Here's Why Everest Group (EG) Stock is Investors' Favorite Now
Everest Group Ltd’s EG new business growth, strong renewal retention, continued favorable rate increases and solid capital position poise this Zacks Rank #1 (Strong Buy) insurer well for growth.
Shares of Everest Group have gained 6.4% year to date, outperforming the industry’s increase of 2.3%. With a market capitalization of $15.3 billion, the average volume of shares traded in the last three months was about 0.4 million.
EG, the seventh-largest global property and casualty reinsurer, has a decent history of delivering positive surprises in three of the last four reported quarters while missing in one, the average being 24.50%. Earnings grew 16.5% over the last five years, better than the industry average of 4.5%. Everest Group has a VGM Score of A.
Return on equity (ROE), a profitability measure to identify how efficiently a company is utilizing its shareholders’ funds, has been improving over the last several years. EG’s trailing 12-month ROE of 21.9% is much better than the industry average of 13.2%.
Growth Drivers
The Zacks Consensus Estimate for Everest Group’s 2024 earnings is pegged at $62.62 per share, indicating a 12.6% increase from the year-ago estimated figure on 15.2% higher revenues of $17.2 billion.
The expected long-term earnings growth rate is 37.3%, outperforming the industry average of 12.4%.
Global presence, product diversification, rate increase and high retention rate continue to drive EG’s overall growth. The Insurance segment is poised to benefit from an increase in property and short tail business and a rise in specialty casualty business. On the other hand, leveraging opportunities stemming from the continued disruption and evolution of the reinsurance market should poise the Reinsurance segment for growth.
Net investment income stands to benefit from higher income from the fixed income portfolio, increase in limited partnership income, rise in dividend income from equity portfolio and higher income from other invested assets. An improved interest rate environment adds to the upside.
Everest Group has a strong capital position, banking on sufficient cash generation capabilities and benefits from capital adequacy, financial flexibility, long-term operating performance and traditional risk management capabilities.
Everest Group has increased dividends by 133% over a decade and targets a total shareholder return of more than 13% by 2023 and more than 17% by 2026, reflecting robust and well-diversified earnings power. EG boasts consistent and industry-leading shareholder returns.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
Optimistic Guidance
Everest Group envisions gross written premium to witness a three-year CAGR of 10-15%. Segment-wise, gross written premium in the Insurance segment is expected to rise at a three-year CAGR of 18-22%, while the same in the Reinsurance segment is expected to witness a three-year CAGR of 8-12%.
Given prudent underwriting, EG aims for a low-90 combined ratio in 2023, which will improve to 89-91% by 2026. Return on invested assets is projected between 2.75% and 3.25%. The insurer targets a long-term debt-leverage ratio between 15% and 20%.
Attractive Valuation
Everest Group shares are trading at a price-to-book multiple of 1.36, lower than the industry average of 2.64.
EG has a Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B, combined with a Zacks Rank #1 or #2 (Buy), offer better returns.
Before valuation expands, one can add the stock to their portfolio for better returns.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Assurant Inc. AIZ, Enact Holdings ACT and Old Republic International ORI.
The Zacks Consensus Estimate for Assurant’s 2024 earnings indicates an increase of 4.2% from the 2023 estimated figure and has moved and 0.7% north in the past 30 days. AIZ delivered a four-quarter average earnings surprise of 42.38%. Its shares have gained 34.4% year to date. AIZ sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Enact Holdings delivered a four-quarter average earnings surprise of 21.82%. Year to date, ACT’s shares have gained 21.2%. The Zacks Consensus Estimate for ACT’s 2024 earnings has moved 1.1% higher in the past 60 days. It carries a Zacks Rank #2.
Old Republic delivered a four-quarter average earnings surprise of 28.59%. Year to date, ORI’s shares have gained 21.9%. The Zacks Consensus Estimate for ORI’s 2024 earnings has moved north by 3% in the past 60 days. It carries a Zacks Rank #2.
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Assurant, Inc. (AIZ) : Free Stock Analysis Report
Old Republic International Corporation (ORI) : Free Stock Analysis Report
Enact Holdings, Inc. (ACT) : Free Stock Analysis Report
Everest Group, Ltd. (EG) : Free Stock Analysis Report
