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XL, PTP, CB, RLI, CINF, UFCS, Insurance - Property Casualty Stocks Overvalued

^{Published on 2011-08-30 06:41:13 - WOPRAI}
 

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. XL GROUP PLC (NYSE:XL), PLATINUM UNDERWRITERS HLDGS (NYSE:PTP), CHUBB CORP (NYSE:CB), RLI CORP (NYSE:RLI), CINCINNATI FINANCIAL CORP (NASDAQ:CINF), UNITED FIRE & CASUALTY CO (NASDAQ:UFCS) 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               
     XL         XL GROUP PLC                        20.6           11.22          83.60% Overvalued           Insurance - Property Casualty
     PTP        PLATINUM UNDERWRITERS HLDGS         31.28          30.28          3.30% Overvalued            Insurance - Property Casualty
     CB         CHUBB CORP                          62.1           56.77          9.40% Overvalued            Insurance - Property Casualty
     RLI        RLI CORP                            62.66          60.65          3.30% Overvalued            Insurance - Property Casualty
     CINF       CINCINNATI FINANCIAL CORP           27.62          26.19          5.50% Overvalued            Insurance - Property Casualty
     UFCS       UNITED FIRE & CASUALTY CO           17.81          17.72          0.50% 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.

XL GROUP PLC (NYSE:XL) - XL Group plc, through its subsidiaries, provides insurance and reinsurance coverages to industrial, commercial, and professional firms, insurance companies, and other enterprises worldwide. The company operates in three segments: Insurance, Reinsurance, and Life Operations. The Insurance segment offers property, casualty, professional liability, environmental liability, aviation and satellite, marine and offshore energy, equine, fine art and specie, and excess and surplus lines, as well as other insurance coverages, including program business. The Reinsurance segment provides casualty, property risk comprising energy and engineering, property catastrophe, marine, aviation, and other specialty reinsurance on a global basis with business being written on both a proportional and non-proportional basis and in certain limited instances on a direct basis. The Life Operations segment offers life reinsurance on business written by life insurance companies, principally to help them manage mortality, morbidity, survivorship, investment, and lapse risks. It markets its products through international, national, and regional producers, acting as the brokers and representatives of policyholders; and through general agents and independent agents acting on behalf of the company. The company was formerly known as XL Capital Ltd and changed its name to XL Group plc in July 2010. XL Group plc was founded in 1986 and is based in Dublin, Ireland.

PLATINUM UNDERWRITERS HLDGS (NYSE:PTP) - Platinum Underwriters Holdings, Ltd., through its subsidiaries, provides property and marine, casualty, and finite risk reinsurance products worldwide. The companys Property and Marine segment offers property catastrophe excess-of-loss reinsurance contracts, property per-risk excess-of-loss reinsurance contracts, and property proportional reinsurance contracts. This segment provides reinsurance coverage for damage to property and crops; reinsurance coverage for marine and offshore energy insurance programs, including hull damage, protection and indemnity, cargo damage, satellite damage, aviation hull, aviation liability, and general marine liability. The companys Casualty segment provides reinsurance contracts that cover general and product liability, professional liability, accident and health, umbrella liability, workers compensation, casualty clash, automobile liability, surety, trade credit, and political risk. Its Finite Risk segment principally offers structured reinsurance contracts with ceding companies. This segment provides various categories of finite risk contracts, such as quota share, multi-year excess-of-loss, and whole account aggregate stop loss. Platinum Underwriters Holdings sells its products through reinsurance intermediaries to the providers of commercial and personal lines of insurance and reinsurance. The company was founded in 2002 and is based in Pembroke, Bermuda.

CHUBB CORP (NYSE:CB) - The Chubb Corporation, through its subsidiaries, provides property and casualty insurance to businesses and individuals. Its Personal Insurance segment offers insurance products, such as automobile, homeowners, and other personal coverage products, as well as supplemental accident and health insurance. The companys Commercial Insurance segment provides multiple peril, casualty, workers compensation, property, and marine insurance products. Its Specialty Insurance segment offers various professional liability coverage and surety products for privately and publicly owned companies, financial institutions, professional firms, and healthcare organizations. The company provides its products and services through independent insurance agents and brokers in the United States, Canada, Europe, Australia, Latin America, and Asia. The Chubb Corporation was founded in 1882 and is based in Warren, New Jersey.

