Last week the rating agency, A.M. Best affirmed the issuer
credit ratings ("ICR") of "a-" of
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.
Everest Re has adequate capital flexibility, which shields the
company from market uncertainties. Moreover, its combined ratio,
signifying an insurer's profitability, remained below the
breakeven levels over the past decade.
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 company has also successfully increased its cash flows
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 praised 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
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.
Everest Re also carries net asbestos and environmental
(A&E) exposure of approximately $426 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.
Going forward, the rating agency is likely to give a positive
review to Everest Re'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
capital reserves may compel the agency to provide a negative
Everest Re currently retains a Zacks Rank #2. Other players,
XL Group Plc
) all carry investment grade ratings from A.M. Best.
ACE LIMITED (ACE): Free Stock Analysis Report
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EVEREST RE LTD (RE): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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