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Everest Re or RenaissanceRe: Which P&C Insurer Has an Edge?

Property and casualty insurers are facing operational challenges arising due to the pandemic. The resultant increase in unemployment and furlough adversely impacted new sales in property and casualty insurance space.

Claims are also likely to increase that might induce deterioration of expense ratios. Nonetheless, a benign catastrophe environment coupled with better pricing and exposure growth will likely help maintain underwriting profitability. Per a report by Carrier Management, Fitch Ratings analysts project an overall combined ratio of 97 in 2020, a slight improvement from 98 in 2019.

However, a low interest rate and equity market fluctuations will continue to weigh on investment results.

The industry has declined 8.5% year to date compared with the Finance sector’s decline of 15.4%. In contrast, the Zacks S&P 500 composite has risen 7%.


 

The property and casualty insurance industry in particular is witnessing the emergence of insurtech — technology-led insurers. This should help cater to demand even during the pandemic.

Sturdy policyholders’ surplus will help the industry absorb losses. Also, given a sturdy capital level, insurers are buying businesses as they look to gain market share and grow in their niche areas. Also, non-traditional firms are gradually entering the insurance space and combining insurance with their core products.

Here we focus on two property and casualty insurers, namely Everest Re Group RE and RenaissanceRe Holdings RNR. Both Everest Re and RenaissanceRe provide reinsurance and insurance products globally and carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let’s now see how these P&C insurers have fared in terms of some of the key metrics.

Price Performance

RenaissanceRe has lost 7.8% year to date compared with the industry’s decrease of 8.5% and Everest Re’s decline of 21.6%.

Return on Equity (ROE)

Everest Re with a return on equity of 5.7% exceeds RenaissanceRe’s ROE of 5.2%. However, its ROE is lower than the industry average of 6.2%.

Valuation

Price to book value is the best multiple used for valuing insurers. Compared with the P&C insurance industry’s P/B ratio of 1.3 and RenaissanceRe’s reading of 1.4, Everest Re is cheaper with a reading of 1.2.

Dividend Yield

Everest Re with dividend yield of 2.9% betters RenaissanceRe’s 0.8 % as well as the industry’s average of 0.5%.

Debt-to-Equity

Everest Re’s debt-to-equity ratio of 6.7 is lower than the industry average of 27 as well as RenaissanceRe’s reading of 15.5.  

Earnings Surprise History

Everest Re outpaced expectations in the four trailing quarters, delivering average earnings surprise of 28.95%. RenaissanceRe surpassed estimates in only one of the last four quarters with, the average negative surprise being 31.73%.

Combined Ratio

Combined ratio is a profitability measure to identify how well an insurer is performing in its daily operations. A ratio below 100% indicates that the company is making an underwriting profit. RenaissanceRe’s combined ratio of 78.5 betters Everest Re’s reading of 97.5.

VGM Score

VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum. Everest Re has a VGM Score of B while RenaissanceRe has a VGM Score of C. Everest Re thus is better placed.

To Conclude

Our comparative analysis shows that Everest Re has an edge over RenaissanceRe with respect to return on equity, valuation, dividend yield, leverage, VGM Score and earnings surprise history.  Meanwhile, RenaissanceRe scores higher in terms of price performance and combined ratio.

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RenaissanceRe Holdings Ltd. (RNR): Free Stock Analysis Report
 
Everest Re Group, Ltd. (RE): Free Stock Analysis Report
 
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