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Cat Loss to Weigh on Everest Re Group's (RE) Q4 Earnings

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Everest Re Group (RE - Free Report) is slated to report fourth-quarter 2020 results on Feb 8, after market close. The company delivered earnings surprise in two of the three reported quarters of 2020.

Factors to Consider

Global presence, product diversification, strong renewal retention and better pricing are likely to have fueled premium increase for Everest Re in the to-be-reported quarter. The Zacks Consensus Estimate for premiums earned is pegged at $2.3 billion, indicating an increase of 0.1% from the year-ago reported figure.

The Insurance segment is likely to have benefited from product diversification, staffing up of underwriting operations, international insurance growth and ramp up of Canadian and European platforms. The Lloyds platform is likely to have added to the upside. The Zacks Consensus Estimate for net premiums written is pegged at $646 million.

The Reinsurance segment is likely to have been aided by growth initiatives including deployment of increased capacity to pro-rata deal. The Zacks Consensus Estimate for net premiums written is pegged at $1.7 billion.

Net investment income is likely to have benefited from repositioning of the portfolio by moving up fixed-income credit quality, reducing equity exposure, and increasing income from other invested assets. The company also expects improvement in limited partnerships. The Zacks Consensus Estimate for net investment income is pegged at $179 million, up 22.6% from the year-ago reported figure.

The company estimates pre-tax net catastrophe losses of $70 million, net of reinsurance and reinstatement premiums, stemming from hurricanes Delta, Zeta, Eta, Iota, and the Queensland Australia Hailstorm. While Reinsurance segment should absorb $60 million losses, the Insurance segment should absorb the remaining $10 million.

The company projects pre-tax net losses of $76 million for third-party due to the pandemic. While the Reinsurance segment should absorb $56 million losses, Insurance segment should absorb the remaining $20 million.

Nonetheless, the Zacks Consensus Estimate for Insurance segment combined ratio is pegged at 101, implying a deterioration of 600 basis points from the year-ago period reported figure. The consensus estimate for Reinsurance segment combined ratio is pegged at 97. The consensus estimate for consolidated combined ratio is pegged at 98, an improvement of 400 basis points.

Everest Re expects to deliver net income between $475 and $525 million and operating income between $275 and $325 million in 2020.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Everest Re this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case as you can see below.

Earnings ESP: Everest Re has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of $1.03. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Everest Re Group, Ltd. Price and EPS Surprise

Everest Re Group, Ltd. Price and EPS Surprise

Everest Re Group, Ltd. price-eps-surprise | Everest Re Group, Ltd. Quote

Zacks Rank: Everest Re currently carries a Zacks Rank of 3.

Stocks to Consider

Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

Cincinnati Financial (CINF - Free Report) has an Earnings ESP of +2.72% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

American International (AIG - Free Report) has an Earnings ESP of +0.85% and a Zacks Rank #3.

Trean Insurance (TIG - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank of 3.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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