Everest Re Starts Crop Insurance - Analyst Blog

Yesterday, reinsurer Everest Re Group Ltd. (RE) announced that it has completed the acquisition of crop insurer Heartland Crop Insurance Inc., based in Kansas.

With Heartland Crop within its nest, Everest Re has gained entry into a specialty line of insuring U.S. crops. The deal is expected to add to the company's earnings from the first year with an expected $160 million in premiums including insurance and reinsurance premiums.

The acquisition has cost Everest Re $55 million along with the agreed-upon value for the net assets of the agency and an additional contingency of up to $13.5 million based on potential performance.

Everest Re is further trying to procure permission from the Federal Crop Insurance Program for the license of approved insurance provider for the 2012 crop season. Until it gets the approval, it will act as in the capacity of a reinsurer in this business. 

Given the soft market conditions in the property and casualty as well as reinsurance rates, the crop insurance business looks attractive with solid underwriting dynamics and will provide revenue diversification outside its core business.

Everest Re expects its top line to be flat in 2010. While the company expects its property line to post growth, the casualty line is expected to continue to decline due to ongoing tough market conditions. The extent of increased competition and its effect on rates, terms and conditions varies widely by market and coverage but are most prevalent in the U.S. casualty insurance and reinsurance markets.

Everest Re is expected to release fourth quarter and full-year 2010 results on February 7, 2011. The Zacks Consensus earnings estimate is $3.28  for the fourth quarter and $7.70 for full-year 2010.

Everest is a global reinsurance leader with a diversified platform and a long history of solid growth and returns. Its competitors include RenaissanceRe Holdings Ltd. (RNR), Partner Re Ltd. (PRE), and Translantic Holdings Ltd., (TRH).