Atlas Financial: A Strong Buy - Analyst Blog

On Mar 12, Zacks Investment Research upgraded Atlas Financial Holdings, Inc. AFH to a Zacks Rank #1 (Strong Buy) owing to solid fourth quarter 2013 results.

Why the Upgrade?

Atlas Financial posted strong fourth-quarter 2013 financial results on Mar 10, 2014. The results included a positive earnings surprise of 4.8%. With this, the company delivered positive earnings surprises in two of its last four reported quarters with an average beat of 4.6%. Following the earnings release, shares of this property and casualty insurer spiked nearly 9.5% to close at $14.37 on Mar 11.

Atlas Financial reported fourth-quarter net operating earnings per share of 22 cents, escalating 46.7% year over year. The number also beat the Zacks Consensus Estimate by a penny.

Bottom-line growth was largely attributable to the company's revenue accretion. Significant improvement in net premiums earned drove the top line, which surged 72.2% year over year. Total revenue also exceeded the Zacks Consensus Estimate by 20.7%.

Atlas Financial is witnessing operating synergies owing to its well-managed vertical expansion throughout its geographic base, established over the past two years. The company's acquisition of Gateway, in early 2013, has also contributed to top-line growth.

We expect the company's 2014 earnings to gain from insurance price strengthening and increasing business. It is also worth noting that Atlas Financial is not materially exposed to catastrophic risk which eliminates potential earnings volatility.

The Zacks Consensus Estimate for 2014 is currently pegged at 96 cents per share, while for 2015 it is pegged at 20 cents a share.

Other Insurers Worth a Look

Investors interested in the property and casualty insurance industry may also consider some other top-ranked stocks like Alleghany Corp. Y, American Financial Group Inc. AFG and AmTrust Financial Services, Inc. AFSI. All these stocks sport the same Zacks Rank as Atlas Financial.