Reinsurance Update: Interim 2013 Q1 Earnings Comparisons

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 |  About: Validus Holdings, Ltd. (VR), Includes: AHL, AXS, MRH, PTP, XL
by: Brian Abbott

Hello! This is a quarterly update on reinsurance sector. We are mid-way through reinsurance earnings season for Q1 reporting, so I wanted to post an update. For review, I have previously written about investment metrics that I follow among the reinsurers. I wanted to post a mid-earnings update, to summarize results to date, and help position for the remaining results to be released next week.

Q1 results

2013 2013 2013 2012
company current price Q1 BV Q1 P/B Q1 Combined Ratio Q4 Combined Ratio market cap (NYSE:B) % of 52wk hi
Aspen Insurance Holdings (NYSE:AHL) $37.52 40.7 92% 90% 108% 2.46 96%
Axis Capital Holdings (NYSE:AXS) $43.51 44.7 97% 83% 112% 5.31 98%
Montpelier Re Holdings (NYSE:MRH) $25.67 27.5 93% 62% 116% 1.39 93%
Platinum Underwriter (NYSE:PTP) $56.22 60.2 93% 45% 25% 1.79 96%
Validus Holdings (NYSE:VR) $38.59 41.6 93% 61% 123% 4.15 96%
Click to enlarge

Initial thoughts are that results have been an overall success. Combined ratios haven't been this low in a few years. It is indeed nice when there aren't major catastrophes. Book value growth has been good as a result, which helped bring the price to book ratios a little more down to earth - meaning below 100%. We're still over 90% for P/BV on all of these companies, and prices remain pretty close to 52-week highs.

Conclusions

So far, Validus is the company I like most at current valuations. Aspen Insurance is another favorite. It sold off the morning after earnings, to the tune of about 4%. This is indicative of how high expectations had gotten, and this might create some additional opportunities next week.

If you have been waiting to deploy cash in this sector, which I have been recommending for 4 months now, it may be a painful wait watching these stocks continue to go up. I still favor hanging tight - hurricane season will be here right around the corner. These stocks aren't a momentum trade - buy Amazon or Apple if that's your trade. These are deeply cyclical stocks enjoying a favorable period lately. XL Group (NYSE:XL) is another company due to report next week, and has been favorably valued.

A few more companies in the reinsurance universe that I follow don't report until next week, so I will include those results on a update next weekend.

Disclosure: I am long VR, AHL, AXS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.