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Why Is Everest Re (RE) Down 2.2% 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 lost about 2.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Everest 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 drivers.

Everest Re Q3 Earnings and Revenues Beat Estimates

Everest Re Group, Ltd. delivered third-quarter 2018 operating earnings of $4.09 per share, surpassing the Zacks Consensus Estimate of $3.07 by 33.2%. Moreover, the bottom line reversed the year-ago quarter’s loss of $15.35 per share.

The reported quarter witnessed an increase in premiums and net investment income. The company saw solid underlying results with a continued positive momentum across its underwriting operations.

Including after-tax net realized capital gains of $1.06 and a foreign exchange expense of 13 cents, net income came in at $5.02 per share versus the year-ago quarterly loss of $15.73.

Operational Update

Everest Re Group’s total operating revenues of $1.9 billion increased nearly 12.3% year over year. Also, the top line beat the Zacks Consensus Estimate by 4.7%.

Gross written premiums rose 8% year over year to $2.2 billion. The company’s worldwide reinsurance premiums increased 7% while direct insurance premiums improved 8% for the third quarter.

Net investment income came in at $161.4 million in the quarter under review, up 17.8% year over year.

Total claims and expenses declined nearly 33.6% to $1.7 billion, attributable to lower incurred loss and loss adjustment expenses.

Combined ratio improved 6360 basis points (bps) to 100% from 163.6% in the year-earlier quarter. Excluding catastrophe loss, attritional combined ratio was 86.8% with a deterioration of 130 bps from the prior-year period.

Financial Update

Everest Re Group exited the quarter with total assets of $24.4 billion, up 3.5% from $23.6 billion at the end of 2017. Shareholder equity at the end of the reported quarter slid 0.5% 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 inched up 0.7% to $639.8 million from the end of 2017.

Book value per share came in at $204.91 as of Sep 30, 2018, flat with the 2017-end level.

Return on equity was 10%.

Everest Re Group’s cash flow from operations for the nine months having ended Sep 30, 2018, was $543.6 million, slumping nearly 47.9% 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 -38.64% due to these changes.

VGM Scores

Currently, Everest Re has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was 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.

Outlook

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