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Why Is Everest Re Group (RE) Down 5.8% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Everest Re Group, Ltd. (RE - Free Report) . Shares have lost about 5.8% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is 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 Q1 Earnings Top Estimates, Premiums Rise

Everest Re Group, Ltd. delivered first-quarter 2018 operating earnings of $5.34 per share, surpassing the Zacks Consensus Estimate of $5.29 by 0.95%. The bottom line declined 17.6% from the year-ago quarter.

The quarter witnessed increase in premiums and net investment income. Return on equity improved in double digits. Claims and expenses also escalated in the quarter.

Including after-tax net realized capital losses of 47 cents and foreign exchange income of 24 cents, net income came in at $5.11 per share, down 27.7% from the prior-year quarter.

Operational Update

Everest Re Group’s total operating revenues of $1.8 billion increased nearly 23.9% year over year. Moreover, the top line beat the Zacks Consensus Estimate by 6.8%.

Gross written premiums grew 21% year over year to $1.9 billion. The company’s worldwide reinsurance premiums surged 22% while direct insurance premiums improved 16% for the quarter.

Net investment income came in at $138.3 million in the quarter, up 13% year over year.

Total claims and expenses increased 33.2% to $1.5 million, attributable to higher incurred losses and loss adjustment expenses, increase in commission, brokerage, taxes and fees, higher other underwriting expenses as well as corporate expenses.

Combined ratio deteriorated 730 basis points (bps) to 93.3% from 86% in the year-ago quarter. Excluding catastrophe losses, net operating income improved 5%, underwriting income was more than $200 million and combined ratio was 87.1%.

Financial Update

Everest Re Group exited the quarter with total assets of $23.5 billion, decreasing 0.3% from $21.6 billion at the end of 2017. Shareholder equity at the end of the reported quarter dipped 0.3% to $8.3 billion from the level of $8.4 billion at 2017-end.

Total cash balance at the end of the quarter under review increased 10.3% to $700.6 million from end of 2017.

Book value per share came in at $203.62 as of Mar 31, 2018, down 0.6% from the 2017-end level.

Return on equity was 10.5%.

Everest Re Group’s cash flow from operations was $195.6 million, plunging nearly 49% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.

VGM Scores

At this time, RE has a poor Growth Score of F. Its Momentum is doing a lot better with a B. The stock was also allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, 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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