HCC Insurance Holdings
) touched their 52-week high of $36.07 on October 18, after the
specialty insurance underwriter got some rating affirmations and
paid an increased dividend.
This Zacks #1 Rank (Strong Buy) has reported 4 straight quarters of
positive earnings surprises, and has a fair chance of continuing
that streak when it reports third-quarter results next week.
Q3 Coming Up
HCC Insurance Holdings is scheduled to report its third quarter
results on October 30. The Zacks Consensus Estimate is pegged at 75
cents on expected revenues of $626 million.
On July 31, HCC Insurance Holdings delivered second quarter
earnings of 95 cents per share, reflecting an increase of 55.7%
from last year and surpassing the Zacks Consensus Estimate by
Total revenue increased 8.1% year over year to gross $632.3
million, thanks to higher premiums and investment income.
The retention rate increased 200 basis points to 87%. A lower level
of catastrophe activities led to a 430 basis points improvement in
the combined ratio over the prior-year quarter to 84.9%.
On August 23, the company's board of directors authorized a 6.4%
hike in its quarterly cash dividend to 16.5 cents. On August 27,
the board approved a share buyback program. Per the approval, the
company is authorized to repurchase shares worth $300 million. HCC
Insurance Holdings spent $59.5 million to buyback 1.9 million
shares in the second quarter.
On September 26, credit rating agency A.M. Best affirmed the
ratings of HCC Insurance Holdings and its subsidiaries. Also, on
October 1, Fitch Ratings affirmed the ratings of HCC Insurance
Holdings and its subsidiaries.
Earnings Estimates Move North
The Zacks Consensus Estimate for 2012 increased 1.9% to $3.24 as
five of 10 estimates rose over the last 30 days. This also
represents a year-over-year increase of 24.7%.
For 2013, the Zacks Consensus Estimate rose 0.6% to $3.21 over the
same time frame.
Valuation Looks Attractive
HCC Insurance Holdings currently trades at a forward P/E of 10.9x,
a 12.1% discount to the peer group average of 12.4x. On a
price-to-book basis, shares are trading at 1.08x, compared to the
peer group average of 1.02x.
HCC Insurance Holdings has a trailing 12-month return on equity
(ROE) of 9.8%, substantially higher than the peer group average of
Market Performance & Technicals
HCC Insurance Holdings has been trading above its 50-day and
200-day moving averages following the announcements of an increased
dividend and the share repurchase authorization.
Shares have also gained 16.6% since reporting second quarter
Volume is fairly strong, averaging roughly 411,986 daily. The
year-to-date return for the stock came in at 28.9%, way ahead of
the S&P 500's return of 13.9%.
Headquartered in Houston, Texas and founded in 1974, HCC Insurance
Holdings underwrites non-correlated specialty insurance products,
including property and casualty, accident and health, surety and
credit product lines. With offices in the United States, the United
Kingdom, Spain and Ireland, it has a market capitalization of $3.54
billion and competes with ACE Limited (
), The Travelers Companies, Inc. (
) and W.R. Berkley Corporation (
), among others.
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