A.M. Best has affirmed the issuer credit ratings ("ICR") of "a-"
Everest Re Group, Ltd
). The company's debt ratings were also affirmed along with the
ratings of its subsidiaries. All the ratings carry a Stable
This rating affirmation indicates Everest Re's strong balance sheet
profile and better-than-average underwriting performance, along
with its ability to perform favorably amidst tough market
conditions, a seasoned management team and huge market share in the
insurance and reinsurance industry.
The company has adequate capital flexibility, which shields from
market uncertainties. Moreover, its combined ratio, signifying an
insurer's profitability, remained below the breakeven levels over
the past five years.
The company also has a liquid investment portfolio that has a short
duration maturity. It has kept its investment portfolio
conservative by investing just 10% of the total investment money in
equities. A low incidence of equity in the investment portfolio
will protect the company from equity market volatility.
The rating agency noted that Everest is well-run by a seasoned and
experienced management team, which has kept the company's operating
costs under control and successfully delivered underwriting
profitability year after year. The company is also well-diversified
across different regions with a wide product portfolio, which helps
it to garner a greater market share.
The rating agency also praises Everest Re for managing its
enterprise risk effectively over the years. The company's effective
risk management capability has helped it to reduce risk across its
business, and at the same time enabled it to allocate capital
Nevertheless, factors negating the positives include Everest Re's
exposure to catastrophe losses, which impart volatility to its
earnings. Though the company uses catastrophe models and has
maintained risk limits to control catastrophe losses, occurrence of
such incidents reduce the company's earnings.
The company also carries net asbestos and environmental
(A&E) exposure of approximately $480 million, which has been
going down recently. Reserves against these policies are monitored
on a quarterly basis and the current review shows that the company
has adequate reserves against these liabilities.
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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Going forward, the rating agency is likely to give a positive
review to the company's ratings if it continues to deliver
consistent underwriting profitability as well as maintain strong
However, reduced profitability and capital levels, along with
greater-than-expected exposure to catastrophe loss and declining of
capital reserves may compel the agency to provide a negative
Last month, A.M. Best Co. affirmed the financial strength ratings
(FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa" of
Everest Re's peer,
XL Group Plc
), also received affirmation of FSR of "A" and ICR of "a" from A.
Everest Re currently retains a Zacks #2 Rank, which translates into
a short-term Buy rating. Considering the fundamentals, we are also
maintaining our long-term Neutral recommendation on the shares.