Everest Re (RE) Down 2.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Everest Re (RE). Shares have lost about 2.7% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Everest Re due for a breakout? Before we dive into how investors and analysts have reacted as 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 Q4 Earnings Beat, Revenues Miss Estimates
Everest Re Group, Ltd.’s fourth-quarter 2022 operating income per share of $12.21 beat the Zacks Consensus Estimate by 31.4% and our estimate of $8.25. The bottom line increased 33.9% year over year. Everest Re witnessed higher premiums across its reinsurance and insurance businesses. RE experienced improved pricing as well as terms and conditions and deepening relationships with new and existing core clients.
Operational Update
Everest Re’s total operating revenues of $3.2 billion increased 6.4% year over year on higher premiums earned and net investment income. The top line, however, missed the consensus estimate by 2.9% and our estimate of $3.3 billion.
Gross written premiums improved 6.1% year over year to $3.6 billion, largely driven by double-digit growth in the Insurance segment. However, it missed and our estimate of $3.8 billion
Net investment income was $210 million, up 2.4% year over year, driven by rising fixed-income returns as new money yields continue to improve. It beat our estimate of $174 million.
Total claims and expenses increased 2.6% to $2.7 billion, primarily due to higher commission, brokerage, taxes and fees, other underwriting expenses and interest, fees and bond issue cost amortization expense. Our estimate was $2.8 billion. Pre-tax underwriting loss of $368 million includes $15 million of pre-tax catastrophe losses net of estimated recoveries and reinstatement premiums as previously announced. The losses were primarily from Winter Storm Elliott.
The combined ratio improved 410 basis points (bps) year over year to 87.8 in the reported quarter.
Segment Update
The Reinsurance segment generated premiums of $2.4 billion, up 0.4% year over year, driven by growth with core casualty clients and the advantage of increased mortgage opportunities, offset by targeted reductions in property portfolio and foreign exchange movements. Our estimate was $2.6 billion.
The combined ratio of the Reinsurance segment improved 510 bps to 86.4.
The Insurance segment generated a premium of $1.3 billion, up 19% year over year, driven by balanced and diversified growth across most lines of business and geographies. Our estimate was $1.2 billion. The combined ratio improved 140 bps to 91.4 for the Insurance segment.
Full-Year Highlights
Operating income per share of $27.08 beat the Zacks Consensus Estimate of $24.14. The bottom line decreased 6.5% year over year. Our estimate was $23.07
Operating revenues of $12.5 billion increased 7.8% year over year. The top line beat the consensus estimate of $12.4 billion. Our estimate was $12.6 billion. Gross written premium improved 6.9% to $14 billion, which was almost in line with our estimates. The combined ratio improved 180 basis points.
Financial Update
Everest Re exited 2022 with total investments and cash of $29.9 billion, up 0.7% from the 2021 level. Shareholder equity at the end of the reported quarter decreased 17% from 2021 end to $8.4 billion. Book value per share was $215.54 as of Dec 31, 2022, down 16.5% year over year.
The annualized net income return on equity was 17.7%, which expanded 310 bps from the year-ago quarter. Everest Re’s cash flow from operations was 3.7 billion in the quarter, down 3.6% year over year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 7.87% due to these changes.
VGM Scores
Currently, Everest Re has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Everest Re has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Everest Re belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Progressive (PGR), has gained 3.6% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
Progressive reported revenues of $13.54 billion in the last reported quarter, representing a year-over-year change of +12.2%. EPS of $1.50 for the same period compares with $1.05 a year ago.
For the current quarter, Progressive is expected to post earnings of $1.60 per share, indicating a change of +42.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -8.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Progressive. Also, the stock has a VGM Score of D.
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Everest Re Group, Ltd. (RE) : Free Stock Analysis Report
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