Stocks & Investing
Stocks and InvestingStocks and Investing 
Tue, August 30, 2011
MKL, AFG, WTM, RE, MCY, PRA, Insurance - Property Casualty Stocks Overvalued
August 30, 2011/ M2 PRESSWIRE / BUYINS.NET / http://www.squeezetrigger.com is monitoring the Insurance - Property Casualty sector and these stocks are the most undervalued as of today. MARKEL CORP (NYSE:MKL), AMERICAN FINANCIAL GROUP INC (NYSE:AFG), WHITE MOUNTAINS INSURANCE GP (NYSE:WTM), EVEREST RE GROUP LTD (NYSE:RE), MERCURY GENERAL CORP (NYSE:MCY), PROASSURANCE CORP (NYSE:PRA) are all expected to go Down as they are Overvalued according to industry standard valuation metrics. The valuation model employs a three-factor approach to stock valuation using fundamental variables--the company's trailing 12-month Earnings-Per-Share (EPS), the analyst consensus estimate of the company's forecasted 12-month EPS, and the 30-year Treasury yield--to create a highly accurate reflection of a company's fair value.
The chart below displays the projected Fair Value and Valuation discount/premium of the most undervalued stocks in the highlighted industry group:
Symbol Company Name Last Close Fair Value Valuation Industry
MKL MARKEL CORP 395.1 383.53 3.00% Overvalued Insurance - Property Casualty
AFG AMERICAN FINANCIAL GROUP INC 33.63 32.45 3.60% Overvalued Insurance - Property Casualty
WTM WHITE MOUNTAINS INSURANCE GP 400 340.85 17.40% Overvalued Insurance - Property Casualty
RE EVEREST RE GROUP LTD 81.01 74.04 9.40% Overvalued Insurance - Property Casualty
MCY MERCURY GENERAL CORP 39.38 37.38 5.40% Overvalued Insurance - Property Casualty
PRA PROASSURANCE CORP 72.3 63.04 14.70% Overvalued Insurance - Property Casualty
Here are some of the variables that are utilized when calculating the Fair Market Valuation of a stock: Long-run EPS growth rate, Duration of Business-growth-cycle, Volatility of EPS growth rate, Systematic or beta risk of the firm, Correlation between the firm's EPS and the interest rate environment, EPS growth volatility, Dividend payout ratio, Buffer earnings, Interest rate related criteria: Interest rate (30 year yield) long-run level, Duration of interest rate cycle, Interest rate volatility. The Fair Market Valuation uses 12-month historic and forecasted EPS values and the current 30-year treasury yield as primary determinants. When calculating risk/return values such as the Sharpe ratio, the historic periods used are five years.
Some expected results of the Valuation Model are: the valuation of a stock increases in a declining interest rate environment. Increasing current and/or projected EPS will produce a higher Valuation. While long-term EPS growth would produce a corresponding long-term Valuation increase, concomitant long-term interest rate increases would offset EPS growth and depress the Valuation. The shorter a company's own business cycle, the higher its stock Valuation will be.
MARKEL CORP (NYSE:MKL) - Markel Corporation markets and underwrites specialty insurance products and programs. It operates in three segments: Excess and Surplus Lines, Specialty Admitted, and London markets. The Excess and Surplus Lines segment writes property and casualty insurance outside of the standard market for hard-to-place risks, including catastrophe-exposed property, professional liability, products liability, general liability, and commercial umbrella, as well as environmental, transportation, inland marine, ocean marine, and miscellaneous coverages. The Specialty Admitted segment writes risks that remain with an admitted insurance company for marketing and regulatory reasons. This segment writes specialty program insurance, personal and commercial property, and liability coverages and workers compensation insurance. The London markets segment writes specialty property, casualty, professional liability, equine and marine insurance, energy and trade credit insurance, and reinsurance. The company was founded in 1930 and is based in Glen Allen, Virginia.
