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Should You Dump National General After Q2 Earnings Miss?

Zacks Investment Research downgraded National General Holdings Corp.NGHC to a Zacks Rank #5 (Strong Sell) on Aug 27.

Why the Downgrade?

National General witnessed a sharp fall in estimate revisions after reporting lower-than-expected second-quarter 2015 results. Shares of this property and casualty insurer have been on a downtrend and lost 17% since it reported a weak quarterly results on Aug 3

National General reported second-quarter operating earnings per share of 36 cents missing the Zacks Consensus Estimate by 18.2%. The bottom line was flat year over year.

Earnings growth was limited primarily by increasing expenses. Total expenses of National General increased 18.1% year over year due to higher loss and loss adjustment expenses, acquisition costs and other underwriting expenses, general and administrative expenses and interest expenses.

Though the company's capital position is strong and maintains solid cash balance and investments, notes payable increased 1.3% from Dec 2014 to $302.9 million at the end of the second quarter. A higher level of notes payable has also induced interest expense surge by 90.7% in the quarter.

The company has also been witnessing downward estimate revisions for earnings on account of rising expenses and increasing liability. The Zacks Consensus Estimate for 2015 decreased to $1.55 per share from $1.73 and by 5.4% to $1.93 for 2016 as all the estimates moved south in the last 30 days.

Stocks to Consider

Some better-ranked stocks in the Property and Casualty Insurance space are First American Financial Corporation FAF , NMI Holdings, Inc. NMIH , Selective Insurance Group Inc. SIGI . All these stocks sport a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

FIRST AMER FINL (FAF): Free Stock Analysis Report

SELECT INS GRP (SIGI): Free Stock Analysis Report

NMI HOLDINGS-A (NMIH): Free Stock Analysis Report

NATIONAL GNL HL (NGHC): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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