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Bull of the Day: White Mountains Insurance (WTM)

Neena Mishra

Headquartered in Hamilton, Bermuda, White Mountains Insurance Group (WTM) 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 $3.78 billion. Rising estimates sent the stock back to Zacks Rank # 1 (Strong Buy) earlier this month. It is the ‘Bull of the Day’.

Solid First Quarter Results 

White Mountains reported its Q1 2014results on April 28. Net income for the quarter was $96 million in the first quarter of 2014, compared to $120 million in the first quarter of last year.

Adjusted book value at the end of the quarter was $656 per share, up 2.2% including dividends. The investment portfolio was up 1.1% with gains from both fixed income and equity investments. 

OneBeacon's book value per share increased 4.2% for the first quarter of 2014, including dividends driven by solid results in both underwriting and investments.

Sirius Group's GAAP combined ratio was 73% for the first quarter of 2014 compared to 81% for the first quarter of last year.  The decrease in the combined ratio was driven by better loss reserve development.

Overall, results were above street consensus.

Positive Earnings Estimates Revisions

After impressive earnings, Zacks Consensus Estimate for the current year has increased to $27.90 per share from $26.20 per share, 30 days ago.

Rising estimates helped WTM earn a Zacks Rank #1 (Strong Buy), on July 4.

Solid Industry Outlook

P&C insurance industry is currently ranked 50 out of 265 Zacks industries (top 19%)
Improving economic picture is positive for all insurers as their business volume is highly correlated to the health of the economy. Per Zacks Industry Outlook “looking at the broader trends, the overall health of the industry improved to a great extent in the recent past riding on improved macroeconomic trends, after enduring pricing pressures and reduced insured exposure since the latest recession”.

The Bottom Line
WTM is a Zacks Rank#1 (Strong Buy) stock. Further a high Zacks Industry rank greatly increases the likelihood of short-to-mid- term outperformance.
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