Federated National: Strong Buy


On Mar 6, Zacks Investment Research upgraded Federated National Holding Co. (FNHC) to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

Federated National has been experiencing rising earnings estimates on the back of strong fourth-quarter 2013 results and a significant growth momentum. Additionally, this multi-line insurer outperformed the one-year Nasdaq index, which posted growth of 37.5% against a robust return of 171.7% clocked by the company.

On Feb 27, Federated National reported fourth-quarter 2013 operating earnings per share of 46 cents, which outpaced the Zacks Consensus Estimate of 25 cents, delivering a positive earnings surprise of 84%. Furthermore, the result significantly outpaced the year-ago quarter number of 13 cents.

Robust year-over-year top-line improvement of 101% was generated by resilient growth in policy count, net earned premiums along with a surge in commissions, finance revenue and policy fees. These were partially offset by higher loss and operating expenses and lower investment income, overall boosting the margins and bottom line. Moreover, capital position remained sturdy with appreciated cash position and book value per share.

Federated National boasts writing 100% of its new business on a voluntary basis with its partner agents, thereby optimally capitalizing on its superior brand value. Alongside, strong creditworthiness,prudent risk management, diversified product portfolio and effective capital deployment score well with the ratings agencies and investors.

Based on Federated National’s fundamental strength and prudent capital management, the Zacks Consensus Estimate for 2014 soared 25.5% to $1.23 per share in the last 7 days. Meanwhile, the estimate for 2015 grew 2.1% to $1.48 during the same period.

Moreover, the Most Accurate Estimate for Federated National’s 2015 earnings stands at $1.50 a share, resulting in an Earnings ESP of +1.4%. Furthermore, no downward revision in estimates was witnessed for both the years.

Other Stocks to Consider

Besides Federated National, other top-ranked insurers in the industry include American Financial Group Inc. (AFG), EMC Insurance Group Inc. (EMCI) and OneBeacon Insurance Group Ltd. (OB). All these stocks sport the same Zacks Rank as Federated National.

Read the Full Research Report on FNHC
Read the Full Research Report on OB
Read the Full Research Report on EMCI
Read the Full Research Report on AFG

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