EG: Improved Reserve Protection Will Support Future Margin Expansion Despite Reserve Charge

Analysts have modestly lifted their price target on Everest Group, reflecting greater confidence in reserve adequacy and resilient earnings despite a $478M reserve charge and mixed sector sentiment.

Analyst Commentary

Street commentary on Everest Group reflects a more balanced stance, with incremental optimism around earnings durability and reserve visibility, offset by lingering concerns on casualty trends and long term return on capital.

Bullish Takeaways

• Bullish analysts are lifting price targets, in some cases toward the $500 level, as they factor in a calmer catastrophe environment and less earnings volatility than feared.
• Improved visibility into reserve adequacy, even after the large reserve charge, is seen as reducing tail risk and supporting a higher valuation multiple over time.
• Commentary that Q3 is shaping up as a solid quarter, with supportive pricing on select commercial lines, underpins expectations for steady top line growth and sustained underwriting margins.
• The recent post earnings selloff is viewed by some as overdone, creating an entry point for investors willing to underwrite normalized returns and capital generation.

Bearish Takeaways

• Bearish analysts remain cautious on U.S. casualty exposure, particularly commercial auto, and see a risk that pricing remains inadequate, pressuring long term loss ratios and capital needs.
• Concerns that property pricing is declining despite rising average annual losses raise questions about the sustainability of current returns and justify more conservative valuation assumptions.
• For reinsurance, some see the cost of capital surpassing return on capital over the next cycle, implying margin compression and limiting upside to earnings growth.
• Initiation with an underperform rating and a materially lower target price reflects skepticism that Everest can fully offset sector headwinds through execution alone.

What's in the News

• Everest Group appointed Elias Habayeb as EVP and Group Chief Financial Officer, effective on or about May 1, 2026. He will succeed retiring CFO Mark Kociancic and join the Executive Leadership Team, bringing over 30 years of global insurance and financial services experience. (Key Developments)
• The company entered into definitive agreements to sell renewal rights for its Global Retail Commercial Insurance business to AIG. The transaction covers an estimated $2 billion of aggregate gross premiums written across the U.S., U.K., Europe, and Asia Pacific and is intended to sharpen its focus on global reinsurance and wholesale and specialty insurance. (Key Developments)
• As part of the renewal rights deal, Everest introduced a new operating structure for its insurance division centered on Global Wholesale and Specialty Insurance. The company appointed Jason Keen as CEO of the segment to strengthen its position in the excess and surplus market. (Key Developments)
• Everest entered into a $1.2 billion adverse development reinsurance agreement with Longtail Re, effective October 1, 2025. The agreement provides protection on substantially all North American insurance policies for accident years 2024 and prior, with the transaction accounted for as retroactive reinsurance. (Key Developments)
• The adverse development cover consists of two layers in excess of $5.4 billion of subject reserves. Everest will co-participate $100 million in each layer and recognize approximately $122 million as an incurred loss in fourth quarter 2025 upon closing. (Key Developments)

Valuation Changes

• Fair Value Estimate unchanged at approximately $369 per share, indicating no material revision to intrinsic value assumptions.
• Discount Rate edged down slightly to about 6.96 percent, implying a marginally lower required return in the valuation model.
• Revenue Growth effectively unchanged at around negative 7.83 percent, signaling no shift in expectations for top line contraction.
• Net Profit Margin stable at roughly 23.98 percent, reflecting consistent assumptions for long term profitability.
• Future P/E essentially unchanged at about 5.30 times, suggesting no notable change in the market multiple applied to forward earnings.