Q1 snap: good underwriting but result FX assisted
CB delivered a 4% EPS beat on recently downgraded guidance. At an underlying level, we calculate a 2-3% beat based on good cost control, a low underlying combined ratio and some favourable FX. However, premium growth remains relatively lacklustre with Global P&C written premium up 2.6% ex FX and earned premium up c1%. The effective tax rate of 12.0%, below guidance of 13-15%, also provided a small boost. Management mentioned in the earnings release that pricing had improved as the quarter developed, which will no doubt be of interest on the call. While we accept that catastrophes impacted the result, an operating ROE of 8.7% remains low and we calculate an underlying ROE of 8.9%. As a result, BVPS growth remains light at 5.5% YoY.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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