RLI CORP (NYSE:RLI) - RLI Corp., through its subsidiaries, underwrites property and casualty insurance primarily in the United States. The company operates in three segments: Casualty, Property, and Surety. The Casualty segment provides general liability services consisting of coverage for third party liability of commercial insurers, including manufacturers, contractors, apartments, and mercantile; commercial and personal umbrella coverage; and commercial transportation that include automobile liability and physical damage insurance to local, intermediate, and long haul truckers, public transportation risks, and equipment dealers, as well as incidental and related insurance coverage. It also offers professional liability coverages, such as directors and officers liability insurance, employment practices liability, and other miscellaneous professional liability coverage; and specialty program coverages, such as commercial property, general liability, inland marine, and crime, as well as deductible buy-back. The Property segment offers property coverage that consists primarily of excess and surplus lines and specialty insurance, such as fire and earthquake. It also provides insurance for commercial and industrial risks, such as office buildings, apartments, condominiums, and certain industrial and mercantile structures, as well as writes boiler and machinery coverage; marine coverage, including hull, cargo, and protection and indemnity; homeowners and dwelling fire insurance; and property facultative reinsurance for insurance companies. The Surety segment specializes in writing small-to-large commercial and small contract surety coverages, as well as for the energy, petrochemical, and refining industries. It offers miscellaneous bonds, such as license and permit, notary, and court bonds; and fidelity and crime coverage for commercial insured and select financial institutions. RLI Corp. was founded in 1965 and is headquartered in Peoria, Illinois.

CINCINNATI FINANCIAL CORP (NASDAQ:CINF) - Cincinnati Financial Corporation, through its subsidiaries, operates in the property casualty insurance business in the United States. It operates in four segments: Commercial Lines Property Casualty Insurance, Personal Lines Property Casualty Insurance, Life Insurance, and Investment. The Commercial Lines Property Casualty Insurance segment provides coverage for commercial casualty, commercial property, commercial auto, and workers compensation. It also offers specialty packages, including coverages for property, liability, and business interruption for specific industry classes, such as artisan contractors, dentists, garage operators, financial institutions, metalworkers, printers, religious institutions, or street businesses. In addition, this segment provides contract and commercial surety bonds, fidelity bonds, and director and officer liability insurance, as well as machinery and equipment coverage. The Personal Lines Property Casualty Insurance segment offers coverage for personal auto and homeowners, as well as insurance products, such as dwelling fire, inland marine, personal umbrella liability, and watercraft coverages to individuals. The Life Insurance segment provides term insurance; universal life insurance; whole life insurance; and worksite products, which include term, whole life, universal life, and disability insurance offered to employees through their employer. This segment also markets disability income insurance, deferred annuities, and immediate annuities. The Investment segment invests in fixed maturity investments, equity investments, and short-term investment products. The company markets its insurance products through independent insurance agencies. It also provides insurance brokerage services; commercial leasing and financing services; and surplus lines insurance products. The company was founded in 1950 and is headquartered in Fairfield, Ohio.

UNITED FIRE & CASUALTY CO (NASDAQ:UFCS) - United Fire & Casualty Company, together with its subsidiaries, engages in writing property, casualty, and life insurance; and selling annuities in the United States. Its commercial insurance product line comprises fire and allied lines, other liability, automobile, workers compensation, fidelity and surety, and miscellaneous products. The companys personal insurance product line includes fire and allied lines, including homeowners; and automobile insurance. Its life insurance products comprise single premium annuities, universal life products, and traditional life products; and term and whole life insurance products. The company markets its products through independent agents. United Fire & Casualty Company was founded in 1946 and is headquartered in Cedar Rapids, Iowa.

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