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Bull of the Day: Allied World Assurance (AWH)

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The insurance industry is typically considered a pretty boring segment, but that does not mean that it cannot produce impressive returns for your portfolio.  And that is just what Allied World Assurance Company (AWH) just did last week.  That is why they are the Zacks Bull of the Day.  

This Zacks Rank #1 (Strong Buy) is one of Bermuda's leading property and casualty insurers. The company, through its operating subsidiaries, offers property and casualty insurance and reinsurance on a worldwide basis. The principal operating subsidiaries of Allied World Assurance Company Holdings, Ltd have A Excellent ratings from A.M. Best Company and A- ratings from Standard and Poor's.

Recent Earnings Results

AWH reported Q2 16 earnings last week, and they absolutely annihilated both the Zacks Consensus Earnings and Revenue estimates.  The company reported year over year gains in Net Income +1514.7%, Operating Income +220.5%, Underwriting Income +669.5%, cut their loss and loss expense ratio from 66.8% to 60.6%, and decreased their expense ratio from 32.4% to 31.8%. 

Management’s Take

According to Scott Carmilani, President and CEO, “I am very pleased with our results this quarter, which were attributable to strong performances across both the underwriting and investment portfolios. In particular, with a combined ratio of 92.3%, our North American Insurance business is showing the strength and results of our focused build out.”

Price and Consensus Graph

As you can see in the price and EPS consensus graph below, 2016 and 2017 earnings estimates, and the current stock price have all shot up recently due to their impressive earnings report.

ALLIED WORLD AS Price and Consensus

ALLIED WORLD AS Price and Consensus | ALLIED WORLD AS Quote

Increasing Estimates

Over the past 7 days estimates for Q3 16, Q4 16, FY 16, and FY 17 have all seen significant upgrades; Q3 16 rose from $0.51 to $0.64, Q4 16 improved from $0.61 to $0.69, FY 16 jumped up from $2.20 to $2.90, and FY 17 leaped upwards from $2.33 to $2.75.

Bottom Line

Besides posting amazing income and cost cutting measures in Q2, management has also repurchased a total of 4,427,396 shares, year to date, and still has $410 million remaining on its outstanding share repurchase authorization. 

Also, in April of 2016, shareholders approved four quarterly dividends equal to $0.26 per share. The first dividend was paid on June 30, 2016.  The company is currently paying a dividend yield of 2.49%. 

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