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Why Is Everest Re (RE) Down 3.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Everest Re (RE - Free Report) . Shares have lost about 3.4% in that time frame, underperforming the S&P 500.

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

Everest Re Q2 Earnings Top Estimates, Revenues Up Y/Y

Everest Re Group, Ltd. delivered second-quarter 2020 operating net income per share of $2.07, beating the Zacks Consensus Estimate by 10.1%. The bottom line declined 73.6% year over year.

The quarter witnessed higher premiums across its reinsurance and insurance businesses, offset by higher expenses and lower net investment income.

Operational Update

Everest Re’s total operating revenues of nearly $2 billion increased 3.5% year over year on higher premiums earned.

Gross written premiums improved 9.4% year over year to $2.4 billion. Worldwide reinsurance premiums grew 9.1% year over year at $1.5 billion. Direct insurance premiums grew 9.8% to $830.9 million.

Net investment income was $38.1 million in the quarter under review, down 78.7% year over year due to limited partnership losses of $88.3 million.

Total claims and expenses increased 22.7% to $2 billion primarily due to higher incurred losses and loss adjustment expenses, commission, brokerage, taxes and fees, other underwriting expenses, and corporate expenses.

Underwriting profit decreased 74.1% to $50.9 million in the quarter. Underwriting profit for the Reinsurance segment decreased 60.9% to $69.5 million and the Insurance segment incurred an underwriting loss of $18.6 million against the year-ago profit of $19 million.

Combined ratio deteriorated 830 basis points (bps) to 97.5%. Excluding the pandemic’s impacts, attritional combined ratio was 88.5%, improving 10 bps from the prior-year period. Combined ratio deteriorated 860 bps to 95.4% in the Reinsurance segment, whereas it deteriorated 740bps to 103.4% in the Insurance segment.

Financial Update

Everest Re exited the quarter with total investments and cash of $21.6 billion, up 4.1% from the 2019 level. Shareholder equity at the end of the reported quarter increased 1.7% from 2019 end to $9.3 billion.

Book value per share was $232.32 as of Jun 30, 2020, up 3.8% from the 2019-end level.

Annualized net income return on equity was 4.7%, reflecting a contraction of 1180 bps from the year-ago period.

Everest Re’s cash flow from operations was $598.6 million in the second quarter, up 52% year over year.

The company paid common share dividends of $61.9 million during the quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -61.65% 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 20% 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

Everest Re has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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