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.
|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%|
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.
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.