On Aug 28, 2013, Zacks Investment Research downgraded
White Mountains Insurance Group Ltd.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Earnings estimates for White Mountains have been trending down
owing to dismal second-quarter 2013 results and a reduced
investment portfolio. The company reported second-quarter results
with a negative earnings surprise of 19.9%. Additionally, this
property-casualty insurer and reinsurer underperformed the
year-to-date S&P 500 index, which posed a growth of 16.6%
against White Mountains' 9.3%.
On Jul 31, White Mountains reported second-quarter operating
earnings per share of $3.62, which lagged both the Zacks
Consensus Estimate and year-ago figure of $4.52 and $3.85,
The downside was due to 9.58% decline in top line, led by
lower premiums, investment income and higher capital losses.
Although total expenses dipped 3.8% from the prior-year quarter,
loss and loss adjusted as well as underwriting expenses were
still high. Consequently, book value depreciated 1.9% year over
year to $597.29 per share.
White Mountains has been facing operating challenges thus far
in 2013. Fluctuations in currencies and equity markets have taken
a toll on the investment portfolio. Moreover, higher underwriting
and loss adjusted expenses amid weak premiums and reserves are
weakening the operating leverage. Depreciated asset base, cash
and equity pose additional financial risks, which are also making
the investors jittery.
While the Zacks Consensus Estimate for 2013 edged up 1.9% to
$24.10 per share in the last 30 days, it is still 34.4% lower
than 2012. Moreover, the estimate for 2014 is pegged at $23.55,
down 9.4% in the last 30 days and 2.3% from 2013. Meanwhile, no
upward revision in estimates was witnessed for 2014, although one
firm raised estimate for 2013.
Other Stocks to Consider
While we prefer to avoid White Mountains at present, other
stocks that are outperforming in the insurance sector include
HCI Group Inc.
EMC Insurance Group Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
EMC INSURANCE (EMCI): Free Stock Analysis
HCI GROUP INC (HCI): Free Stock Analysis
EVEREST RE LTD (RE): Free Stock Analysis
WHITE MTN INS (WTM): Free Stock Analysis
To read this article on Zacks.com click here.