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Why Hold is an Apt Strategy for Everest Re Group (RE) Stock

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Everest Re Group is well-poised for growth, driven by higher premiums across its segments, solid capital position, and prudent capital deployment.

The stock carries an impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

Why Should Investors Hold the Stock?

The expected long-term earnings growth rate is pegged at 10.2%, better than the industry average of 8.8%. It carries a Growth Score of B. The Growth Score analyzes a company’s growth prospects. Everest Re’s global presence, product diversification, capital adequacy, long-term operating performance, financial flexibility and traditional risk management capabilities bode well for growth.

Everest Re delivered earnings beat in three of the last four quarters with the average surprise being 9.54%.

This Zacks Rank #3 (Hold) underwriter of property and casualty, reinsurance and insurance in the United States, Bermuda and international markets has been benefiting from operational excellence at both its Insurance and Reinsurance segments. Product diversification, recruitment at underwriting operations, expansion of geographic footprint, international insurance expansion, and growth of the existing platforms should help it retain the momentum.

Repositioning portfolio by moving up in fixed income credit quality while lowering equity exposure, increase in limited partnership income, higher dividend income from equity portfolio and increased income from other invested assets should continue to aid investment income.

Everest Re has been strengthening its balance sheet by lowering debt and improving cash balance. It boasts a strong capital position with sufficient cash generation capabilities. This in turn helps in effective capital deployment that enhances shareholders value. The company has increased dividend at a five-year CAGR of 15.6%. Its current dividend yield is 2.7%, which compares favorably with the industry average of 0.4%.

However, being a property and casualty insurer, it is exposed to catastrophe loss, weighing on underwriting profit and in turn deteriorating combined ratio. Shares of Everest Re have gained 6.8% in the past six months compared with the industry's increase of 19.8%. The Zacks Consensus Estimate for 2020 has moved up 11.2% over the past 60 days, reflecting analysts’ optimism.

Stocks to Consider

Some better-ranked players in the property and casualty industry include Alleghany , Fidelity National Financial (FNF - Free Report) and First American Financial Corporation (FAF - Free Report) . While Alleghany sports a Zacks Rank #1 (Strong Buy), Fidelity National and First American Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany’s bottom-line surpassed estimates in two of the last four quarters, the average beat being 34.08%.

Fidelity National Financial surpassed earnings estimates in each of the last four quarters, with the average being 30.48%.

First American Financial surpassed estimates in three of the last four quarters, the average beat being 16.83%.

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