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Everest Re (RE) Up 2.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Everest Re (RE - Free Report) . Shares have added about 2.8% in that time frame, outperforming 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 Reports Narrower-Than-Expected Loss in Q4

Everest Re incurred fourth-quarter 2018 operating loss of $5.89 per share, narrower than the Zacks Consensus Estimate of operating loss of $7.54. However, the bottom line came in against the year-ago quarter’s income of $12.98 per share.

Nonetheless, the reported quarter witnessed an increase both in premiums and revenues.

Including after-tax net realized capital losses of $3.58, foreign exchange expense of 6 cents and the impact of TCJA enactment (Tax Cuts and Jobs Act of 2017), net loss came in at $9.50 per share versus the year-ago quarterly income of $13.85.

Full-Year Highlights

For 2018, Everest Re delivered operating income of $4.65 per share, missing the Zacks Consensus Estimate by 22.5%. Also, the bottom line plunged 53.5% from the level in 2017.

Moreover, total operating revenues of $7.5 billion lagged the consensus mark by 0.4% but grew 16.4% year over year.

Operational Update

Everest Re’s total operating revenues of $1.9 billion increased 7.8% year over year. However, the top line missed the Zacks Consensus Estimate by 2.7%.

Gross written premiums improved 18% year over year to $2.3 billion. The company’s worldwide reinsurance premiums rose 26% to $1.7 billion on the back of growth across each segment.

Net investment income came in at $140.2 million in the quarter under review, down nearly 6% year over year.

Total claims and expenses skyrocketed 113.1% to $2.5 billion, attributable to higher incurred loss and loss adjustment expenses, commission, brokerage, taxes and fees, corporate expenses and interest plus fees and bond issue cost amortization expense.

Combined ratio deteriorated 6410 basis points (bps) to 134.1% from 70% in the year-ago quarter. Excluding catastrophe loss, attritional combined ratio was 90.4% with a deterioration of 670 bps from the prior-year period.

Financial Update

Everest Re Group exited the quarter with total assets of $24.7 billion, up 5.1% from $23.6 billion at the end of 2017. Shareholder equity at the end of the reported quarter declined 5.6% to $7.9 billion from the level of $8.4 billion at 2017 end.

Total cash balance at the end of the quarter under discussion rose 3.3% to $656.1 million from the end of 2017.

Book value per share came in at $194.43 as of Dec 31, 2018, down 5.1% from the 2017-end level.

Return on equity was 10%.

Everest Re Group’s cash flow from operations for the 12 months ended Dec 31, 2018, was $610.1 million, slumping 47.5% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Everest Re has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Everest Re has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.




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