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Everest Re or AXIS Capital: Which P&C Insurer has an Edge?
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Property and casualty insurers continue to face the brunt of catastrophes, coronavirus pandemic and near-zero interest rates.
The third quarter of a year generally witnesses the most catastrophes as the hurricane season typically starts in June and lasts through November, gathering strength in August and September. Colorado State University expects ‘extremely active Atlantic hurricane season in 2020 and hurricane activity will be about 190% of the average season’. Insurers have already provided third-quarter cat loss estimates, which is likely to be a drag on underwriting profitability.
However, improved pricing (most of the lines are witnessing rate increase), exposure growth, prudent underwriting, favorable reserve development and sturdy capital level should help withstand the blow. Per a report by Carrier Management, Fitch Ratings analysts project an overall combined ratio of 97 in 2020, a slight improvement from 98 in 2019.
A low interest rate and equity market fluctuations will continue to weigh on investment results.
The industry has declined 10.2% year to date compared with the Finance sector’s fall of 16.7%. In contrast, the Zacks S&P 500 composite has risen 4.5%.
Nonetheless, the property and casualty insurance industry in particular is witnessing the emergence of insurtech — technology-led insurers. This should help cater to the demand uninterruptedly while maintaining social distancing norms.
Sturdy policyholders’ surplus will help the industry absorb losses. Also, given a solid capital level, insurers are buying businesses as they look to gain market share and grow in their niche areas. Also, non-traditional insurers are gradually entering the insurance space and combining insurance with their core products.
Let’s now see how these P&C insurers have fared in terms of some of the key metrics.
Price Performance
Everest Re’s has lost 28.4% year to date compared with the industry’s decrease of 10.3% and AXIS Capital’s decline of 25.1%.
Return on Equity (ROE)
Everest Re with a return on equity of 5.7% exceeds AXIS Capital’s ROE of -1.9%. However, its ROE is lower than the industry average of 6.2%.
Valuation
Price-to-book value is the best multiple used for valuing insurers. Compared with the P&C insurance industry’s P/B ratio of 1.3 and Everest Re’s reading of 0.9, AXIS Capital is cheaper with a reading of 0.8.
Dividend Yield
AXIS Capital with dividend yield of 3.7% tops Everest Re’s 3.1 % as well as the industry’s average of 0.5%.
Debt-to-Equity
Everest Re’s debt-to-equity ratio of 6.7 is lower than the industry average of 27 as well as AXIS Capital’s reading of 31.3.
Earnings Surprise History
Everest Re outpaced expectations in the four trailing quarters, delivering earnings surprise of 28.95%, on average. AXIS Capital surpassed estimates in only three of the last four quarters, with the average surprise being 58.74%.
Growth Projection
The expected long-term earnings growth of Everest Re with a reading of 10.4% exceeds AXIS Capital’s reading of 5.5% and industry average of 8.8%
Combined Ratio
Combined ratio is a profitability measure to identify how well an insurer is performing in its daily operations. A ratio below 100% indicates that the company is making an underwriting profit. AXIS Capital’s combined ratio of 94.7 tops Everest Re’s reading of 97.5.
VGM Score
VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum. Everest Re has a VGM Score of B while AXIS Capital has a VGM Score of C. Everest Re thus is better placed.
To Conclude
Our comparative analysis shows that Everest Re has an edge over AXIS Capital with respect to return on equity, leverage, earnings surprise history, growth projection and VGM Score. Meanwhile, AXIS Capital scores higher in terms of price performance, dividend yield, valuation and combined ratio.
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Everest Re or AXIS Capital: Which P&C Insurer has an Edge?
Property and casualty insurers continue to face the brunt of catastrophes, coronavirus pandemic and near-zero interest rates.
The third quarter of a year generally witnesses the most catastrophes as the hurricane season typically starts in June and lasts through November, gathering strength in August and September. Colorado State University expects ‘extremely active Atlantic hurricane season in 2020 and hurricane activity will be about 190% of the average season’. Insurers have already provided third-quarter cat loss estimates, which is likely to be a drag on underwriting profitability.
However, improved pricing (most of the lines are witnessing rate increase), exposure growth, prudent underwriting, favorable reserve development and sturdy capital level should help withstand the blow. Per a report by Carrier Management, Fitch Ratings analysts project an overall combined ratio of 97 in 2020, a slight improvement from 98 in 2019.
A low interest rate and equity market fluctuations will continue to weigh on investment results.
The industry has declined 10.2% year to date compared with the Finance sector’s fall of 16.7%. In contrast, the Zacks S&P 500 composite has risen 4.5%.
Nonetheless, the property and casualty insurance industry in particular is witnessing the emergence of insurtech — technology-led insurers. This should help cater to the demand uninterruptedly while maintaining social distancing norms.
Sturdy policyholders’ surplus will help the industry absorb losses. Also, given a solid capital level, insurers are buying businesses as they look to gain market share and grow in their niche areas. Also, non-traditional insurers are gradually entering the insurance space and combining insurance with their core products.
Here we focus on two property and casualty insurers, namely Everest Re Group and AXIS Capital Holdings Limited (AXS - Free Report) . Both the firms provide reinsurance and insurance products globally and carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s now see how these P&C insurers have fared in terms of some of the key metrics.
Price Performance
Everest Re’s has lost 28.4% year to date compared with the industry’s decrease of 10.3% and AXIS Capital’s decline of 25.1%.
Return on Equity (ROE)
Everest Re with a return on equity of 5.7% exceeds AXIS Capital’s ROE of -1.9%. However, its ROE is lower than the industry average of 6.2%.
Valuation
Price-to-book value is the best multiple used for valuing insurers. Compared with the P&C insurance industry’s P/B ratio of 1.3 and Everest Re’s reading of 0.9, AXIS Capital is cheaper with a reading of 0.8.
Dividend Yield
AXIS Capital with dividend yield of 3.7% tops Everest Re’s 3.1 % as well as the industry’s average of 0.5%.
Debt-to-Equity
Everest Re’s debt-to-equity ratio of 6.7 is lower than the industry average of 27 as well as AXIS Capital’s reading of 31.3.
Earnings Surprise History
Everest Re outpaced expectations in the four trailing quarters, delivering earnings surprise of 28.95%, on average. AXIS Capital surpassed estimates in only three of the last four quarters, with the average surprise being 58.74%.
Growth Projection
The expected long-term earnings growth of Everest Re with a reading of 10.4% exceeds AXIS Capital’s reading of 5.5% and industry average of 8.8%
Combined Ratio
Combined ratio is a profitability measure to identify how well an insurer is performing in its daily operations. A ratio below 100% indicates that the company is making an underwriting profit. AXIS Capital’s combined ratio of 94.7 tops Everest Re’s reading of 97.5.
VGM Score
VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum. Everest Re has a VGM Score of B while AXIS Capital has a VGM Score of C. Everest Re thus is better placed.
To Conclude
Our comparative analysis shows that Everest Re has an edge over AXIS Capital with respect to return on equity, leverage, earnings surprise history, growth projection and VGM Score. Meanwhile, AXIS Capital scores higher in terms of price performance, dividend yield, valuation and combined ratio.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>