On Apr 12, 2013, we upgraded
Montpelier Re Holdings Ltd
) to Outperform from Neutral, as it remains well positioned to
deliver solid numbers going forward, given its increased exposure
in the property catastrophe lines of business. In addition,
focusing on underwriting operations, augmenting capital
flexibility, and strengthening its competitive position augur
well for the company going forward. This property and casualty
insurer presently carries a Zacks Rank #1 (Strong Buy).
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Montpelier has been continuously experiencing upward revisions in
estimates. Over the last 30 days, 2 of 5 estimates were revised
upward, pushing the Zacks Consensus Estimate for 2013 to $2.60 by
5.3%. For 2014, 1 of 5 estimates moved north, pushing the Zacks
Consensus Estimate to $2.60, up 2% over the same time frame.
Montpelier has expanded its underwriting reach beyond Bermuda. It
has transformed from a Bermuda 'monoline' property catastrophe
reinsurer to a global diversified catastrophe specialist. The
company benefits from tax exemptions in Bermuda as no income
taxes are levied there.
Gross insurance and reinsurance premiums written continue to
exhibit an uptrend. Favorable performances at Montpelier Bermuda
and Montpelier Syndicate 5151 continue to drive the upside.
Additionally, the company also prudently manages risks by
diversifying across geographies. Management expects a 1% to 5%
increase in net written premiums for the first quarter of 2013.
In an effort to expand the underwriting partnership business, the
company launched Blue Capital.
Additionally, it engages into share repurchases and hikes
dividend to enhance shareholder value.
With respect to earnings trend, Montpelier delivered positive
earnings surprise in all 4 quarters of 2012 with an average beat
of 44.7%. Our proven model shows that the investment manager is
likely to beat earnings in the first quarter of 2013 because it
has a right combination of a positive Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and Zacks Rank. ESP or Expected Surprise Prediction,
which represents the difference between the Most Accurate
Estimate and the Zacks Consensus Estimate, is at +5.81%.
Other Stocks to Consider
Property and casualty insurers like
AXIS Capital Holdings Ltd.
Cincinnati Financial Corp.
Arch Capital Group Ltd
), among others, also carry a Zacks Rank #1 (Strong Buy) and