Aspen Insurance Holdings Limited (AHL), Allied World Assurance Co Holdings, AG. (AWH): This Company Is Placing High Hopes on Share Buybacks

Not all analysts are bullish on Allied World Assurance Co Holdings, AG. (NYSE:AWH), with at least one analyst having a sell rating on the stock, but with a P/E rating of 7.13 Allied World Assurance Co Holdings, AG. (NYSE:AWH) appears to be a solid alternative to Aspen.

Partnerre Ltd (NYSE:PRE)’s outlook has been revised upwards from negative to stable by A.M. Best. Mentioned among the factors for this upgrade are the good risk-adjusted capitalization and business profile, as well as the global reach of its reinsurance business, which has resulted in better than average 2012 operating performance, insuring Partnerre Ltd (NYSE:PRE)’s capacity to compete successfully with the best of its peers. Its net income for the first quarter of 2013 was $210 million, which translated into $3.53 per share, underperforming first-quarter results for 2012. Its P/E ratio stands at 5.94.

Aspen’s buyback program

The claim by Aspen to being a good investment with perhaps better prospects than either Allied World Assurance Co Holdings, AG. (NYSE:AWH) or Partnerre Ltd (NYSE:PRE) as far as capitalization gains go rests largely on its buyback program. Since the start of the year, Aspen has dramatically increased its program, amounting to a buyback of 10% of the total, and plans to continue doing so for the rest of the year.

Conclusion: Prospects for capital gains

Fewer shares translates into higher earnings per share. This is in line with Aspen’s ROE targeting, which also means that it will continue with its buyback program. At current rates, it is buying shares at below book value, which, given present trends, should be a good investment.

An analyst also points out that Aspen is anticipating Warren Buffett’s investment strategy of buying big time into the type of insurance Aspen is into. Given Buffett’s reputation and track record, it is a very comforting reference to have for investors contemplating doing the same via Aspen.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article This Company Is Placing High Hopes on Share Buybacks originally appeared on Fool.com is written by Mike Thiessen.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.