Why Is Everest Re (RE) Up 24.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Everest Re (RE). Shares have added about 24.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Everest Re due for a pullback? 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 Q1 Earnings and Revenues Beat Estimates

Everest Re Group delivered first-quarter 2020 operating net income per share of $4.03, which beat the Zacks Consensus Estimate by 6.9%. The bottom line however deteriorated 41.7% year over year.

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

Operational Update

Everest Re’s total operating revenues of $2.2 billion increased 18.4% year over year on the back of higher premiums earned and net investment income. Moreover, the top line beat the Zacks Consensus Estimate by 3.6%.

Gross written premiums improved 21% year over year to $2.6 billion.

Net investment income came in at $147.8 million in the quarter under review, up 4.8% year over year.

Total claims and expenses increased 30.6% to $2 billion, attributable to higher incurred losses and loss adjustment expenses, commission, brokerage, taxes and fees, other underwriting expenses and corporate expenses.

Combined ratio deteriorated 990 basis points (bps) to 98.6%. Excluding catastrophe loss, attritional combined ratio was 97.3%, deteriorated 990 bps from the prior-year period.

Financial Update

Everest Re Group exited the quarter with total investments and cash of $20.3 billion, down 2% from 2019-end level. Shareholder equity at the end of the reported quarter decreased 5.5% from 2019-end to $8.6 billion.

Book value per share came in at $214.59 as of Mar 31, 2020, down 4.1% from 2019-end level.

Annualized net income return on equity was 0.8% in the first quarter of 2020.
Everest Re Group’s cash flow from operations was $506 million, up 10% year over year.

The company bought back shares worth $200 million in the quarter. The company still has 0.4 million shares remaining under its authorization.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -61.53% due to these changes.

VGM Scores

Currently, Everest Re has an average Growth Score of C, a grade with the same score on the momentum front. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Everest Re has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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