Allied World Assurance Co Holdings AG (NYSE: AWH) Q3 2011 Price Target

Recent price: 58.07$

P/E Ratio: 5.26

3 Months Target Price: 63$

Company Description

According to data provided by Reuters, Allied World Assurance Company Holdings, AG, formerly Allied World Assurance Company Holdings, Ltd., is a specialty insurance and reinsurance company that underwrites a diversified portfolio of property and casualty lines of business through offices located in Bermuda, Hong Kong, Ireland, Singapore, Switzerland, the United Kingdom and the United States. The Company offers its clients and producers significant capacity in both the direct property and casualty insurance markets, as well as the reinsurance market. It operates through three segments: U.S. insurance, international insurance and reinsurance. The U.S. insurance segment includes its direct insurance operations in the United States. The international insurance segment includes its direct insurance operations outside of the United States. Its reinsurance segment includes the reinsurance of property, general casualty, professional liability, specialty lines and property catastrophe coverages..

Confidence Margins

Strong resistance $65.70 (+13%)

Light resistance $61.64 (+6%)

Light support $57.67 (-1%)

Strong support $54.53 (-6%)

Recommendation

Over the past couple of weeks, insurers like Allied World Assurance Co Holdings AG have been hammered by the market because of the Japan earthquake. This company is however very well managed and haw good fundamentals compared to it's peers. As the market and the insurance sector recovers, this stock will provide a good return to it's investors.

Entry strategy

For the cautious investor:

Buy the stock for 59$ or less.

For the risk-taking trader:

The September 2011 60$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 230$ per contract.

Exit Strategy

For the cautious investor:

Sell when the stock reaches 63$, or keep it until 65$ if you are more bullish in your own analysis.

For the risk-taking trader:

The contracts should be kept until the underlying reaches 63$. This should provide a very interesting return if the underlying reaches the target price as the contracts will get in the money.