HANOVER INSURAN (THG): Free Stock Analysis
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