3. ACE Limited
Shares of ACE, Ltd. ( ACE) of Zurich closed at $79.23 Monday, returning 16% year-to-date. The shares trade for 1.2 times their reported Sept. 30 tangible book value of $64.67, and for 10 times the consensus 2013 earnings estimate of $7.92 a share. The consensus 2014 EPS estimate is $8.11. Based on a quarterly payout of 49 cents, the shares have a dividend yield of 2.47%. Cohen on Monday raised his price target for ACE's shares by a dollar to $95, and said that the company's "earnings through the first nine months of 2012 consistently beat our forecast and our forward estimates gradually rose during that time," and that the "solid performance occurred despite the drought conditions in the US, which were the worst in over 20 years." ACE reported net income of $1.9 billion for the first three quarters of 2012, or $5.67 a share, increasing from $805 million, or $2.36 a share, during the first three quarters of 2011. Underwriting income grew to $1.1 billion during the first three quarters from $663 million a year earlier, while the combined ratio -- underwriting losses plus expenses, divided by earned premiums -- improved to 90.2% from 95.3%. A combined ratio of over 100% indicates an underwriting loss. Cohen said that ACE's valuation was "attractive," trading "just below its book value" of $79.36, and that although "some investors point out that ACE's shares are trading at just over 1.2x tangible book value, making it look more expensive than it does on a straight price/book basis... we note that on a tangible basis, ACE's 2013 estimated ROE would be about 200 basis points higher than on a reported book basis or about 11.5%, suggesting that a premium to tangible book is warranted." The analyst also said that "there is no doubt that Sandy will have an impact on fourth quarter result, but at this point, we have no reason to believe that ACE's loss from this event will be outsized in nature." Cohen estimates that ACE's adjusted book value will increase from $80.30 at the end of 2012 to $86.22 at the end of 2013, while the tangible book value will grow from $66.08 at the end of this year, to $72.00 at the end of 2013. ACE data by YCharts
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2. Axis Capital Holdings
Shares of Axis Capital Holdings, Ltd. ( AXS) of Pembroke, Bermuda, closed at $35.80 Monday, returning 14% year-to-date. The shares trade for 0.8 times their reported Sept. 30 diluted book value of $43.57, and for nine times the consensus 2013 EPS estimate of $3.94. The consensus 2014 EPS estimate is four dollars. Based on a quarterly payout of 24 cents, the shares have a dividend yield of 2.68%. Cohen said that "after a catastrophe-mired 2012, AXIS reported sold results" during the first nine months of 2012. For that period, the company reported net income of $513.6 million, or $4.11 a share, improving from a loss of $70.6 million, or 58 cents a share, during the first three quarters of 2011. The company's underwriting income totaled $337.4 million during the first three quarters of 2012, increasing compared to an underwriting loss of $342.3 million a year earlier. The combined ratio improved to 90.8% during the first three quarters of 2012, from 116.3% a year earlier. A combined ratio of over 100% indicates an underwriting loss. Cohen's price target for AXIS Capital is $44, which is "0.9x the estimated year-ahead book value, a multiple that reflects an ROE that should remain under pressure." The analyst called Axis a "longer-term opportunity," and said that "a reduced earnings drag from the new
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1. XL Group
Shares of XL Group PLC ( XL) of Dublin closed at $24.31 Monday, returning 25% year-to-date. The shares trade for 0.7 times their reported Sept. 30 fully diluted tangible book value of $32.82, and for 10 times the consensus 2013 EPS estimate of $2.36. The consensus 2014 EPS estimate is $2.51. Cohen called XL Group his "top name" among P&C carriers, "looking at both risk and reward," saying that the company was a "turnaround story, with the shares trading at 70% of last reported book value, there appears to be some lasting skepticism among investors regarding XL's ability to improve its returns, most notably in its insurance business where margins have lagged peers." XL Group reported earnings attributed to ordinary shareholders of $569.7 million, or $1.82 a share, for the first nine months of 2012, increasing from a profit of $40.8 million, or 13 cents a share, during the first nine months of 2011. For its P&C business, the company reported an underwriting profit of $306.8 million during the first three quarters, compared to an underwriting loss of $283.2 million a year earlier, while the combined ratio improved to 92.7% from 107.2%. Cohen said that "given the continued momentum in commercial insurance pricing and our view that price increases will remain ahead of claims inflation, we would expect the fundamental backdrop to remain favorable for XL's efforts to improve margins. The analyst's price target for XL group is $30, and he estimates the company's adjusted tangible book value will increase from $33.01 at the end of 2012 to $35.79 at the end of 2013. XL data by YCharts
Interested in more on XL Group? See TheStreet Ratings' report card for this stock. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn