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Everest Re (RE) to Report Q1 Earnings: What's in Store?

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Everest Re Group, Ltd.  is set to report first-quarter 2020 earnings on May 6, after market close. In the last reported quarter, the company beat estimates by 35% on the back of higher contribution from both its segments — Reinsurance and Insurance.

Factors at Play

Everest Re’s first-quarter performance is likely to have benefited from higher net investment income, increased insurance premiums and share buyback. The Zacks Consensus Estimate for earnings stands at $5.02, implying a decrease of 27.35% from the year-ago quarter reported figure.

Pricing is expected to have been driven by several large global property programs that tapped out global capacity, global reinsurance programs, pockets of casualty, mortgage, structured business, many facultative lines and several loss-affected areas.

Insurance premiums are likely to have benefited from increase in many lines of business, including casualty, energy and accident and health. Overall premiums written in the quarter are likely to have gained from growth in treaty casualty. The Zacks Consensus Estimate for premiums earned in Bermuda business is $421 million, indicates increase of 27.6% from the year-ago quarter reported figure. The consensus estimate for the Insurance business of $540 million indicates an increase of 27% from the year-ago reported figure.

The company expects net investment income of $148 million in the first quarter of 2019. Higher income from growing fixed maturity portfolio is likely to have aided net investment income.

Higher premium earned and net investment income are likely to have driven revenue improvement. The Zacks Consensus Estimate for revenues is pegged at $2.1 billion, indicating 14.2% increase from the year-ago reported figure.

The company expects combined ratio is expected to be below 100% for the consolidated reinsurance and insurance operations. Combined ratio includes $150 million in pre-tax net first party losses for expected claims related to the COVID 19 outbreak. The company expects most of the losses to come from Reinsurance segment. The Zacks Consensus Estimate for the consolidated combined ratio is pegged at 95, indicating an increase of 6.7% from first-quarter 2019.

Operating cash flows are likely to have been driven by an increase in premium and investment income.

Everest Re boasts a strong capital position with low debt and high liquidity in its investment portfolio in addition to strong operating cash flows. The company’s share buyback activity is likely to have aided the bottom line.

Earnings Surprise History

The company delivered positive earnings surprise in each of the last four quarters, the average being 31.59%.

What Our Quantitative Model States

Our proven model does not predict an earnings beat for Everest Re this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Everest Re has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $5.02. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Everest Re Group, Ltd. Price and EPS Surprise

Stocks to Consider

Some stocks from the finance sector with the apt combination of elements to surpass estimates this reporting cycle are as follows:

Virtu Financial, Inc. (VIRT - Free Report) has an Earnings ESP of +39.67% and a Zacks Rank #1.

Green Dot Corp. (GDOT - Free Report) has an Earnings ESP of +3.83% and is a Zacks #3 Ranked stock.

Arbor Realty Trust (ABR - Free Report) has a Zacks Rank #3 and an Earnings ESP of +1.59%.

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