Everest Re Group Ltd. (RE): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Everest Re Group Ltd. reported third-quarter 2014 operating earnings of $6.12 per share, way ahead of the Zacks Consensus Estimate of $4.97. Earnings were up 45.7% year over year. Several strategic initiatives and significantly higher underwriting income boosted year-over-year results. Additionally, the company has a strong balance sheet profile, a seasoned management team and huge market share in the insurance and reinsurance industry. Everest Re is witnessing improving rates in its insurance business. The company's overseas business is also performing well and the trend is expected to continue in the future. Everest Re's 10-year average combined ratio has remained below the break-even level, leading to underwriting profitability. It has also been generating stable cash flows from operations. However, the company has exposure to catastrophes that lend volatility to its earnings. Also, declining net investment income due to a low interest rate environment, and decreasing limited partnership income and low reinsurance rates remain concerns. We presently have a Neutral recommendation on Everest Re.

Overview:

Based in Hamilton, Bermuda, Everest Re Group Ltd. writes property and casualty (P&C), reinsurance and insurance in the United States, Bermuda and international markets. The company also offers other innovative products like excess and surplus lines of insurance. Everest Re virtually underwrites all classes and categories of business in treaty, facultative, and specialty lines both through brokers and directly with ceding companies.

Incorporated in 1999 as a wholly owned subsidiary of Everest Reinsurance Holdings, Everest Re Group, Ltd. now operates as the parent company. However, Everest Reinsurance Holdings continues to be the parent organization for the company's U.S. based operations. The company is rated 'A+' by both A.M. Best and S&P.

In the beginning of the third quarter of 2011, Everest Re consolidated its Specialty segment partly with the Insurance segment and partly with Reinsurance. The company now reports primary accident and health (A&H) as part of Insurance, while A&H Reinsurance, Surety and Marine & Aviation are now in the U.S. Reinsurance segment.


Reinsurance (generated 78% of net premium written in 2013) This segment writes property and casualty reinsurance on both a treaty and a facultative basis, through reinsurance brokers as well as directly with ceding companies within the U.S. It also includes marine, aviation as well as surety business within the U.S. and worldwide through brokers and directly with ceding companies.

Insurance (22%) This segment writes property and casualty insurance primarily through general agents and surplus lines brokers within the U.S. One-third of this business comprises short-tail specialty components led by Heartland, its Crop Insurance Company. Another third of the business is workers' compensation, mostly for California workers. Approximately 15% of the U.S insurance segment comprises Director s & Officer s insurance written out of New York and Canada, and the remaining 20% of the segment s book is general casualty. It also includes accident and health (A&H) business.

Mt. Logan Re is the special purpose reinsurer formed in early 2013 to provide collateralized capacity to the worldwide property catastrophe reinsurance market.

Everest Re Group operates through the following subsidiaries:

Everest Reinsurance Company provides reinsurance to property and casualty insurers in both the U.S. and international markets. Everest Reinsurance (Bermuda) Ltd., along with its branch in the United Kingdom, provides reinsurance and insurance to worldwide property and casualty markets as well as to life insurers. Everest Reinsurance Company (Ireland) Limited provides reinsurance to non-life insurers in Europe. Everest National Insurance Company and Everest Security Insurance Company provide property and casualty insurance to policyholders in the U.S. Everest Indemnity Insurance Company offers excess and surplus lines insurance in the U.S.

As of Dec 31, 2013, shareholders' equity was $7.0 billion, up 3.5% from $6.7 billion at year-end 2012.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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