Why Is Everest Re (RE) Down 4.6% Since Last Earnings Report?

It has been about a month since the last earnings report for Everest Re (RE). Shares have lost about 4.6% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Everest Re Q1 Earnings Beat, Revenues Increase Y/Y

Everest Re Group, Ltd. delivered first-quarter 2021 operating net income per share of $6.49, which beat the Zacks Consensus Estimate by 41.4%. The bottom line improved 61% year over year.

The quarter witnessed higher premiums and improved net investment income, offset by higher expenses.

Operational Update

Everest Re’s total operating revenues of $2.7 billion increased 22.5% year over year on the back of higher premiums earned and net investment income.

Gross written premiums improved 14% year over year to $2.9 billion. The company’s worldwide reinsurance premiums increased 15.8% year over year to $2 billion, driven by rate, increased share on profitable deals, and new opportunities in property, casualty, specialty lines, and facultative business. Direct insurance premiums increased 10% to $872.4 million, driven primarily by notable growth in specialty casualty, property/short-tail and professional liability classes of business, offset by reductions in workers’ compensation as the company sought growth in lines with more attractive pricing.

Net investment income came in at $260.4 million in the quarter under review, up 76.2% year over year.

Total claims and expenses increased 17% to $2.4 billion, attributable to higher incurred losses and loss adjustment expenses, commission, brokerage, taxes and fees, other underwriting expenses, corporate expenses and interest, fees and bond issue cost amortization expense.

Underwriting income was 45 million, which increased 58.1% year over year. The Reinsurance segment recorded underwriting income of $44.8 million, which decreased 10.5% year over year. Underwriting income in the Insurance segment was $0.4 million against the year-ago loss of $21.5 million.

Combined ratio improved 50 basis points (bps) to 98.1%. Excluding catastrophe loss, attritional combined ratio was 87.2%, up 1010 bps from the prior-year period.

Combined ratio deteriorated 90 bps to 97.5% in the Reinsurance segment while the same improved 400 bps to 99.9% in the Insurance segment.

Pre-tax catastrophe losses were $260 million, which increased more than eight-fold from the year-ago quarter.

Financial Update

Everest Re Group exited the quarter with total investments and cash of $25.9 billion, up 1.9% from 2020-end level. Shareholder equity at the end of the reported quarter remained flat from 2020-end at $9.7 billion.

Book value per share came in at $241.57 as of Mar 31, 2021, up 12.6% from 2019-end level.

Annualized net income return on equity expanded 1420 basis points to 15% in the first quarter of 2021.

Everest Re Group’s cash flow from operations was $904 million, up 78.6% year over year.

The company bought back shares worth $23.5 million in the quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 15.15% due to these changes.

VGM Scores

At this time, Everest Re has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 #2 (Buy). We expect an above average return from the stock in the next few months.

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