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Why Is Everest Re (RE) Up 9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Everest Re . Shares have added about 9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Everest Re due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Everest Re's Q3 Earnings Beat Despite High Cat Loss

Everest Re Group, Ltd.’s third-quarter 2022 operating loss per share of $5.28 was narrower than the Zacks Consensus Estimate of a loss of $5.89 but wider than the year-ago loss of $1.34.

Everest Re witnessed higher premiums across its reinsurance and insurance businesses. RE noted that its diversification strategy and underwriting discipline were key to mitigating exposure to one of the industry’s largest hurricane losses in U.S. history.

Operational Update

Everest Re’s total operating revenues of $3.2 billion increased 9.5% year over year on higher premiums earned. The top line, however, missed the consensus estimate by 2.2%. Gross written premiums improved 6.3% year over year to $3.7 billion, largely driven by double-digit growth in the Insurance segment. However, it missed and our estimate of $$3.9 billion

The Reinsurance segment generated premiums of $2.6 billion, up 3.4% year over year, driven by casualty lines and continued international expansion, which were offset by targeted reductions in property and headwinds from a stronger dollar.

The Insurance segment generated a premium of $1.1 billion, up 13.1% year over year, driven by balanced and strong diversified growth across most lines of business and geographies.

Net investment income was $151 million, down 48.5% year over year. Stronger fixed-income returns as new money yields continued to improve partially, offset by volatile equity markets and a lag in private equity reporting. Total claims and expenses increased 15.3% to $3.5 billion, primarily due to higher incurred losses and loss adjustment expenses, commission, brokerage, taxes and fees, other underwriting expenses, and interest, fees and bond issue cost amortization expenses. Our estimate was $3.1 billion.

Pre-tax underwriting loss of $367 million includes $730 million of pre-tax catastrophe losses net of estimated recoveries and reinstatement premiums as previously announced. The losses were primarily from Hurricane Ian and other events, including European Hailstorms, Hurricane Fiona and Typhoon Nanmadol. The combined ratio deteriorated 1320 basis points (bps) year over year to 112 in the reported quarter. The combined ratio of the Reinsurance segment deteriorated 1520 bps to 115 while the same deteriorated 760 bps to 103.5 for the Insurance segment.

Financial Update

Everest Re exited the third quarter of 2022 with total investments and cash of $28.5 billion, down 3.9% from the 2021 level. Shareholder equity at the end of the reported quarter decreased 24.6% from 2021 end to $7.6 billion. Book value per share was $195.27 as of Sep 30, 2022, down 19.7% year over year.

The annualized net income return on equity was -8.3% versus -2.3% in the year-ago quarter. Everest Re’s cash flow from operations was 1.1 billion in the quarter, flat year over year. Everest Re bought back shares worth $58 million during the quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -12.57% due to these changes.

VGM Scores

At this time, Everest Re has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Everest Re has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Everest Re belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Chubb (CB - Free Report) , has gained 3.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Chubb reported revenues of $12.59 billion in the last reported quarter, representing a year-over-year change of +8.3%. EPS of $3.17 for the same period compares with $2.64 a year ago.

For the current quarter, Chubb is expected to post earnings of $4.19 per share, indicating a change of +10% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.6% over the last 30 days.

Chubb has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.


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