Late last week, Everest Re Group Ltd., (RE) announced that its subsidiary Everest Reinsurance Co. had purchased Premiere Underwriting Services (Premiere) based in Toronto, Canada.
Premiere is a managing general agent specializing in Entertainment, Sports and Leisure related risks.
In addition, Everest also announced the purchase of renewal rights and operations of financial lines business of Executive Risk Insurance Services, Ltd. which is also based in Toronto, Canada.
The value of the deals was however, not disclosed.
The purchase of these units signifies Everest Re’s efforts to foray into “short tail” specialty lines. A particular class of insurance business, where claims related to it are typically paid out during or shortly after the policy period, is described as having a “short tail.” These types of businesses reduce the risk of claims uncertainty, thereby eliminating the requirement of keeping huge reserves for paying claims.
During the most recent conference call, management stated a sluggish topline growth for 2011. Management is taking full advantage of the current market environment to start new business units in international markets for future growth.
To this end, in December 2008, the company expanded its presence in Brazil via its subsidiary Everest Reinsurance Company, which was licensed to operate as an admitted property and casualty reinsurer in the region.
Also, in the beginning of the year, Everest completed the acquisition of Kansas based crop insurer Heartland Crop Insurance Inc., thereby gaining entry into a short tail specialty line of the U.S. crop insurance business. The business is expected to add $175 million worth of business this year.
However, Everest Re is facing a decline in casualty and property insurance rates both in the U.S. and abroad. But we think excess capital, which management expects to use for continued share buyback, will buoy earnings to some extent.
Everest Re competes with RenaissanceRe Holdings Ltd. (RNR), PartnerRe Ltd. (PRE). All three of them are based in Bermuda.
PARTNERRE LTD (PRE): Free Stock Analysis Report
EVEREST RE LTD (RE): Free Stock Analysis Report
RENAISSANCERE (RNR): Free Stock Analysis Report
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