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What's in Store for Everest Re (RE) This Earnings Season?

Zacks Equity Research

Everest Re RE is set to report third-quarter 2019 earnings on Oct 28, after market close. In the last reported quarter, the company beat estimates by 17.87% on the back of higher contribution from both its segments – Reinsurance and Insurance.

The company delivered positive surprise in the last four quarters with the average being 20.66%.

Factors at Play

Everest Re’s third-quarter results are likely to have benefited from insurance pricing gains in its different business lines, strong underwriting discipline ad share buyback.

Overall premiums written in the quarter are likely to have gained from increase in renewal and new insurance pricing. Pricing is likely 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, Insurance and International businesses indicates increase of 33%, 14% and 9.6%, respectively.

Strong underwriting performance of Reinsurance and Insurance segments is likely to have aided combined ratio.

Investment income is expected to have gained from investment grade fixed income portfolio, which had a higher asset base compared to last year.

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

The company provided preliminary third-quarter pre-tax catastrophe loss estimate of $280 million or $225 million after tax primarily due to Hurricane Dorian and Typhoon Faxai. The estimated losses are net of reinsurance recoveries and reinstatement premiums. Pre-tax estimated cat loss from Hurricane Dorian is $160 million while that from Typhoon Faxai is $120 million. The Zacks Consensus Estimate for loss ratio is 73%. In the year-ago quarter, the company’s loss ratio was 72%.

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

The Zacks Consensus Estimate for earnings stands at $2.07, implying a decline of 49.3% from the year-ago quarter reported figure.

What Our Quantitative Model States

Our proven model does not conclusively 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.

Everest Re Group, Ltd. Price and EPS Surprise

Everest Re Group, Ltd. Price and EPS Surprise

Everest Re Group, Ltd. price-eps-surprise | Everest Re Group, Ltd. Quote
 

Zacks Rank: Everest Re carries a Zacks Rank #3.

Stocks to Consider

Some stocks from the insurance industry with the apt combination of elements to surpass estimates this reporting cycle are as follows:

CNA Financial Corp. CNA has an Earnings ESP of +2.25% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chubb Limited CB has an Earnings ESP of +0.44% and a Zacks Rank #3

Lincoln National Corp. LNC has an Earnings ESP of +0.65% and a Zacks Rank #3.

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