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On Feb 26, Zacks Investment Research upgraded Employer Holdings Inc. (EIG - Snapshot Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Employer Holdings has remained steady based on its strong fundamentals, which involves a disciplined underwriting approach and prudent reserving practices. Based on higher expenses and market weakness that continues to hurt payrolls, the bottom line portrays a downward trend. However, given a modest economic recovery, the company is expected to rebound.

Nonethless, this specialty provider of workers' compensation insurance has been generating significant growth in premiums. Strong operating cash flow, higher realized gains on investments, book value per share growth and strong financial strength ratings further validate Employer Holdings commitment to accentuate growth in the long run.

Employer Holdings has delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 134.1%. The long-term expected earnings growth rate for this stock is 7.5%.

On Nov 7, Employer Holdings reported its third-quarter 2012 operating earnings of 15 cents per share, remarkably beating the Zacks Consensus Estimate of 6 cents a share. However, it lagged the year-ago quarter’s earnings by a nickel.

While total revenue surged 33.8% year over year to $151.1 million, total expenses also spiked 36.7% to $144.2 million. This negated most of the top-line growth.

Ahead of its fourth quarter earnings results, scheduled to release after the closing bell on Feb 27, the Zacks Consensus Estimate for 2012 remained flat at 20 cents per share as none of estimates were revised over the last 30 days. Following a similar revision trend, the Zacks Consensus Estimate remained at 59 cents per share for 2013.

Other Stocks to Consider

Other strong performers in the insurance sector include EMC Insurance Group Inc. (EMCI - Snapshot Report), XL Group Plc (XL - Analyst Report) and Navigators Group Inc. (NAVG - Snapshot Report), all of which carry a Zacks Rank #1 (Strong Buy).

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