Compass Point Remains Bullish Folloing Third Point Reinsurance's (TPRE) 4Q - PT to $15

Compass Point maintained a Buy rating on Third Point Reinsurance (NYSE: TPRE), and cut the price target to $15.00 (from $16.00), following the company's 4Q. TPRE reported operating EPS of $0.37, below the consensus estimate of $0.48.

Analyst Ken Billingsley commented, "Investment losses continue to play a major role in EPS reductions and our reduced price target. We estimate that for every 1% change in our investment yield assumption, earnings are impacted by $0.19 per share, while for every 1% change in our combined ratio assumption, earnings are impacted by $0.05 per share. Based on reported investment results for January 2016, we have lowered our 1Q16 estimates, which has had a significant impact on our BVPS estimates. The current investment market has behaved like a CAT event for hedge fund reinsurers, however, they can still significantly outperform their peers with just a few years of historical average investment performance. TPRE will not likely look to grow premiums aggressively in future quarters as their investment leverage has reached their goal of ~ 1.5x. We view this as a positive as the company believes that it will be difficult to get their combined ratio below 100% in the current underwriting environment. They see current market conditions allowing for a 102% to 103% combined ratio. With a higher sensitivity to investment returns, and investment leverage at their target level, TPRE now needs investment returns to match historical levels to show the ROE strength of their model versus peers who have recently benefited from lower CAT events and reserve releases."

For an analyst ratings summary and ratings history on Third Point Reinsurance click here. For more ratings news on Third Point Reinsurance click here.

Shares of Third Point Reinsurance closed at $11.23 yesterday.

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