AMERICAN FINANCIAL GROUP INC (NYSE:AFG) - American Financial Group, Inc., through its subsidiaries, engages in property and casualty insurance business in the United States. It offers property and transportation insurance products that include inland and ocean marine, agricultural-related, and commercial automobile insurance; specialty casualty products consisting of executive and professional liability, umbrella and excess liability, excess and surplus, general liability, and targeted programs; and specialty financial products, such as fidelity and surety bonds, and lease and loan services; and workers compensation products. The company also provides various retirement products, primarily fixed, indexed, and variable annuities; life; and supplemental insurance products. In addition, it engages in commercial real estate operations, including hotels, marinas, resorts, apartments, and office buildings. The company was founded in 1872 and is based in Cincinnati, Ohio.
WHITE MOUNTAINS INSURANCE GP (NYSE:WTM) - White Mountains Insurance Group, Ltd., through its subsidiaries, operates property and casualty insurance, and reinsurance businesses. The company operates through four segments: OneBeacon, White Mountains Re, Esurance, and Other Operations. The OneBeacon segment offers specialty line products, including professional liability products, marine insurance, collector cars and boats, property and inland marine, tuition reimbursement, excess property, and accident and health, as well as property and casualty insurance coverages for various industry groups, such as technology, financial services, entertainment, sports and leisure industries, and government entities. This segment offers its products through a network of independent agents, regional and national brokers, and wholesalers. The White Mountains Re segment provides reinsurance coverage for property, casualty, accident and health, agriculture, aviation and space, and other exposures, as well as reinsurance underwriting advice and reinsurance portfolio analysis services. The Esurance segment writes personal auto insurance through its Website and through select online agents. The Other Operations segment offers investment advisory services for managing the companys investments in fixed income and equity securities comprising hedge funds, limited partnerships, limited liability corporations, and private equities. It offers its products and services in the United States, Europe, Canada, the Caribbean, Latin America, and Asia. The company was founded in 1980 and is headquartered in Hamilton, Bermuda.
EVEREST RE GROUP LTD (NYSE:RE) - Everest Re Group, Ltd., together with its subsidiaries, underwrites reinsurance and insurance in the United States (the U.S.), Bermuda, and international markets. The company operates in five segments: U.S. Reinsurance, U.S. Insurance, Specialty Underwriting, International, and Bermuda. The U.S. Reinsurance segment writes property and casualty reinsurance, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies within the United States. The U.S. Insurance segment offers property and casualty insurance primarily through general agents, brokers, and surplus lines brokers in the U.S. The Specialty Underwriting segment writes accident and health, marine, aviation, and surety business within the U.S. and worldwide through brokers and directly with ceding companies. The International segment offers non-U.S. property and casualty reinsurance. The Bermuda segment provides reinsurance and insurance to worldwide property and casualty markets and reinsurance to life insurers through brokers and directly with ceding companies, as well as offers reinsurance to the United Kingdom and European markets. The company was founded in 1973 and is based in Liberty Corner, New Jersey.
MERCURY GENERAL CORP (NYSE:MCY) - Mercury General Corporation, together with its subsidiaries, engages in writing private passenger and commercial automobile insurance in the United States. The company also writes homeowners, mechanical breakdown, fire, umbrella, and commercial automobile and property insurance. It offers various types of coverage, such as bodily injury liability, underinsured and uninsured motorist, personal injury protection, property damage liability, comprehensive, collision, and other hazards to automobile policyholders. The company sells its policies through a network of independent agents and brokers in 13 states. Mercury General Corporation was founded in 1960 and is headquartered in Los Angeles, California.
PROASSURANCE CORP (NYSE:PRA) - ProAssurance Corporation, through its subsidiaries, provides professional liability insurance products primarily to physicians, dentists, other healthcare providers, and healthcare facilities in the United States. It also engages in the legal professional liability business. The company markets its products through direct marketing and independent agents. ProAssurance Corporation was founded in 1976 and is based in Birmingham, Alabama.
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