Zacks Investment Ideas feature highlights: Montpelier Re Holdings, PartnerRe, Endurance Specialty Holdings and CNA Financial

Zacks Investment Ideas feature highlights: Montpelier Re Holdings, PartnerRe,
                Endurance Specialty Holdings and CNA Financial

PR Newswire

CHICAGO, Dec. 11, 2013

CHICAGO, Dec. 11, 2013 /PRNewswire/ -- Today, Zacks Investment Ideas feature
highlights Features: Montpelier Re Holdings (NYSE:MRH-Free Report), PartnerRe
Ltd. (NYSE:PRE-Free Report), Endurance Specialty Holdings (NYSE:ENH-Free
Report) and CNA Financial (NYSE:CNA-Free Report).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Profit from This Top-Ranked Industry

Insurance may not be the most exciting industry in the business world. But
right now it is one of the hottest based on earnings momentum.

According to the Zacks Industry Rank, the 'Property & Casualty Insurance'
industry currently ranks 13th out of 265 industries. That puts it in the top
5% of all industries. It is also the highest-ranked among industries with at
least 13 companies in it.

This means that analysts have been revising their estimates significantly
higher for a number of property and casualty insurers. That's a sign of good
things to come for investors.

A Turnaround Story

An insurance company essentially makes money in two ways: by collecting enough
premiums to cover its claims, and by earning investment returns ("the float").
But the past few years have been very challenging for the property and
casualty insurance industry.

First, the ratio of claims paid to premiums collected (the "loss ratio") has
marched significantly higher throughout the industry. This is due not only to
a number of large scale catastrophes but also to weak premium growth thanks to
a soft economy. Secondly, record low interest rates have led to anemic
investment income on the float. This has led to depressed valuations
throughout the industry.

But things are starting to improve for P&C insurers. After years of marching
higher, loss ratios have been improving thanks to improved underwriting and a
relatively low number of catastrophes this year (it was a very quiet hurricane
season).

And many analysts expect loss ratios to continue improving over the next few
years as premiums continue to rise at a healthy clip. For instance, according
to Dallas-based electronic insurance exchange MarketScout, commercial property
and casualty insurance rates rose an average of 4% year-over-year in November.

While The Taper Hurt Insurers?

While rising premiums will undoubtedly help insurers, the overall impact of a
rising long-term interest environment is still unclear. On one hand, rising
interest rates could hurt book values as the value of bonds held in the
investment portfolio decline. But insurers with a short-duration bond
portfolio should be relatively unharmed since short-term interest rates are
expected to remain low for quite some time. Plus, higher interest rates could
lead to higher future interest income for insurers.

The impact of rising rates will vary on a company-by-company basis that
depends on the nature of its liabilities and how skilled its portfolio manager
is at forecasting interest rates.

Valuations Still Attractive

Investors in property and casualty insurers have had a good year. The KBW
Property & Casualty Index is up +33% year-to-date, outpacing the +27% return
for the S&P 500. But due to depressed valuations at the start of the year and
rising earnings estimates, valuations still look attractive for many within
the industry.

The price to tangible book value ratio for the entire P&C industry is
currently just 1.8, for instance. That's well below its 10-year median of 2.4.
And the price to cash flow ratio of 11.9 is also well below its 10-year median
of 13.1.

4 Attractive Property & Casualty Insurers

While many property and casualty insurers look attractive, here are my top 4
companies based on earnings momentum and valuation:

Montpelier Re Holdings (NYSE:MRH-Free Report)

Zacks Rank: 1 (Strong Buy)

Price/Tangible Book: 1.0

Montpelier Re Holdings provides global property and casualty reinsurance and
insurance products, specializing in property and short-tail lines.

PartnerRe Ltd. (NYSE:PRE-Free Report)

Zacks Rank: 1 (Strong Buy)

Price/Tangible Book: 0.9

PartnerRe is an international reinsurer with total assets of more than $23
billion.

Endurance Specialty Holdings (NYSE:ENH-Free Report)

Zacks Rank: 1 (Strong Buy)

Price/Tangible Book: 0.9

Endurance Specialty Holdings provides property and casualty insurance and
reinsurance with primary offices in Bermuda, London, New York, Zurich and
Singapore.

CNA Financial (NYSE:CNA-Free Report)

Zacks Rank: 1 (Strong Buy)

Price/Tangible Book: 0.9

CNA Financial is the 8th largest U.S. commercial insurer and the 13th largest
U.S. property & casualty insurer. It is headquartered in Chicago.

The Bottom Line

With improving industry trends, excellent earnings momentum and attractive
valuation, these 4 property and casualty insurers are well-positioned to move
higher.

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