Everest Re Group Ltd. ( RE )
reported second quarter 2012 operating earnings of $4.25 per share,
substantially higher than the Zacks Consensus Estimate of $3.83.
Results surged 73% from $2.46 earned in the prior-year quarter.
Operating income improved 66% year over year to $223 million.
The quarter's earnings primarily benefited from lower claims
expenses along with a modest revenue increase.
Including after tax net realized capital loss of 16 cents, the
company reported net income of $4.08 per share, comparing favorably
with $2.41 per share in the year-ago quarter. Net earnings of $214
million were 63% higher in comparison to the year-ago
quarter.
Operational Update
Total revenue for the quarter came in at $1.18 billion, up 0.4%
year over year, primarily driven by higher other income. Top line
missed the Zacks Consensus Estimate of $1.19 billion.
Gross written premiums declined 8% year over year to $909 million,
attributable largely to the non-renewal of a large Florida quota
share reinsurance contract in the quarter.
Net investment income dropped 6% over the prior-year quarter to
$149.3 million, primarily due to declining reinvestment
rates.
Total claims and expenses were down 9% year over year to $942.6
million, primarily led by lower incurred losses and loss adjustment
expenses.
The loss ratio in the quarter narrowed down to 56.1% from 59.7% in
the prior-year quarter, while combined ratio improved to 86.8% from
87.2% in the year-ago quarter.
Segment Results
The company's Insurance segment reported net
premium written of $203 million, down 4.8% year over year. The
segment reported underwriting gain of $7.4 million, which improved
60% over the prior-year quarter. Combined ratio improved 130 basis
points to 96.5%.
The Reinsurance segment reported premium written
of $653.6 million, down 11.9% year over year. Underwriting gain was
$107 million, exhibiting an immense a huge improvement from the
gain of $16 million in the year-ago quarter. Combined ratio
improved 1100 basis points to 87%.
Financial update
Everest Re exited the second quarter with total investments and
cash of $16 billion, improving from $15.8 billion as of December
31, 2011.
Long term debt at quarter end stood at $818 million, almost flat
with 2011-end level.
Cash from operations totaled $138 million in the quarter under
review, down 7.9% over the year-ago quarter due to higher
catastrophe loss payouts and taxes.
Book value per share as of June 30 was $123.75, up 9.5% from the
end of fiscal 2011.
Share Repurchase Update
During the quarter, Everest Re spent $100 million to buyback 0.99
million shares. The company is still left with 4.9 million shares
under its current share buyback authorization program.
Peer Take
ACE Ltd. ( ACE ),
which competes with Everest Re, reported second quarter operating
income of $2.17 per share, breezing past the Zacks Consensus
Estimate by 24 cents. Earnings improved 10% from $1.97 earned in
the year-ago quarter. The quarter largely benefited from solid
current accident year underwriting results as well as lower
catastrophe losses.
Another peer, XL Group Plc. ( XL ) is
scheduled to release its second quarter results on August 7 after
the bell.
Our Take
Everest Re is aggressively expanding its overseas business,
thereby contributing significantly to the overall top line in
recent years. Moreover, given its conservative financial leverage
measures, the company maintains strong financial flexibility
coupled with the ability to effectively manage its capital
mid-market cycles. However, lower reinvestment rates and reserving
performances are near-term headwinds to its earnings.
The quantitative Zacks #2 Rank (short-term Buy rating) for Everest
Re indicates slight boost on the stock over the near term.
ACE LIMITED (ACE): Free Stock Analysis Report
EVEREST RE LTD (RE): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
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