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

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Everest Re Group, Ltd.  (RE - Free Report) is set to report fourth-quarter 2019 earnings on Feb 10, after market close. In the last reported quarter, the company beat estimates by 63.77% on the back of higher contribution from both its segments – Reinsurance and Insurance.

Factors at Play

Everest Re’s fourth-quarter performance is likely to have benefited from insurance pricing gains in its different business lines, strong underwriting discipline and share buyback. The Zacks Consensus Estimate for earnings stands at $2.35, implying an increase of 139.9% from the year-ago quarter reported figure.

Overall premiums written in the quarter are likely to have gained from increase in renewal and new insurance pricing. Pricing is expected to have been driven by a combination of recent catastrophe losses, capacity shortages, trapped capital, pockets of poor loss experience and new found discipline from some of the largest players in both insurance and reinsurance.

The company is likely to have witnessed higher rates in the Property lines as well as Commercial auto business, Liability lines, Primary and Excess, Professional and Financial lines. The Zacks Consensus Estimate for premiums earned in Bermuda and Insurance businesses indicates increase of 18.2% and 22.7%, respectively.

Investment income is expected to have gained from an increase in asset base.

An increase in premium and investment income may have driven operating cash flows.

Everest Re boasts a capital position with low debt and high liquidity in its investment portfolio in addition to strong cash flow. The company’s share buyback activity is likely to have aided the bottom line.

Company’s Guidance

The company disclosed that higher-than-normal 2019 losses in the reinsurance crop book related to poor weather conditions in the United States and Canada, would negatively impact underwriting income in the amount by about $50 million. The company would witness a net favorable prior year reserve development of $19 million. Net investment income of $146 million is expected, including lower limited partnership income of $6 million.

The company provided preliminary fourth-quarter pre-tax catastrophe loss estimate of $215 million due to Typhoon and tornado losses in Dallas, Texas.

Earnings Surprise History

The company delivered positive earnings surprise in the last four quarters, the beat being 28.30%, on average.

Everest Re Group, Ltd. Price and EPS Surprise


What Our Quantitative Model States

Our proven model does not predict an earnings beat for Everest Re this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Everest Re has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.07. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks to Consider

Some stocks from the insurance industry with the apt combination of elements to surpass estimates this reporting cycle are as follows:
Manulife Financial Corp. MFC has an Earnings ESP of +0.89% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sun Life Financial Inc. SLF has an Earnings ESP of +1.27% and a Zacks Rank #2

America International Group Inc. AIG has an Earnings ESP of +3.7% and a Zacks Rank #3

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