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Will Stronger Premiums Drive Everest Re (RE) Q3 Earnings?

Everest Re Group, Ltd . RE is slated to report third-quarter 2018 results on Oct 29 after market close. The company came up with a negative surprise last reported quarter.

Factors to be Considered in Q3

Product diversification, staffing up underwriting operations, expanding the property insurance geographic footprint and international insurance growth have likely aided Everest Re's Insurance segment's results.

The Reinsurance segment might have benefited from growth in mortgage and other credit-related business as well as improved pricing. The company pursued several growth initiatives including deployment of increased capacity to pro-rata deal wherein it saw attractive original pricing terms and conditions, which have supported the strong performance. These efforts are expected to have favored the segmental performance in the quarter to be reported.

The company noted an improving rate environment in U.S. property and commercial auto books as well as in primary general liability and various professional lines. However, in U.S. workers' compensation, rate pressure persists.

The Zacks Consensus Estimate for premiums earned is pegged at $1.7 billion, up 5.9% year over year.

Accelerated pace of rate hike is anticipated to have boosted net investment income, an important component of insurers' top line. The Zacks Consensus Estimate for investment income stands at $135 million.

Prudent underwriting and re-underwriting actions are estimated to have improved attritional loss ratio at both segments.

The third quarter of a year generally bears the brunt of unprecedented catastrophes. A hurricane season typically gathers strength in August and September. This time was also no exception as the company suffered the wrath of catastrophe. The company estimated pre-tax cat loss of $240 million in the third quarter from Hurricane Florence, California wildfires, Typhoon Jebi, Typhoon Trami and Japan floods. Nonetheless, prudent underwriting is likely to have aided the combined ratio improvement. The Zacks Consensus Estimate for combined ratio is pegged at 96%, an improvement of 6800 basis points year over year.

The Zacks Consensus Estimate is pegged at $2.87 per share, reflecting 117.4% year-over-year growth on 7.3% higher revenues of $1.8 billion.

What the Quantitative Model Says

Our proven model shows that Everest Re is likely to beat estimates this to-be-reported quarter. This is because it has the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP : Everest Re has an Earnings ESP of +7.29% as the Most Accurate Estimate of $3.08 is pegged higher than the Zacks Consensus Estimate of $2.87. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Everest Re Group, Ltd. Price and EPS Surprise

Everest Re Group, Ltd. Price and EPS Surprise | Everest Re Group, Ltd. Quote

Zacks Rank : Everest Re carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. Thus, a favorable Zacks Rank combined with a positive Earnings ESP makes us confident of an earnings beat this quarter to be reported.

Conversely, all Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Some other stocks worth considering from the insurance industry with the right combination of elements to also come up with an earnings beat this time around are:

American Financial Group, Inc. AFG is set to report third-quarter earnings on Oct 30. The stock has an Earnings ESP of +2.46% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

CNA Financial Corporation CNA is set to report third-quarter earnings on Nov 5. The stock has an Earnings ESP of +4.19% and a Zacks Rank #2.

Cigna Corp. CI that is set to report third-quarter earnings on Nov 1. The stock has an Earnings ESP of +0.85% and a Zacks Rank of 3.

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Cigna Corporation (CI): Free Stock Analysis Report

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Everest Re Group, Ltd. (RE): Free Stock Analysis Report

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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.


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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