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Everest Re (RE) Up 28% in a Year: Can It Retain the Momentum?

Shares of Everest Re Group RE have gained 28.3% in a year compared with the industry’s growth of 23.1%. With a market capitalization of $10.1 billion, the average volume of Everest Re’s shares traded in the last three months was 0.3 million.
 


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New business opportunities, rate increases, solid renewal retention, and higher limited partnership income continue to drive Everest Re.

It has a decent track record of beating earnings estimates. It beat estimates in two of the last four quarters and missed in two, delivering an earnings surprise of 20.33%, on average.

Will the Bullish Run Continue?

The Zacks Consensus Estimate for 2021 and 2022 earnings has moved 21.3% and 6.3% north respectively in the last 60 days, reflecting analysts’ optimism.

The Reinsurance and Insurance operations should benefit from increased exposure and new business opportunities with the recovery of the U.S. economy, continued double-digit rate increases, and strong renewal retention.

Its strong gross written premium growth creates operating leverage. The company has an active catastrophe management process that deploys modeling and establishes risk limits to control catastrophic exposures. Everest Re aims low- 90 combined ratio.  

The company outlined a three-year strategic plan to generate total shareholders return of more than 13% in 2023. The plan encompasses gross written premium to grow 10-15% CAGR in Group, 8-12% CAGR in Reinsurance, and 18-22% CAGR in Insurance. Return on invested assets is estimated to be in the range of 2.75%-3.25% while long-term debt leverage ratio is expected to be 15-20. The company aims to increase alternative fixed income, public and private equity.

This Zacks Rank #1 (Strong Buy) company should benefit from its capital adequacy, financial flexibility, long-term operating performance, and traditional risk management capabilities.

Dividend History

This property and casualty insurer has a solid track of increasing dividend each year. Its dividend increased at a seven-year CAGR (2014-2021) of 10.9%. Its dividend yield of 2.3% betters the industry average of 0.4%.

Discounted Valuation

The stock is still undervalued. Price to book value of 1.21X is cheaper than the industry average of 1.26X. It has an impressive Value Score of A. This style score helps to identify undervalued stocks that have a long history of showing superior returns. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 or #2 (Buy) are the best investment options. Thus, before its valuation increases, it is wise to take a position in the stock.

Other Stocks to Consider

Some other top-ranked stocks in the same space include American Financial Group AFG, Cincinnati Financial Corporation CINF, and Fidelity National Financial FNF, all sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Financial Group delivered an earnings surprise of 45.73% in the last reported quarter.

Cincinnati Financial delivered an earnings surprise of 80.81% in the last reported quarter.

Fidelity National delivered an earnings surprise of 48.20% in the last reported quarter.






 


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Cincinnati Financial Corporation (CINF): Free Stock Analysis Report
 
Everest Re Group, Ltd. (RE): Free Stock Analysis Report
 
American Financial Group, Inc. (AFG): Free Stock Analysis Report
 
Fidelity National Financial, Inc. (FNF): Free Stock Analysis Report
 
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