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3 Reasons Why Insurer James River Group Was Upgraded By KBW

3 Reasons Why Insurer James River Group Was Upgraded By KBW
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A Keefe, Bruyette & Woods analyst zerored in on three reasons to be incrementally positive on the insurance holding company James River Group Holdings Ltd (NASDAQ: JRVR) despite recent underperformance.

The Analyst

Keefe Bruyette & Woods analyst Meyer Shields upgraded James River Group from Market Perform to Outperform and increased the price target from $38 to $42, suggesting 22-percent upside.

The Thesis

The reserve strengthening in the James River Group's excess and surplus lines segment in the fourth quarter was an "anomaly that is unlikely to recur," Shields said in a Wednesday note. 

The company's year-end 2017 GAAP loss and loss adjustment expense reserves were overstated by almost $80 million, the analyst said.

KBW expects rate increases on James River's core non-commercial auto and commercial auto book to support top-line growth, and strong accident-year 2018 margins.

Citing the company's "solid" long-term underwriting track record and demonstrated innovation skills, Shields said it could be an attractive M&A candidate if industrywide consolidation persists.

KBW raised its earnings per share estimates for 2018 and 2019 from $2.50 and $2.60, respectively, to $2.65 and $2.75 to account for the higher expected net reserve releases.

The Price Action

James River Group shares were rallying 4.83 percent to $36 at the time of publication Thursday. 

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Latest Ratings for JRVR

Aug 2018B. Riley FBRMaintainsNeutralNeutral
Mar 2018Keefe Bruyette & WoodsUpgradesMarket PerformOutperform
Jan 2018B. Riley FBRDowngradesBuyNeutral

View More Analyst Ratings for JRVR
View the Latest Analyst Ratings

Posted-In: Keefe Bruyette & Woods Meyer ShieldsAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


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