OneBeacon Insurance: Strong Buy - Analyst Blog

On April 1, Zacks Investment Research upgraded OneBeacon Insurance Group, Ltd. OB to a Zacks Rank #1 (Strong Buy) on the back of rising earnings estimates following solid fourth-quarter 2013 results announced by the company early last month.

Why the Upgrade?

OneBeacon has been witnessing an upward trend in earnings estimate revisions ever since it reported its fourth-quarter 2013 results on Feb 7. The Zacks Consensus Estimate for 2014 has gone up 5.9% to $1.08 per share in the past two-month time frame. Likewise, the Zacks Consensus Estimate for the first quarter of 2014 also escalated 16.7% over the same time frame and is currently pegged at 28 cents per share.

Fourth-quarter results at OneBeacon clocked a positive earnings surprise of 9.1%. With this, the company delivered positive surprises in three of its last four quarters with an average beat of 21.4%. Since the earnings release, shares of this property and casualty insurer has spiked nearly 12.3% to close at $15.46 on Mar 31.

OneBeacon's fourth-quarter operating net income of 24 cents per share beat the Zacks Consensus Estimate of 22 cents by 9.1%. The number also surged significantly from the prior-year quarter's operating net loss of 13 cents a share.

The bottom-line surge was driven by increase in revenues coupled with lower expenses. Total expenses declined on account of lower loss and loss adjustment expenses and policy acquisition expenses.

On the other hand, OneBeacon is witnessing growth in net written premiums across all its businesses including new units. Moreover, OneBeacon Government Risks, International Marine Underwriters and OneBeacon Program Group contribute considerably toward premium growth.
 
Additionally, OneBeacon's book value per share improved 5.9% year over year to $11.58 per share at the end of 2013. Also, combined ratio improved 2060 basis points to 91.3% during the fourth quarter. All these improvements are reflected in better results at all fronts, increased focus on business activities and disciplined underwriting.

Other Stocks to Consider

Some other top-ranked stocks worth mentioning in the property and casualty insurance industry are Alleghany Corp. Y, AmTrust Financial Services, Inc. AFSI and Fidelity National Financial, Inc. FNF. All these stocks carry the same Zacks Rank as OneBeacon.