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Here's Why Should You Hold onto Everest Re (RE) Stock Now

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Everest Re Group, Ltd. (RE - Free Report) is well-poised to gain from improved net investment income and strong premium growth in the Reinsurance market.

The company has an impressive surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 31.6%. The Zacks Consensus Estimate for its current-quarter earnings has been revised 4.2% upward in the past 60 days.

Let’s take a look and delve deep into the factors that bode well for the company.

Factors Driving the Company

Everest Re continues to perform well on high premium growth, which, in turn, is boosting top-line growth. Premiums witnessed 6.8% growth in 2019, with which the top line witnessed a CAGR of 9.7% over the past four years (2015-2019). Strong investment income is being driven by higher yields on fixed income portfolio and improved limited partnership income. Investment income rose 11.3% in 2019 and continued to boost the company’s revenues.

Furthermore, Everest Re is well-positioned to benefit from strong premium growth in its reinsurance market. Such premiums usually contribute a major portion to a company’s total gross written premiums and 2019 was no exception. Evidently, it accounted for nearly 70% of total gross written premiums and inched up 2% in 2019 as well. Apart from the adoption of advanced capital and hedging abilities, the company seems to be working to enhance its product portfolio to explore opportunities in the evolving reinsurance market.

Also, Everest Re boasts a robust capital position, which enables it to return value to shareholders via dividend hikes and share buybacks. Last November, it raised the quarterly dividend by 11% and also witnessed a five-year CAGR (2014-2019) of 15.6%. Its current dividend yield is 3.3%, which compares favorably with the industry average of 0.5%. The company also seems to be efficient in utilizing its shareholders’ funds, as indicated by its return on equity of 9.9% being higher than the industry average of 6.4%.

However, shares of this Zacks Rank #3 (Hold) property casualty insurer have lost 31.8% on a year-to-date basis compared with the industry’s decline of 26%. The downside was caused by overall market volatility. Nevertheless, we believe that the company’s strong fundamentals are likely to drive its shares going forward.

Stocks to Consider

Some better-ranked stocks in the same space are CNA Financial Corp. (CNA - Free Report) , First American Financial Corp. (FAF - Free Report) , and RLI Corp. (RLI - Free Report) . While CNA Financial and First American Financial sport a Zacks Rank #1 (Strong Buy), RLI carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

All three companies surpassed estimates in the last reported quarters by 6.59%, 33.33% and 28.57%, respectively.

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