DFG Positives Priced In

Delphi (DFG - Analyst Report) has, in our opinion, strong potential to expand its ROE beyond the 12.8-13.9% level it has generated in the last three years. The hard market for excess workers comp insurance (more than 40% of Delphi’s income in 2005), Delphi’s recent sale of its reserve-intensive property catastrophe business, and potential to increase its premium-to-equity ratio are three catalysts for improving ROE, in our opinion. Nevertheless, pricing the workers comp market is showing signs of moderation and we think the positives are factored into Delphi’s valuation multiple, which has expanded recently. Therefore, we believe DFG stock will perform in-line with the overall market. Read the analyst report on DFG