On Sep 17, 2013, Zacks Investment Research downgraded
OneBeacon Insurance Group Ltd.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Earnings estimates forOneBeacon have been trending down owing
to dismal second-quarter 2013 results and a reduced investment
portfolio. The company delivered negative earnings surprise in 3
of the last 4 quarters, with an average of negative 155.9%.
Additionally, this specialty insurer and underwriter
underperformed the year-to-date S&P 500 index, which posed a
growth of 23.0% against OneBeacon's negative return of 7.9%.
On Jul 30, OneBeacon reported second-quarter operating
earnings per share of 15 cents, which lagged both the Zacks
Consensus Estimate and year-ago earnings of 23 cents and 21
The downside was due to 5.4% year-over-year decline in the top
line, primarily driven by lower-than-expected premiums and 18.6%
reduction in net investment income. Alongside, higher loss
adjusted, underwriting and operating expenses more than offset
the benefit of lower policy acquisition and interest expenses.
However, book value per share witnessed improvement.
OneBeacon has been facing operating challenges thus far in
2013. Lower interest rates and fluctuations in equity markets
have adversely affected the investment portfolio, also
depreciating the asset base. Moreover, higher underwriting and
loss adjusted expenses amid weak premiums, particularly in
specialty products, pose direct risk on the reserves and weaken
the operating leverage.
The Zacks Consensus Estimate for 2013 decreased 6.9% to an
earnings of 95 cents per share in the last 60 days. However, the
estimate for 2014 is pegged at $1.08 a share, which was flat over
the last 60 days. Meanwhile, no upward revision in estimates was
witnessed for both the years.
Other Stocks to Consider
While we prefer to avoid OneBeacon at present, other stocks
that are outperforming in the insurance sector include
Global Indemnity Plc
CNA Financial Corp.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
CNA FINL CORP (CNA): Free Stock Analysis
GLOBAL INDEMNTY (GBLI): Free Stock Analysis
ONEBEACON INSUR (OB): Free Stock Analysis
EVEREST RE LTD (RE): Free Stock Analysis
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