It has been about a month since the last earnings report for Everest Re (RE). Shares have lost about 8% 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 Lag Estimates, Revenues Rise Y/Y
Everest Re Group first-quarter 2023 operating income per share of $11.31 missed the Zacks Consensus Estimate by 9.4%. However, the bottom line increased 9.7% year over year and beat our estimate of $7.02 per share.
Everest Re witnessed higher premiums across its reinsurance and insurance businesses, improved net investment income and underwriting income, partly offset by higher expenses.
Everest Re’s total operating revenues of nearly $3.3 billion increased 7.5% year over year on higher premiums earned and net investment income and beat our estimate of $3.2 billion. The top line, however, missed the consensus mark by 3.4%.
Gross written premiums improved 17.5% year over year to $3.7 billion. Our estimate was $3.5 billion.
Net investment income was $260 million, which increased 6.9% year over year. The upside was driven by stronger fixed income returns as new money yields remain attractive. It missed our estimate of $263.3 million.
Total claims and expenses increased 10.9% to $2.8 billion primarily due to higher incurred losses and loss adjustment expenses, commission, brokerage, taxes and fees, other underwriting expenses, corporate expenses and interest, and fees and bond issue cost amortization expense. Our estimate was $2.9 billion.
Pre-tax underwriting income was $273 million, which increased 16.2% year over year.
Pre-tax catastrophe losses net of estimated recoveries and reinstatement premiums were $110 million, which was due to the Turkey earthquake as well as the New Zealand floods and cyclone.
The combined ratio improved 40 basis points (bps) year over year to 91.2 in the reported quarter.
The Reinsurance segment generated gross written premiums of $2.6 billion, up 20.6% year over year. The increase was driven by 19.4% growth in property pro-rata, 27.5% growth in property Cat and 22.1% in Casualty pro-rata as a flight to quality continues across various markets. Our estimate was $2.3 billion.
The combined ratio of the Reinsurance segment improved 60 bps to 90.8.
The Insurance segment generated gross written premiums of $1.1 billion, up 10.8% year over year, driven by a diversified mix of property, marine, energy and other specialty lines. Our estimate was $1.1 billion.
The combined ratio deteriorated 50 bps to 92.4 for the Insurance segment.
Everest Re exited the first quarter of 2023 with total investments and cash of $31.4 billion, up 5.2% from the 2022 level. Shareholder equity at the end of the reported quarter increased 6.7% from the figure at 2022 end to $9 billion.
Book value per share was $229.49 as of Mar 31, 2023, up 6.8% from the 2022-end level.
Annualized net income return on equity was 17.2%, up 100 bps year over year.
Everest Re’s cash flow from operations was $1.1 billion in the quarter, up 25.7% year over year.
Everest Re paid common share dividends of $65 million during the quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -9.13% due to these changes.
At this time, Everest Re has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Everest Re has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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