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We expect Montpelier Re Holdings Ltd. (MRH - Analyst Report) to beat expectations when it reports first-quarter 2013 results on Apr 24.

Why a Likely Positive Surprise?

Our proven model shows that the property & casualty insurer is likely to beat earnings because it has the two key ingredients.

Positive Zacks ESP: ESP (Read:  Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +5.50%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #1 (Strong Buy): Note that stocks with a Zacks Rank of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Montpelier’s Zacks Rank # 1 (Strong Buy) and +5.50% ESP makes us expect a positive earnings beat on Apr 23.

What is Driving the Better Than Expected Earnings?

Montpelier’s increased exposure in the property catastrophe lines of business, efforts to focus on underwriting operations, augment capital flexibility and strengthen competitive position are expected to lead to a positive earnings surprise in the upcoming quarter.

During its fourth-quarter 2012 earnings conference call, Montpelier stated that it had already spent $8 million in share repurchases for first quarter 2013. This will likely aid the bottom line.

The positive trend was seen in the trailing four-quarter’s average surprise of 44.7%, significantly boosted by surprises in the first and last quarter of 2012. Fourth quarter 2012 experienced higher premium as well as narrow underwriting loss compared with the prior-year quarter.

Other Stocks to Consider

Montpelier is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 industry peers:

Aspen Insurance Holdings Ltd. (AHL - Snapshot Report), Earnings ESP of +13.54% and a Zacks Rank #1 (Strong Buy).

PartnerRe Ltd. (PRE - Analyst Report), Earnings ESP of +6.78% and a Zacks Rank # 1 (Strong Buy).

W.R. Berkley Corporation (WRB - Analyst Report), Earnings ESP of +2.70% and a Zacks Rank #1 (Strong Buy).

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