Why Is Hold Strategy Apt For Everest Re (RE) Stock Now?

Shares of Everest Re Group, Ltd. (NYSE:RE) rallied 17.10% year to date, significantly outperforming the Zacks categorized Property and Casualty Insurance industry’s increase of 3.89%. We expect the stock to retain this momentum owing to a number of positives.

Everest Re’s Insurance segment has been witnessing an improvement in gross premiums written, driven by initiatives like product diversification and expansion of the property insurance geographic footprint. We expect such strategic initiatives to drive the premiums even higher.

Incidentally, Mt. Logan Re – one of the key growth drivers of the property and casualty (P&C) insurer – has displayed a significant improvement in Asset Under Management (AUM) and remains the fastest growing capital market vehicle.

An increase in AUM will help Everest Re execute and enhance its long-term capital management and business scheme. In addition, introduction of several reinsurance products like the Purple Everest Color Product is expected to benefit this Zacks Rank #3 (Hold) property and casualty (P&C) insurer to a large extent in future.

The company also remains well-poised to benefit from its capital adequacy, financial flexibility, long-term operating performance and traditional risk management capabilities. Everest Re’s prudent capital management plan and robust capital balance position should help it further continue dividend payouts and share buybacks.

However, exposure to catastrophe losses will affect the company’s earnings and pose as headwinds in the near term.

Nonetheless, valuation is attractive at present as the stock is currently trading at a price to book multiple of 1.25, a 12.6% discount to the industry average of 1.43, in the last one year. Also, the company has a trailing 12-month return on equity (ROE) of 12.7%, higher than the industry’s 6.5% average. Besides, the company’s expected long-term earnings growth is laudably pegged at 10.00%.

Maintaining the positivity ahead, this P&C insurer also carries a decent VGM Score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics.

Stocks to Consider

Some better-ranked stocks from the same space include American Financial Group, Inc. (NYSE:AFG) , Fidelity National Financial, Inc. (NYSE:FNF) and Argo Group International Holdings, Ltd. (NASDAQ:AGII) . Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Financial provides property and casualty insurance products in the United States. The company has delivered positive surprises in three of the last four quarters with an average beat of 11.47%.

Fidelity National provides title insurance and technology plus transaction services to real estate and mortgage industries in the United States. The company has delivered positive surprises in three of the last four quarters with an average beat of 8.47%.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company has delivered positive surprises in all of the last four quarters with an average beat of 35.70%.

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