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Everest Re (RE) Up 6.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Everest Re (RE - Free Report) . Shares have added about 6.1% 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 Q4 Earnings Lag Estimates, Revenues Rise Y/Y

Everest Re Group, Ltd. delivered fourth-quarter 2020 operating net loss per share of $1.12, wider than the Zacks Consensus Estimate of a loss of $1.03 per share. In the year-ago quarter, the company had recorded income of $3.20 per share.

The quarter witnessed higher premiums across its Reinsurance and Insurance businesses, and increased net investment income, offset by elevated expenses.

Operational Update

Everest Re’s total operating revenues of $2.6 billion increased 20.7% year over year. Gross written premiums improved 12.9% year over year to $2.7 billion. The company’s worldwide reinsurance premiums increased 12% year over year to $1.8 billion, driven by new business opportunities, growth with existing customers, and improved rates and terms and conditions. Direct insurance premiums increased 15% to $871.9 million, driven primarily by new business opportunities, strong renewal retention, and rate improvement.

Net investment income came in at $222 million in the quarter under review, up 52.2% year over year. Total claims and expenses increased 32.4% to $2.6 billion due to higher incurred losses and loss adjustment expenses, commission, brokerage, taxes and fees, other underwriting expenses, corporate expenses, interest, fees and bond issue cost amortization expense.

Underwriting loss was $218.7 million, much wider than the year-ago underwriting loss of $28.8 million. The Reinsurance segment incurred an underwriting loss of $224.7 million, wider than the year-ago underwriting loss of $54.9 million while underwriting income in the Insurance segment decreased 77.3% to $5.9 million.

Combined ratio deteriorated 760 basis points to 109.1%. Combined ratio deteriorated 850 bps to 112.4% in the Reinsurance segment while the same deteriorated 390 bps to 99% in the Insurance segment. Pre-tax catastrophe losses were $70 million, which decreased 68.9% from the year-ago quarter.

Financial Update

Everest Re exited the quarter with total investments and cash worth $ 25.5 billion, up 22.7% from the 2019-end level. Shareholder equity at the end of the reported quarter increased 6.5% from the figure at 2019 end to $9.7 billion.
Annualized net income return on equity was 2.8% in the quarter under review.
Everest Re’s cash flow from operations was $2.9 billion in 2020, up from $1.9 billion in 2019. The company repurchased no common shares in the quarter

Full-Year Update

For the full year, gross written premiums were $10.4 billion, up 14.8% year over year. In 2020, Everest Re delivered operating income of $7.46 per share, declining 65% year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Everest Re has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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

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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