On Aug 13, 2013, Zacks Investment Research upgraded EMC Insurance Group Inc. (EMCI - Snapshot Report) to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #3 (Hold).
Why the Upgrade?
EMC Insurance Group has been experiencing rising earnings estimates on the back of improved second-quarter 2013 results. Moreover, lower catastrophe losses, stable reserves and a consistent capital deployment via dividends have been impressive. Additionally, this property-casualty insurer and reinsurer delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 100.4%.
On Aug 8, EMC Insurance Group reported second-quarter 2013 operating earnings per share of 47 cents, which significantly outpaced the Zacks Consensus Estimate of 10 cents. Earnings also rebounded from the year-ago quarter loss of 14 cents a share.
Results were supported by 13.8% year over year top-line, primarily driven by 15.3% improvement in premiums earned. Moreover, lower-than-expected expenses supported the improvement in combined ratio to 102.2% from 113.9% in the year-ago period. Book value per share also rose 5.7% year over year to $30.75.
While policy rate increases should continue to grow in high-single digits in the second half of 2013, the low interest rate environment is likely to weigh on the underwriting margins and investment returns. Nonetheless, higher retained policies, addition of new business along with a healthy capital position bodes well for long-term growth.
Based on EMC Insurance Group’s fundamental strength and capital management, the Zacks Consensus Estimate for 2013 jumped 17% to $2.75 per share in the last 7 days. Moreover, the same for 2014 rose 9.1% to $3.00 in the last 7 days. Meanwhile, no downward revision in estimates was witnessed for both the years.
Other Stocks to Consider
Apart from EMC Insurance Group, other outperforming insurers in the industry include HCI Group Inc. (HCI - Snapshot Report), Global Indemnity Plc and Everest Re Ltd. (RE - Analyst Report). All the stocks carry a Zacks Rank #1 (Strong Buy).