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Why Is Everest Re (RE) Up 1.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Everest Re (RE - Free Report) . Shares have added about 1.9% in that time frame, underperforming 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 drivers.

Everest Re Earnings Miss Estimates in Q2, Plunge Y/Y

Everest Re Group, Ltd. delivered second-quarter 2018 operating earnings of 98 cents per share, missing the Zacks Consensus Estimate of $1.01 by 2.9%. Moreover, the bottom line plunged 82.7% from the year-ago quarter.

The reported quarter witnessed an increase in premiums and net investment income. The company saw solid underlying results with continued positive momentum across the underwriting operations. However, claims and expenses escalated in the period under review.

Including after-tax net realized capital loss of 26 cents and a foreign exchange income of 46 cents, net income came in at $1.70 per share, down 71.4% from the prior-year quarter.

Operational Update

Everest Re Group’s total operating revenues of $1.9 billion increased nearly 24.6% year over year. Also, the top line beat the Zacks Consensus Estimate by 9%.

Gross written premiums jumped 29% year over year to $2.1 billion. The company’s worldwide reinsurance premiums surged 38% while direct insurance premiums improved 13% for the second quarter.

Net investment income came in at $141.3 million in the quarter, up 5.1% year over year.

Total claims and expenses increased nearly 46% to $1.8 million, attributable to higher incurred loss and loss adjustment expenses, commission, brokerage, taxes and fees as well as other underwriting expenses.

Combined ratio deteriorated 1460 basis points (bps) to 105.1% from 90.5% in the year-ago quarter. Excluding catastrophe loss, attritional combined ratio was 83.5% with an improvement of 320 bps from the prior-year period.

Financial Update

Everest Re Group exited the quarter with total assets of $23.9 billion, up 1.2% from $23.6 billion at the end of 2017. Shareholder equity at the end of the reported quarter slid 1.5% to $8.2 billion from the level of $8.4 billion at 2017 end.

Total cash balance at the end of the quarter under review decreased 2.5% to $619.5 million from the end of 2017.

Book value per share came in at $201.70 as of Jun 30, 2018, down 1.6% from the 2017-end level.

Return on equity was 7%.

Everest Re Group’s cash flow from operations for the six months having ended Jun 30, 2018, was $132.6 million, slumping nearly 79.1% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -5.53% due to these changes.

VGM Scores

At this time, Everest Re has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

The company's stock is suitable solely for value based on our style scores.

Outlook

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