Everest Re’s Q1 Earnings Top, Revs Miss Ests

Zacks

Everest Re Group Ltd. (RE) reported first-quarter 2014 operating earnings of $5.93 per share, surpassing the Zacks Consensus Estimate by nearly 14% and the year-ago earnings by 0.9%. This mark two successive quarters of positive surprises by the Bermuda-based property and casualty insurer.

Including net realized capital gains of 27 cents per share, the company reported net income of $6.21 per share, declining 17.2%.

Operational Update

Everest Re’s total revenue of $1.28 billion missed the Zacks Consensus Estimate by 8%. The top line was also short of the year-ago number by 6%. The decline was primary attributable to lower net investment income, a significant drop in net realized capital gains and derivatives losses compared to gains in the year-ago quarter.

Gross written premiums were $1.3 billion, an increase of 7% year over year driven by higher premiums written at the reinsurance segment.

Everest Re’s net investment income including limited partnership income came in at $123.2 million in the quarter, down 15.5% year over year.

Total claims and expenses increased 3.4% year over year to $928.6 million. The increase was owing to higher incurred losses and loss adjustment expenses and an increase in commission, brokerage, taxes and fees.

A decline in top-line compounded with a hike in expenses led to a lower net income in the quarter.

On the other hand, combined ratio improved 70 bps year over year to 80.0% during the quarter.

Financial Update

Cash balance as of the end of first quarter was $385 million, decreasing 37% from the 2013-end level.

Everest Re exited the quarter with total assets of $20.1 billion, up 1.5% from the 2013-end level.

Everest Re’s shareholders’ equity as of the end of the reported quarter was $7.04 billion, 1% more than the 2013-end level.

Return on equity was 16.6% in the reported quarter.

Book value per share was $152.80 as on Mar 31, 2014, improving 4% from $146.57 at Dec 31, 2013.

Everest Re's cash flow from operations was approximately $367.1 billion, up 42% from the year-ago quarter.

Share Repurchase and Dividend Update

During the first quarter, Everest Re spent $250 million to buy back 1.7 million shares. The company is now left with 2.9 million shares available for repurchase.

The company also paid $35 million in dividend in the quarter.

A total of $285 million returned to shareholders in the quarter marked the largest spending in a quarter in the history of the company.

Performances by other Property and Casualty Insurers

RLI Corporation (RLI) posted first-quarter 2014 operating earnings of 57 cents per share, exceeding the Zacks Consensus Estimate by 5.6% and the year-ago quarter’s earnings by 9.6%.

The Travelers Companies Inc.’s (TRV) first-quarter net income of $2.95 per share outperformed the Zacks Consensus Estimate by 38% and improved 28% year over year.

W.R. Berkley Corp. (WRB) reported first-quarter 2014 core operating earnings of $1.00, handily beating the Zacks Consensus Estimate of 79 cents per share. Earnings also surged 35.1% year over year.

Zacks Rank

Everest Re presently carries a Zacks Rank #2 (Buy).

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