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Everest Re Group (RE) Estimates Q1 Catastrophe Loss of $260M

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Everest Re Group Ltd. (RE - Free Report) estimates preliminary pre-tax catastrophe loss of $260 million, primarily due to Texas winter storms and New South Wales flooding. The estimated losses are net of reinsurance recoveries and reinstatement premiums.

Reinsurance segment is estimated to absorb $203 million cat loss from Texas winter storms and $10 million from New South Wales flooding. The Insurance segment is estimated to absorb $47 million cat loss from Texas winter storms. The property and casualty insurer anticipates insured industry losses of around $15 billion from Texas winter storms.

The Zacks Consensus Estimate for Everest Re’s first-quarter earnings is currently pegged at $5.15, indicating an increase of 27.7% from the year-ago quarter reported figure.  We expect estimates to move south once analysts start incorporating loss estimates into their numbers.

Risk modeling and analytics firm RMS said it expects insured losses from the Texas Big Freeze to be lower than top-end estimates of $18 billion-$20 billion.

According to the Insurance Council of Australia (ICA), insurers have incurred estimated losses of A$254.2 million ($195 million) from current severe weather and flooding in New South Wales and South East Queensland.

According to Enki Research disaster modeler Chuck Watson, the severe weather event could cost as much as $90 billion in losses, with $35 billion of that total stemming from physical damages and $20 billion of that covered by insurance.

Being a property and casualty insurer, Everest Re’s exposure to cat losses induces earnings volatility.

However, its cat loss in 2020 was $425 million, lower than loss of $545.5 million incurred in the year-ago quarter.

But the combined ratio deteriorated 740 basis points to 102.9%.  The loss ratio component increased in 2020 over the same period last year mainly due to $511.1 million of losses related to the COVID-19 pandemic in 2020.

Everest Re’s active catastrophe management process that deploys modeling and establishes risk limits to control catastrophic exposure on both a probable maximum loss and aggregate basis should provide some respite.

Shares of this Zacks Rank #3 (Hold) property and casualty insurer have rallied 46.9% in the past year, outperforming the industry’s increase of 36.7%. Continued solid performance at Reinsurance and Insurance segments, traditional risk management capabilities coupled with well-balanced portfolio mix and capital adequacy should help the stock retain the momentum.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cat Loss Estimates of Other P&C Insurers

Several property and casualty insurers are also coming up with their first-quarter catastrophe loss estimates.

AXIS Capital Holdings Limited (AXS - Free Report) estimates first-quarter 2021 catastrophe loss of $95-$105 million, after-tax, stemming from winter storms Uri and Viola, principally in Texas.

Arch Capital Group Ltd. (ACGL - Free Report) estimates first-quarter pre-tax net catastrophe losses in the range of $180-$190 million. The adverse impact is likely to have stemmed from the effects of North American winter storms Uri and Viola that occurred in February, as well as from other minor global events.

RenaissanceRe Holdings Ltd. (RNR - Free Report) anticipates a net negative impact of roughly $180 million on first-quarter 2021 operational results. The adverse impact stems from the occurrence of winter storm Uri, a highly disastrous wind and ice storm that occured in February 2021.

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