Sunday, June 7, 2015

Seeking Alpha: Everest Re Leaning Into The Wind

Even in the face of persistent double-digit declines in prop-cat reinsurance rates, Everest Re (NYSE:RE) shares have managed to gain another 13% since late September, outperforming rivals like Validus (NYSE:VR), RenRe (NYSE:RNR), Aspen (NYSE:AHL) and Endurance (NYSE:ENH). Investors remain concerned about the long-term returns on the business being written in the sector today, but Everest Re has continued to grow premiums at a strong rate and to report low combined ratios and solid underwriting profits.

There is a risk that the old rules about the reinsurance cycle no longer apply and that companies like Everest Re are looking at a prolonged stretch of single-digit ROEs that will fall below required returns. For its part, management believes they still have the opportunity to write attractive business and control risk, while also looking for growth in the primary insurance market. There is a considerably wider spread between best-case, base-case, and worst-case scenarios for reinsurers like Everest Re today than life insurers, P&C insurers, or mixed operations like Aspen. That said, if you believe that the company can generate long-term ROEs of 11% or higher, there is still upside here.

Read more here:
Everest Re Leaning Into The Wind

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