White Mountains: A Strong Buy - Analyst Blog

On Apr 10, 2013, Zacks Investment Research upgraded White Mountains Insurance Group Ltd. ( WTM ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

White Mountains have been experiencing rising earnings estimates on the back of improved fourth-quarter 2012 results and enterprise growth through acquisitions. As a result, the company reported strong fourth-quarter results with a positive earnings surprise of 724.1%. Additionally, this property-casualty insurer and reinsurer delivered positive earnings surprises in 3 out of the last 4 quarters with an average beat of 245.2%.

On Feb 5, White Mountains reported fourth-quarter 2012 operating earnings of $10.36 per share, which exceeded the Zacks Consensus Estimate of a loss of $1.66, although it lagged the operating earnings of $20.03 per share in the year-ago quarter. The results were supported by 5.6% growth in earned premiums along with lower-than-expected operating and acquisition expenses.

While higher underwriting expenses and lower investment income were the dampeners, White Mountains remains adequately liquid, also reflected by over 8% growth in its book value per share at 2012-end. This also paves the way for investing in its inorganic growth strategy.

The recent acquisition of Fuji Fire and Marine Insurance Co. - a small runoff subsidiary of the American International Group Inc. ( AIG ) and the proposed acquisition of Empire Insurance Co., slated to close by the mid-2013, are projected to enhance the company's existing portfolio and generate incremental earnings.

Based on White Mountain's fundamental strength and claims management, the Zacks Consensus Estimate for 2013 escalated 6.9% to $20.40 per share in the last 60 days. The estimate for 2014 is pegged at $24.25, up 12.8% in the last 60 days. Meanwhile, no downward revision in estimates was witnessed for both the years.

Other Stocks to Consider

Apart from White Mountains, other stocks that are outperforming in the insurance sector include Hilltop Holdings Inc. ( HTH ) and Progressive Corp. ( PGR ). All these stocks carry a Zacks Rank #1 (Strong Buy).

AMER INTL GRP (AIG): Free Stock Analysis Report

HILLTOP HLDGS (HTH): Free Stock Analysis Report

PROGRESSIVE COR (PGR): Free Stock Analysis Report

WHITE MTN INS (WTM): 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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