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HCC Insurance Upgraded to Strong Buy

by Zacks Equity Research

January 09, 2013 | Comments : 0 Recommended this article: (0)

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On January 8, Zacks Investment Research upgraded HCC Insurance Holdings (HCC - Snapshot Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

HCC Insurance has been witnessing rising earnings estimates on the back of a solid third-quarter performance, conviction to attain the guided earnings for 2012, strategic partnerships and new product offerings. Moreover, this specialty insurance underwriter delivered positive earnings surprises in all the 4 quarters with an average beat of 25.6%. The expected long-term earnings growth rate for this stock is 7.3%.

HCC Insurance reported its third-quarter results on October 30. Non-GAAP earnings per share came in at $1.09, surpassing the Zacks Consensus Estimate by 45.3% and the year-ago number by 95%.

The upside largely came on the back of higher premiums written and investment income.

Based on the solid performance of the company in the first nine months of 2012, HCC expects to meet its earnings per share projection of $3.50–$3.65. HCC Insurance expects to generate $2.8 billion in gross written premium, $2.3 billion in net written premium and deliver combined ratio in the range of 84%–86%. The Zacks Consensus Estimate for 2012 is $3.43 per share, lower than the company’s guidance but up nearly 32% year over year.

The Zacks Consensus Estimate for 2013 is $1.63 per share, up 1.5% as 7 of the 10 estimates were revised higher over the last 60 days.

Other Stocks to Consider

Besides HCC Insurance, other stocks in the property and casualty insurers segment that are currently performing well and are worth considering include Alleghany Corp. (Y - Snapshot Report) and Selective Insurance Group Inc. (SIGI - Snapshot Report). Both the companies carry a Zacks Rank #1 (Strong Buy).

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