Everest Re's Strategic Initiatives Impress, Cat Loss A Drag

On Aug 22, 2016, we issued an updated research report on Everest Re Group Ltd. (NYSE:RE) .

Everest Re’s second-quarter 2016 earnings outperformed the Zacks Consensus Estimate on the back of increased premiums and investment income. However, the bottom line deteriorated significantly from the prior-year quarter owing to a number of catastrophe loss events and foreign currency fluctuations.

The company’s Insurance segment has been steady in the past few years. The property and casualty (P&C) insurer witnessed growth in gross and net written premiums in the second quarter owing to certain strategic initiatives undertaken over the last couple of years. These initiatives include product diversification, staffing up of underwriting operations as well as expansion of the relationship between property and casualty, to name a few.

Further, the company is supported by its capital adequacy, financial flexibility, long-term operating performance and traditional risk management capabilities. Moreover, continued share buyback has been enhancing the bottom line of the company. Currently, the company is left with 3.1 million shares available for repurchase. The P&C insurer is anticipated to make continued buybacks supported by its disciplined capital management and strong capital balance position.

The Zacks Consensus Estimate for 2016 and 2017 went up as most of the estimates were revised higher over the last 30 days. While the estimate for 2016 rose 4.1% to $16.76 per share, the one for 2017 inched up 1% to $18.18.

However, exposure to catastrophe losses has adversely affected the company’s earnings. The company incurred a loss of $149 million in the second quarter, which has resulted in the volatility of the earnings. In addition, a competitive reinsurance market and a low interest rate environment are headwinds.

Zacks Rank and Stocks to Consider

Currently, Everest Re carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Allied World Assurance Company Holdings, AG (NYSE:AWH) , Argo Group International Holdings, Ltd. (NASDAQ:AGII) and National Interstate Corporation (NASDAQ:NATL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>