Why Is Everest Group (EG) Up 3.7% Since Last Earnings Report?

It has been about a month since the last earnings report for Everest Group (EG). Shares have added about 3.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Everest Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Everest Group Q4 Earnings Beat on Improved Premiums

Everest Group, Ltd.’s fourth-quarter 2023 operating income of $25.18 per share beat the Zacks Consensus Estimate by 72.1%. The bottom line doubled year over year. Everest Group witnessed higher premiums across its reinsurance and insurance businesses and improved net investment income. Higher expenses and lower underwriting income partially offset the upside.

Operational Update

Everest Group’s total operating revenues of nearly $3.65 billion increased 12.3% year over year on higher premiums earned and net investment income. The top line missed the consensus mark by 8.9%. Gross written premiums improved 18.3% year over year to $4.3 billion, driven by 21.9% growth in Reinsurance and a rise of 11.6% in Insurance. Our estimate was $4 billion.

Net investment income was $411 million, which surged 96% year over year. The upside was driven by strong fixed    income and alternative investment returns. Our estimate was $407.4 million. The Zacks Consensus Estimate was pegged at $413 million.

Total claims and expenses jumped 26% to $3.4 billion, primarily due to higher commission, brokerage, taxes and fees, other underwriting expenses, corporate expenses and interest, fees and bond issue cost amortization expense. Our estimate was $3.2 billion.

Pre-tax underwriting income was $245 million, which plunged 33.4% year over year. Pre-tax catastrophe losses net of estimated recoveries and reinstatement premiums were $143 million, wider than the loss of $15 million in the year-ago quarter. The loss was primarily due to Hurricane Otis.

The combined ratio deteriorated 540 basis points (bps) year over year to 93.2 in the reported quarter. The Zacks Consensus Estimate was 90, while our estimate was 87.8.

Segment Update

The Reinsurance segment’s gross written premiums were $2.9 billion, up 21.9% year over year. The increase was driven by a rise of 39.2% in Property Pro-Rata, 23.3% in Property Catastrophe XOL and 45.2% in Property Non-Catastrophe XOL, when adjusting for reinstatement premiums, as pricing increases and a flight to quality continue globally. The combined ratio of the Reinsurance segment improved 800 bps to 78.8. Our estimate was 88.6. The Zacks Consensus Estimate was pegged at 89.

The Insurance segment generated gross written premiums of $1.4 billion, up 11.6% year over year, driven by a diversified mix of property and specialty lines, partially offset by lower written premiums in monoline workers' compensation and financial lines. The combined ratio deteriorated 4,190 bps to 132.4 for the Insurance segment. Our estimate was 85.3. The Zacks Consensus Estimate was pinned at 91.

Financial Update

Everest Group exited the fourth quarter of 2023 with total investments and cash of $37.1 billion, up 24.3% from the 2022 level. Shareholder equity at the end of the reported quarter increased 56.4% from the figure at 2022 end to $13.2 billion.

Book value per share was $304.29 as of Dec 31, 2023, up 41.2% from the 2022-end level. The annualized net income return on equity was 23.8%, which expanded 370 bps from the year-ago quarter.

Everest Group’s cash flow from operations was $4.5 billion in the quarter, up 23.2% year over year. The company paid common share dividends of $76 million during the quarter.

Full-Year Highlights

Full-year 2023 operating income per share of $66.39 more than doubled year over year. The bottom line beat the Zacks Consensus Estimate by 20%. Total revenues jumped 20.9% from the year-ago quarter to $14.58 billion. The top line missed the Zacks Consensus Estimate by 2.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Everest Group has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Everest Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Everest Group is part of the Zacks Insurance - Multi line industry. Over the past month, The Hartford (HIG), a stock from the same industry, has gained 8.2%. The company reported its results for the quarter ended December 2023 more than a month ago.

The Hartford reported revenues of $4.31 billion in the last reported quarter, representing a year-over-year change of +7.6%. EPS of $3.06 for the same period compares with $2.31 a year ago.

For the current quarter, The Hartford is expected to post earnings of $2.38 per share, indicating a change of +41.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.5% over the last 30 days.

The Hartford has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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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 Nasdaq, Inc.

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