Back to top

Analyst Blog

On Jul 10, Zacks Investment Research upgraded Greenlight Capital Re Ltd. (GLRE - Snapshot Report) to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #5 (Strong Sell).

Why the Upgrade?

Greenlight Capital has been seeing rising earnings estimates on the back of improving core growth. A diversified product portfolio and healthy capital position have been supported by bullish market trends in the near past. Additionally, this property-casualty reinsurer delivered positive earnings surprises in 2 of the last 4 quarters. The last positive beat of 7.1% was however witnessed in third-quarter 2013.

On May 5, Greenlight Capital reported first-quarter 2014 operating loss per share of 24 cents, wider than the Zacks Consensus Estimate of a loss of 13 cents. The company had posted earnings of $1.52 a share in the year-ago quarter. The decline was primarily due to higher investment losses that dragged both the top- and bottom line.

However, premiums earned improved, while total expenses remained stable from the year-ago period. Underwriting income jumped to $6.5 million from $1.9 million in the year-ago quarter, defying the challenging reinsurance market. Subsequently, book value per share surged 17.7% during the quarter.

Greenlight Capital holds adequate liquidity and excellent risk-adjusted capitalization. Moreover, disciplined enterprise risk management and a debt-free balance sheet score well with the ratings agencies. Going ahead, sturdy fundamentals and profitable writing of businesses are expected to mitigate market risks and drive growth in the upcoming quarters, instilling a positive sentiment among investors.

Upward estimate revisions witnessed by Greenlight Capital also reflect optimism. The Zacks Consensus Estimate for 2014 escalated 73.8% to $5.30 per share in the last 7 days. Meanwhile, the estimate for 2015 moved north by 4.1% to $5.10 during the same period. Notably, no downward revision in estimates was witnessed for both the years.

Other Stocks to Consider

Investors interested in the insurance industry can also consider Montpelier Re Holdings Ltd. (MRH - Analyst Report), Hallmark Financial Services Inc. (HALL - Snapshot Report) and Endurance Specialty Holdings Ltd. (ENH - Snapshot Report). All these stocks sport the same Zacks Rank as Greenlight Capital.

Please login to Zacks.com or register to post a comment.