Shares of Aspen Insurance Holdings Limited (AHL) hit a new 52-week high of $41.43 on Dec 31, 2013.
The momentum was driven by continued strong results by the company. The insurer delivered positive earnings surprises in 3 out of the last 4 quarters with an average beat of 28.5%. The formation of Silverton Re, which should enrich the company’s global reinsurance business, also contributed to this growth momentum.
The company’s strong operating performance in 2013 is also reflected in its share price growth, which has clocked an increase of 29.7% over the past one year.
Analysts have also shown their optimism regarding this Zacks Rank #1 (Strong Buy) stock, as is evident in upward estimate revisions. Over the last 30 days, estimates moved north lifting the Zacks Consensus Estimate by 2% to $3.65 per share (representing a year-over-year improvement of 8.3%). Over the same period, the Zacks Consensus Estimate for 2014 also increased 7.6% to $3.53 per share.
We expect Aspen Insurance’s 2014 earnings to gain from the formation of Silverton Re as this long-term growth strategy will create further opportunities in the alternative reinsurance market while also strengthening its operational activities in capital markets.
Earnings are also expected to benefit from the company’s disciplined capital management strategy witnessed by its regular dividend payouts and share repurchase activities. Strong fundamentals have also allowed Aspen Insurance to score strongly with the credit rating agencies.
We expect Aspen Insurance to beat estimate when it reports its fourth–quarter 203 earnings results on Feb 6. This is because our proven model shows that Aspen Insurance has the right combination of a healthy Earnings ESP (+7.37%) and a favorable Zacks Rank. The Zacks Consensus Estimate for the fourth quarter is pegged at 95 cents per share, representing an enormous year-over-year improvement of 734.7%.
Further, valuation looks reasonable for Aspen Insurance .The shares are trading at about 20% discount to the industry average on a forward price-to-earnings basis and about 47% discount on a price-to-book basis. While return on equity is 18.7% lower than the industry average, return on assets was more than 2.5 times of the industry average.
Other Stocks to Consider
Other players in the property and casualty insurance space which look attractive at current levels include Allied World Assurance Co. (AWH), Cincinnati Financial Corp. (CINF) and Fidelity National Financial, Inc. (FNF). All these stocks carry the same Zacks Rank as Aspen Insurance.
Read the Full Research Report on FNF
Read the Full Research Report on AWH
Read the Full Research Report on AHL
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