3 Top-Ranked Property And Casualty Plays Showing Momentum

Prayers for a calmer weather and sunnier climes can be perennially heard across the entire Property and Casualty (P&C) industry. A catastrophe not only leads to physical loss, it also wreaks havoc on the commerce of this industry which offers insurance against property and casualty.

It is so far so good for the second quarter which has escaped the miseries of natural disaster and catastrophe loss. As insurers are relived of claims payment, less capital is being eroded and reserves are being pumped up.

Moreover, insurers continue to enjoy improved pricing on increasing underwriting capacity and the resultant market hardening. Higher premiums that are being written as a consequence in turn find reflection in margin expansion.

The still soft interest rate environment is of course a spoilsport. Yet a broader invested asset base and improving equity market conditions are positives to look out for.

Prudent capital deployment – either through shareholder friendly moves or strategic mergers and acquisitions – are also strengths of this industry. A wave of consolidations, dividend increase and share repurchase approvals over the last few weeks speak volumes in this context. Insurers are bracing up their portfolio by spreading geographically, and adding more products and services to their portfolio to capitalize on opportunities as they arise.

The operational strength is translating into powerful earnings and encouraging capital deployment. Notably, about 62% of the insurers under our coverage pulled a positive surprise in the last reported quarter on higher premiums, better underwriting and investment results.

No doubt the industry environment is now favorable. And coupled with fundamental strength, not only are the property and casualty insurers benefiting (in form to stronger earnings), its investors too are reaping rewards (in form of returns).

Flow with the Tide

As the term momentum means flowing in one direction (preferably north) driven by micro or macro forces, investors would definitely like to add stocks on the rise to their kitty as these promise robust returns. So a study of the price trend of a stock is a good idea before dumping or taking positions in it.

Our Momentum Style Score comes in handy here as it signals the favorable time to take positions in a particular stock. A favorable Zacks Rank is an added advantage when it comes to picking the stocks as it further ensures ‘Bigger Returns’.

Back-tested results show that stocks with Momentum Style Scores of A or B when combined with a Zacks Rank of #1 (Strong Buy) or #2 (Buy) have outperformed others.

We highlight three P&C insurers that not only boast a solid Zacks Rank and Momentum Style Score of ‘A’, but have also returned more than the S&P 500 over the last 3-month period.

Markel Corporation (NYSE:MKL)

With a market capitalization of $10.71 billion, Glen Allen, VA based Markel Corporation markets and underwrites specialty insurance products in the U.S. and internationally.

While this Zacks Rank #1 stock has a decent history of delivering a positive surprise in two of last four quarters, it also saw positive estimate revisions over the last 60 days.

Shares of Markel closed at $768.23 yesterday and the stock gained 2.3% in the last four weeks.

RenaissanceRe Holdings Ltd (NYSE:RNR)

Based in Hamilton, Bermuda, RenaissanceRe Holdings Ltd. primarily provides property-catastrophe reinsurance to insurers and reinsurers globally on the basis of excess of loss (coverage of losses over a specified limit). With a market capitalization of $4.74 billion, RenaissanceRe provides certain specialty reinsurance coverage on accident, health, aviation and satellite concerns, as well as homeowners' insurance in various parts of the U.S. The company also writes specialty and catastrophe reinsurance through two joint ventures.

This Zacks Rank #2 stock surprised in three of last four quarters and witnessed positive estimate revisions over the last 60 days.

Shares of RenaissanceRe closed at $27.10 yesterday and the stock added about 1% in the trailing four weeks.

First American Corporation (NYSE:FAF)

Based in Santa Ana, CA, First American Financial Corporation with a market capitalization of $3.83 billion provides insurance coverage to residential homeowners and renters for liability losses. The company also issues title insurance policies on residential and commercial property, among others.

This Zacks Rank #2 company delivered a positive surprise in three of the last four quarters and witnessed positive estimates revisions over the last 60 days.

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