Seeking Alpha: Hartford Financial Still Has More To Give

Hartford Financial (NYSE:HIG) has the unenviable task of running off a multibillion-dollar portfolio of assets through a run-off operation that is unlikely to generate returns much above the mid-single digits. Even so, this excellent small commercial underwriter is on a path back to double-digit ROEs as strong underwriting results in commercial and personal P&C and aggressive capital management add value. If Hartford can get to 10% ROE in five years (and move closer to 12% over the long term), I think $45 is a fair price today. I'd also note that the Hartford is an appealing asset and its five-year performance may be moot as larger insurance companies ponder what to do with their surplus capital.

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Hartford Financial Still Has More To Give

Seeking Alpha: Argo Group Coming Along, But The Going's Tougher

Argo Group (NASDAQ:AGII) is taking a page from Aspen's (NYSE:AHL) book; trying to leverage strong core underwriting across a somewhat disjointed and sub-scale collection of operations. So far, it hasn't been a bad plan as the company has seen its shares climb more than 100% over the past three years, outdistancing larger players like Aspen, Allied World (NYSE:AWH), ACE (NYSE:ACE), and W. R. Berkley (NYSE:WRB) by rather healthy margins.

I am starting to wonder, though, if it is going to get harder for Argo to continue its path toward higher returns. The excess and surplus, specialty, and reinsurance markets have gotten a lot more challenging of late, with companies finding it more and more difficult to push higher rates - an important part of Argo's drive to write more profitable business upon renewal. I do still think that Argo can get its adjusted ROE above 10% over the next five years, and there is about $5/share of upside for every 1% improvement to long-term ROE, but the roughly 17% move since my last update has captured a lot of the undervaluation that I saw at the time.

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Argo Group Coming Along, But The Going's Tougher

Seeking Alpha: RenaissanceRe Changes With The Times

Insurance companies like ACE (NYSE:ACE), Arch Capital (NASDAQ:ACGL), and W.R. Berkley (NYSE:WRB) are successful in no small part because they are structured in a way that management can smoothly reallocate capital across business lines as rates and projected returns dictate. That wasn't historically as much of an option for RenaissanceRe (NYSE:RNR), though, as this very well-run property catastrophe reinsurer didn't have the same level of diversification across its operations.

Having closed the deal on Platinum Underwriters, it's a new era for RenRe. Management can, and is planning to, allocate significantly more capital toward casualty and specialty reinsurance, sidestepping some of the rate pressure in prop-cat. While this move should decrease the volatility of the business over the long term, it will likely also temper some of the advantages of what had been arguably the best prop-cat reinsurer out there. Long-term ROEs are likely to be lower with the new business mix, but RenRe looks like a stronger company for the deal. The one hitch is valuation - as I have complained on several occasions lately, there aren't that many bargains in the insurance space, and while RenRe does seem undervalued, it isn't a compelling bargain.

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RenaissanceRe Changes With The Times