We have retained our Neutral recommendation on
Montpelier Re Holdings Ltd.
(
MRH
) as we expect that the catastrophe loss stemming from
Hurricane Sandy will weigh on the earnings performance of the
company. The insurance and reinsurance provider currently carries
a Zacks Rank #3 (Hold).
Why Reiterate?
There was no earnings momentum over the last 7 days. Montpelier
is scheduled to release its fourth quarter and full year 2012
results on February 7, after the closing bell. The Zacks
Consensus Estimates for the fourth quarter and 2012 are currently
pegged at a loss of 80 cents per share and earnings of $2.11 per
share, respectively. The estimates translate into a
year-over-year decline of nearly 197% for the fourth quarter,
while an increase of 184% for 2012.
Though the entire industry benefited from lower catastrophe
occurrences through the first nine months of last year, the
occurrence of Sandy in October end will have an effect on the
fourth quarter results. Montpelier expects to incur pretax
loss from Hurricane Sandy to be approximately $95 million, net of
reinsurance recoveries and reinstatement premiums in the fourth
quarter of 2012.
Nevertheless, Montpelier's continued focus to strengthen its
operations, enhance shareholders value via dividend increase and
strong scoring with rating agencies position it well for the
longer term.
Additionally, Montpelier enjoys the exemption of Bermuda-imposed
income, withholding and capital gains taxes until 2035 on all
Bermuda-based subsidiaries, assured by Bermuda Ministry of
Finance.
Other Stock to Consider
Although we have a cautious stance on Principal Financial, other
stocks like
Allstate Corp.
(
ALL
) and
American Financial Group Inc.
(
AFG
), which carry a Zacks Rank #1 (Strong Buy), are worth
considering.
AMER FINL GROUP (AFG): Free Stock Analysis
Report
ALLSTATE CORP (ALL): Free Stock Analysis
Report
MONTPELIER RE (MRH): Free Stock Analysis
Report
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