Endurance Specialty: A Strong Buy - Analyst Blog

On Apr 15, Zacks Investment Research upgraded Endurance Specialty Holdings Ltd. ENH to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

Endurance Specialty has been riding on a strong growth momentum ahead of its first-quarter 2014 results, which is slated to release by the first week of May. Additionally, this global property and casualty (P&C) insurer and reinsurer delivered positive earnings surprises in 3 of the last 4 quarters, with an average beat of 41.8%.

On Feb 6, Endurance Specialty reported fourth-quarter 2013 operating earnings per share of $1.35. Although the result lagged the Zacks Consensus Estimate by 12.3%, it reversed from the year-ago quarter's loss of 96 cents.

Higher premiums and favorable reserves, particularly, in the casualty and specialty lines as well as lower expenses boosted results and improved the combined ratio. Additionally, underwriting income rebounded from a loss in the year-ago period, resulting in a return on equity (ROE) of 11.8% at 2013-end from 5.8% at 2012-end.

Improved underwriting efficiencies, prudent management of product portfolio, risk and reserves as well as disciplined expense control remained the highlights. Moreover, a strong cash and balance sheet position also supported the recent 6.25% dividend hike, paid last month, along with an inflated share buyback. Going ahead, favorable market trends should help mitigate risks on investment returns, overall instilling investor confidence in the stock.

Positive estimate revisions witnessed by Endurance Specialty also reflect optimism. The Zacks Consensus Estimate for 2014 and 2015 moved north by 5 cents and 2 cents to $4.85 and $5.05 per share, respectively, over the last 30 days. The estimate for first-quarter 2014, in particular, shot up 3.7% to $1.11 a share.

Moreover, the Most Accurate estimate for Endurance Specialty's first-quarter and full-year 2014 earnings stand at $1.20 and $4.92 a share, resulting in an Earnings ESP of +8.11% and +1.44%, respectively. Furthermore, no downward revision in estimates was witnessed for all the periods.

Other Insurers that Warrant a Look

Apart from Endurance Specialty, other top-ranked insurers in the industry include Everest Re Ltd. RE, Global Indemnity Plc GBLI and Atlas Financial Holdings Inc. AFH. With a similar Zacks Rank #1, these stocks appear quite promising.