Shares of Everest Re Group Ltd. (RE - Analyst Report) hit its 52-week high on May 11, 2012 after reporting strong first quarter results, which included a 28% earnings surprise. Rebounding from sequential as well as year-ago losses, this Zacks #1 Rank (Strong Buy) property & casualty insurer has now reached the momentum radar.
Upbeat Earnings and Positive Revisions
On April 25, Everest Re reported first quarter 2012 operating earnings per share of $4.48, topping the Zacks Consensus Estimate of $3.51 and reversing the year-ago loss of $5.95. Earnings primarily benefited from lower claims expenses and a modest revenue increase.
The top line of $1.25 billion improved 3.3% year over year, primarily attributable to higher net realized capital gains, partly offset by lower premiums earned and lower investment income.
Total claims and expenses were down 42% year over year to $906.3 million, which was primarily due to lower losses. The loss ratio in the quarter narrowed down to 60.4% from 123.6% in the prior-year quarter.
Everest Re spent $125 million to buyback shares and shelled out $26 million as a dividend payment, and still managed to increase surplus by $260 million.
For 2012, nine of 11 estimates were raised in the last 30 days, pushing the Zacks Consensus Estimate higher by 13% to $13.57, compared to the loss of $1.73 in 2011.
The Zacks Consensus Estimate for 2013 rose 4% to $13.02 as 8 of 12 estimates moved higher.
Valuation Looks Attractive
Shares of Everest Re currently trade at a forward P/E of 7.6x, a 61% discount to the peer group average of 13.8x. On a price-to-book basis, shares currently trade at 0.8x, a 55% discount to the peer group average of 1.8x. This looks attractive given that the trailing 12-month ROE is 7.6% versus 5.5% for the peer group average.
Market Performance & Technicals
Everest Re traded in a band of $84 to $95 from January 3 through April 25. After the company reported strong first quarter results on April 25, it broke the range to trade above its 50-day moving average as well as the 200-day moving average.
Volume is fairly strong, averaging roughly 393,000 daily. The year-to-date return for the stock came in at 20.5%, much above the S&P 500s return of 5.8%.
Incorporated in 1999 and headquartered in Hamilton, Bermuda, Everest Re writes property and casualty insurance and reinsurance. With about 1,000 employees worldwide, Everest Re has branches in Canada, the United States, Singapore, the United Kingdom and Ireland.
With a market capitalization of $5.34 billion, Everest Re competes with White Mountains Insurance Group Ltd. (WTM).