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Everest Re (RE) to Report Q4 Earnings: What's in Store?

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Everest Re Group, Ltd. (RE - Free Report) is slated to report fourth-quarter 2018 results on Feb 11 after market close. The company delivered positive surprise in two of the three reported quarters of 2018.

Factors to Consider

Everest Re’s Insurance segment is likely to benefit from product diversification, staffing up underwriting operations, global expansion, and international insurance growth. The ramp up of Canadian and European platform and Lloyds platform should also add to the upside. The Zacks Consensus Estimate for premiums earned is pegged at $453 million.

The Reinsurance segment is likely to benefit from growth initiatives including deployment of increased capacity to pro-rata deal wherein it saw attractive original pricing terms and conditions.

Improved pricing across all business line is expected to drive premiums though the same at workers compensation line of business remains soft.

The company noted an improving rate environment in U.S. property and commercial auto books as well as in primary general liability and various professional lines. However, in U.S. workers' compensation, rate pressure persists.

Accelerated pace of rate hike is likely to boost net investment income.  Also, improvements in limited partnership investments and  a balanced portfolio should drive an upside.  

The fourth quarter suffered the brunt of catastrophe losses stemming from Hurricane Michael and Hurricane Michael. Being a property and casualty insurer, Everest Re is also exposed to these losses. The company estimates cat loss of $695 million, net of reinsurance, reinstatement premiums and taxes. This estimate also includes cat loss from a hailstorm that occurred in Australia.

In fact, reinsurance operations are likely to bear the brunt. Everest Re relies on the loss reported from ceding insurers across many underlying insurance policies.

The Zacks Consensus Estimate for combined ratio is pegged at 107%, indicating decline of 3700 basis points year over year.

The Zacks Consensus Estimate is pegged at a loss of $4.56 per share, indicating 133.8% year-over-year decline.

What Our Quantitative Model Says

Our proven model does not show that Everest Re is likely to beat estimates in the to-be-reported quarter. This is because it has does not have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Everest Re has an Earnings ESP of -22.59% as the Most Accurate Estimate of loss of $5.59 is wider than the Zacks Consensus Estimate of $4.56. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Everest Re Group, Ltd. Price and EPS Surprise

Zacks Rank: Everest Re carries a Zacks Rank #4 (Sell).

Zacks Rank #4 or 5 (Strong Sell) stocks should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks from the finance sector with the right combination of elements to surpass estimates this time around are as follows:

Ares Capital Corporation (ARCC - Free Report) is set to report fourth-quarter earnings on Feb 12. The company has an Earnings ESP of +1.10% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AerCap Holdings N.V. (AER - Free Report) has an Earnings ESP of +6.84% and a Zacks Rank of 2. The company is scheduled to release fourth-quarter earnings on Feb 14.

Agree Realty Corporation (ADC - Free Report) has an Earnings ESP of +0.88% and a Zacks Rank of 3. The company is slated to announce fourth-quarter earnings on Feb 21.

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