For Immediate Release
Chicago, IL – January 28, 2014– Zacks Equity Research highlights White Mountains Insurance Group ( WTM - Free Report ) as the Bull of the Day and Alico, Inc. ( ALCO - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Aetna Inc. ( AET- Free Report), UnitedHealth Group Inc. ( UNH- Free Report) and WellPoint Inc. ( WLP- Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Headquartered in Hamilton, Bermuda, White Mountains Insurance Group ( WTM - Free Report ) is a Property and Casualty insurer and reinsurer. The Company conducts its principal businesses through OneBeacon (Specialty insurance), Sirius Group (Global reinsurance), HG Global (U.S. municipal bond reinsurance) and White Mountains Advisors (Investment management).
WTM currently has a market capitalization of $3.63 billion. Rising estimates sent the stock back to Zacks Rank # 1 (Strong Buy) earlier this month. It is the ‘Bull of the Day .'
White Mountains reported its Q3 2013 results on Oct 28. Operating net income came in at $9.20 per share, significantly ahead of the Zacks Consensus Estimate of $5.06 per share. The results increased 14% from $8.07 per share reported in the prior-year quarter.
The increase was mainly due to decrease in total expenses during the reported quarter. Total expenses declined 7.7% year over year due to lower loss and loss adjustment expenses as also lower general and administrative expenses.
Healthy returns from investments led to the increase in adjusted book value per share by 2.8% from the year-ago level.
Bear of the Day:
Alico, Inc. ( ALCO - Free Report) is an agribusiness and land management company with approximately 130,800 acres of land in six Florida counties. ALCO is a leading citrus grower in Florida, with 11,000 producing acres.
Other principal lines of business are improved farmland including sugar cane, cattle ranching and conservation, and operations like rock mining.
On Dec 9, 2013, ALCO reported the results for the fourth quarter of its fiscal year 2013. Total operating revenues were $6.7 million slightly up from $6.6 million for the prior-year quarter, mainly due to an increase in cattle sale revenues.
Total operating expenses were $4.9 million up 20% from $4.7 million for the Q4 of 2012, thanks to the increase in the cost of cattle sales. Gross profit was down 8.2% to $1.8 million from $2.0 million in the same quarter of previous fiscal year.
Net income was $11.8 million, or $1.60 per share, compared to a net loss of $0.5 million, or $0.07 per diluted share in the fourth quarter of fiscal 2012. The increase was due to the non-recurring sale of a conservation easement on approximately 11,600 acres, for $20.7 million in the third quarter of fiscal year 2013 resulting in a $20.3 million gain.
Excluding one-time charges, earnings were ($0.19) per share, significantly below the Zacks Consensus Estimate. Alico has delivered negative surprises in three out of last four quarters, with an average negative surprise of 55%.
Aetna Buys Reinsurance Coverage
U.S. health insurer Aetna Inc. ( AET- Free Report) has announced a five-year reinsurance agreement with Vitality Re V Limited, a newly-formed special purpose insurance company based in the Cayman Islands.
The agreement is part of Aetna’s long-term capital management strategy, through which it will receive $200 million of catastrophe bond-type cover for its commercial group health business.
The transaction is expected to release capital held with respect to its commercial group health business, thereby effectively meeting the risk-based capital requirements set by state regulators.
Aetna’s earlier reinsurance agreement with Vitality Re Limited and Vitality Re II Limited expired on Jan 7, 2014.
Aetna’s reinsurance agreement signals that the company is trying to tap the capital market to refinance debt maturities, enhance liquidity at favorable interest rates and fund acquisitions.
Though reinsurance transactions, financed by debt in the form of insurance-linked securities, are common in the property and casualty insurance sector, it is a novel concept in the health insurance sector. It all begun in 2011 when Aetna launched the industry's first collateralized reinsurance transaction financed by health insurance linked to debt securities.
Since the nature of the transaction allows Aetna to replace its equity capital with lower cost capital, we expect other players like UnitedHealth Group Inc. ( UNH- Free Report) and WellPoint Inc. ( WLP- Free Report) to follow suit. Moreover, the increasing desire for capital surplus, and perhaps the uncertainty of health care reform and medical inflation, may make offloading such risks a more common practice in the healthcare sector.
We expect to gain more visibility on this transaction during the fourth quarter earnings conference, which is scheduled before the opening bell on Feb 6, 2014. As per the Zacks Consensus Estimate, Aetna is expected to earn $1.38 per share for fourth quarter which translates into year-over-year growth of 47% and $5.87 per share for full year 2013, which implies a growth rate of 14.5%.
Aetna currently retains a Zacks Rank #3 (Hold).
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