Balanced View on Everest Re - Analyst Blog

On April 2, 2014, we issued an updated research report on Everest Re Group Ltd. RE. 

 

Everest Re holds a niche market position in the reinsurance market. However, the company is aligning its insurance business to achieve a meaningful long term sustainable growth. Recent insurance initiatives, including the company's primary Accident and Health, Canadian insurance, and contingency businesses – all showing good traction with new hires, new products and new distribution channels – are  poised for profitable growth in 2014 and beyond.

 

The company is also growing its international business to gain geographic diversification as well as higher margins. 

 

Everest Re's efforts to maintain its combined ratio at favorable levels over a long time (10 years combined ratio of 98.1%) is also commendable given tough operating conditions in the insurance industry. 

 

However, exposure to cat losses and low interest rate environment are some of the headwinds facing Everest Re.

 

The company is also facing a decline in reinsurance rates recently due to light catastrophe losses in 2013. Top-line growth will remain under pressure due to soft market conditions in the reinsurance lines of business.

 

Nonetheless, adequate capital levels, strong financial flexibility and a shareholder friendly capital management strategy allow Everest Re to return wealth to its shareholders at regular intervals, primarily through share buybacks and dividends.

 

With respect to earnings performance, the company has delivered positive earnings surprises in three out of the last four quarters, posting an average beat of 17.8%.

 

Other Stocks to Consider

 

Everest Re carries a Zacks Rank # 3 (Hold). Other stocks like Alleghany Corp. Y, AmTrust Financial Services, Inc. AFSI and Atlas Financial Holdings, Inc. AFH, all with a Zacks Rank #1 (Strong Buy), are worth considering.