Everest Re Group, Ltd. (RE) guided preliminary losses from earthquake and tsunami in Japan at $320 million, pre-tax and net of reinstatement premiums and taxes.
The company has forecast total industry losses of roughly $25 billion resulting from the Japanese earthquake and tsunami.
ACE Ltd. (ACE) which competes with Everest Re, estimated net after-tax losses from the Japanese earthquake to range between $200 million and $250 million. Another peer, XL Group (XL) guided preliminary losses from the earthquake and tsunami in Japan to be between $190 million and $290 million, pre-tax and net of reinsurance and reinstatement premiums.
Earlier, Everest Re expected preliminary first quarter 2011 pre-tax losses to range between $140 million and $210 million, owing to the deadly February 2011 New Zealand earthquake. The company also expected the Australian floods will likely cause a gross loss of another $45 million to Everest Re, which writes 7% of its Reinsurance business in the Asia/Australia region.
Higher cat losses usually increase the loss ratio. Loss ratio measures the total losses paid out in claims divided by total premiums earned. In 2010, loss ratio of Everest Re deteriorated 1390 basis points year over year to 74.9% largely due to catastrophe losses resulting from the Chilean earthquake, Australian hailstorms and floods, the New Zealand earthquake and the Canadian hailstorm. Everest Re reported operating income of $9.08 per share in 2010 significantly ahead of the Zacks Consensus Estimate of $7.64.
The Zacks Consensus Estimate for first-quarter 2011 is a loss of $5.24 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $3.20 per share and $11.42 per share.
We expect that its top line growth will remain somewhat restricted due to the expected decline in the casualty line as a result of tough market conditions.
We maintain our long-term Underperform recommendation on Everest Re. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward pressure on the stock over the near term.
Based in Hamilton, Bermuda, Everest Re Group Ltd. writes property and casualty reinsurance and insurance in the United States, Bermuda and international markets.
ACE LIMITED (ACE): Free Stock Analysis Report
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