Why Is Everest Re (RE) Down 2.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Everest Re (RE). Shares have lost about 2.4% in that time frame, outperforming 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 Q2 Earnings Top Estimates, Revenues Miss

Everest Re delivered second-quarter 2019 operating net income per share of $7.85, beating the Zacks Consensus Estimate by 17.9%. The bottom line improved more than eightfold year over year.

Both its reinsurance and insurance businesses witnessed growth in the quarter.

Operational Update

Everest Re’s total operating revenues of nearly $2 billion increased 6.1% year over year. However, the top line missed the Zacks Consensus Estimate by 4.8%.

Gross written premiums improved 5% year over year to $2.2 billion. The company’s worldwide reinsurance premiums remained flat year over year at $1.4 billion. Direct insurance premiums grew 17% to $757.1 million.

Net investment income came in at $179 million in the quarter under review, up 27% year over year.

Total claims and expenses decreased 10.6% to $1.6 billion, attributable to lower losses and loss adjustment expenses.

Combined ratio improved 1590 basis points (bps) to 89.2%. Excluding catastrophe loss, attritional combined ratio was 88.6%, a deterioration of 510 bps from the prior-year period.

Financial Update

Everest Re Group exited the quarter with total investments and cash of $19.8 billion, up 7.4% from 2018 level. Shareholder equity at the end of the reported quarter increased 6.6% from 2018 end to $8.9 billion.

Book value per share came in at $218.07 as of Jun 30, 2019, up 12.2% from 2018-end level.

Annualized net income return on equity was 16.1%.

Everest Re Group’s cash flow from operations was $853.5 million in the first half of 2019, up more than sixfold year over year.

The company bought back shares worth $8.5 million in the quarter. The company still has 1.3 million shares remaining under its authorization.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Everest Re has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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