It has been about a month since the last earnings report for Everest Re Group, Ltd. RE. Shares have lost about 2.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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 Group Beats on Q1 Earnings and Revenues
Everest Re reported first-quarter 2017 operating earnings of $6.29 per share that outpaced the Zacks Consensus Estimate of $5.36 by 17.4%. The bottom line also improved 21.2% from the prior-year quarter.
The company witnessed an increase in premiums and investment income, which fueled top-line improvement. Everest Re Group noted strong momentum across its underwriting operations, with opportunities in both reinsurance and insurance.
Including net realized capital gain of 78 cents per share, the company’s net income surged 77% year over year to $7.07 per share.
Operational Update
Everest Re Group’s total operating revenue of $1.43 billion increased nearly 7% year over year. However, revenues beat the Zacks Consensus Estimate of $1.41 billion.
Gross written premiums grew 18% year over year to $1.6 billion. The company’s worldwide reinsurance premiums increased 19% to $1.2 billion, primarily due to the new crop reinsurance transaction and growth in financial lines premium. Direct insurance premiums also improved 15% to $434 million sequentially.
Net investment income came in at $122.3 million in the quarter, up 19% year over year.
Total claims and expenses increased 7.7% year over year to $1.1 billion. Higher incurred losses and loss adjustment expenses, commission, brokerage, taxes and fees, and corporate expenses were responsible for the increase.
Combined ratio remained flat year over year at 86%. Excluding catastrophe losses from the Australian windstorm, Cyclone Debbie, and prior-year development, combined ratio improved 80% year over year to 84.5%.
Financial Update
Everest Re Group exited the quarter with total assets of $22.2 billion, up 4.2% from $21.3 billion at the end of 2016. Everest Re Group’s shareholder equity at the end of the reported quarter rose 2.5% to $8.3 billion from the 2015-end level of $7.6 billion.
Total cash balance at the end of the quarter declined 2.8% to $468.2 million from $283.7 million at the end of 2016. Everest Re Group’s cash flow from operations was $381.8 million, up 1.7% year on year.
Book value per share increased 3% to $203.32 as of Mar 31, 2017 from $197.45 as of Dec 31, 2016.
Return on equity was 12.8% in the quarter.
Dividend Update
The company raised its dividend by a dime from the year-ago quarter to $1.25 per share.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.
Everest Re Group, Ltd. Price and Consensus
Everest Re Group, Ltd. Price and Consensus | Everest Re Group, Ltd. Quote
VGM Scores
At this time, Everest Re’s stock has an average Growth Score of ‘C’, though it is lagging a bit on the momentum front with a ‘D’. However, the stock was allocated a grade of ‘A’ on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of ‘B’. If you aren’t focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Zacks Investment Research
May 25, 2017 at 02:12PM
from Zacks Equity Research
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