National General (NGHC) Stock Up 54% YTD: What's Driving It?
National General Holdings Corp NGHC shares have gained 54.2% year to date against the industry's decrease of 10.8%. The Zacks S&P 500 composite has risen 5.5% in the said time frame. With market capitalization of $3.9 billion, average volume of shares traded in the last three months was 1.3 million.
The company continues to benefit from its focus on specialty niches with short-tail risks, technological advancement, and sufficient liquidity. National General delivered four-quarter average surprise of 22.50%.
Return on equity (ROE) of 19.5% in the trailing twelve months was better than the industry average of 6.2%, reflecting the company’s efficiency in utilizing shareholders’ fund. The company has been continually improving its ROE over the last seven quarters.
Factors Behind the Upside
This Zacks Rank #3 (Hold) specialty personal lines insurer’s efforts to deploy proprietary technologies to create an analytical advantage helped it retain a competitive edge. The company has been focused on growing organically by introducing products, underwriting frameworks and analytical tools to cater to market demand.
The company has restructured its portfolio with strategic acquisition and divestiture to garner improved profitability. Gross written premium growth in the second quarter was driven by acquisition of National Farmers Union Property and Casualty Company as well as organic growth. Buyout of Farmers Union Insurance gave the company access to new niches, new data and expanded presence in the Midwest. On the other hand, divestment of EuroAccident will help it focus on and divert capital to its well performing Accident & Health division.
Also, dividend yield of the company is 0.6%, higher than the industry average of 0.5%. This apart, the company has been repurchasing shares to boost shareholder value.
The Zacks Consensus Estimate for 2020 earnings indicates 37.8% year-over-year increase. The stock carries an impressive Growth Score of A. Growth Score analyzes a company’s growth prospects.
The consensus estimate for 2020 has moved 17.7% north in the past 30 days, reflecting analysts’ optimism. The company’s VGM Score of A is also encouraging. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
National General has agreed to be acquired by Allstate ALL for $34.50 per share cash. The company will help speed up Allstate’s strategy to increase market share in personal property-liability while considerably expanding independent agent distribution.
Stocks to Consider
Some better-ranked companies in the insurance industry are Donegal Group DGICA and Fidelity National Financial FNF, both sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Donegal Group delivered a 134.62% earnings surprise in the last reported quarter.
Fidelity National delivered a 53.52% earnings surprise in the last reported quarter.
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