Smart Dividend Portfolio Edition #63: Underwriting Excellence
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Dear Investor,
Welcome to the 63rd edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: Jun 02, 2025
U.S. stock futures fell early Monday as investor concerns over the U.S.-China trade war rose again, with new tariff disputes and stalled negotiations. Futures on the Nasdaq 100 (NDX), the Dow Jones Industrial Average (DJIA), and the S&P 500 (SPX) were down 0.71%, 0.47%, and 0.52%, respectively, at 4:29 a.m. EST, June 2.
This follows a strong performance in May, where the S&P 500 surged by 6.15%, marking its best monthly increase since November 2023. The Dow Jones and the Nasdaq Composite (NDAQ) gained 3.94% and 9.56%, respectively, last month.
Adding to the trade friction, China has countered U.S. claims of violating the Geneva trade deal, instead blaming Washington for failing to uphold the deal. Also, China said that the U.S. is blocking Chinese tech exports, including AI chips and semiconductor tools.
Further, the U.S. plans to double steel tariffs to 50%, which could hurt manufacturing and global supply chains.
It must be noted that the National Economic Council director said President Trump and China’s President Xi might undertake trade talks this week, but no exact date has been set.
Looking ahead, investors are awaiting several key economic reports this week for insights into the impact of tariffs on the U.S. economy, with particular attention on Friday’s key May Nonfarm Payrolls data.
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This Week’s Quality Dividend Stock Idea
Everest Group (EG) is a global leader in reinsurance, insurance, and risk management solutions, headquartered in Bermuda. Known for its property, casualty, and specialty reinsurance products, EG serves clients worldwide, offering innovative underwriting and risk assessment services. With a focus on financial strength and disciplined growth, Everest maintains a robust global presence and leverages data-driven insights to deliver tailored solutions for insurers, businesses, and institutions.
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Strategic Evolution
Founded in 1973 as Prudential Reinsurance, a subsidiary of Prudential Financial, Everest Group began its journey with a focus on property and casualty reinsurance. The company gained independence through a 1995 IPO and rebranded as Everest Re in 1996, signaling a broader and more ambitious vision. In 2017, it joined the S&P 500, and in July 2023, it adopted the name Everest Group, reflecting its evolution into a global insurance and reinsurance leader.
Everest now operates in over 100 countries across six continents through its Reinsurance and Insurance segments. Its expansion has been driven by a clear focus on disciplined portfolio management, profitability, and strategic market positioning.
Mergers and acquisitions have played a limited but purposeful role in Everest’s growth. The company’s most notable deal came in 2011 with the $55 million acquisition of Heartland Crop Insurance, strengthening its position in the U.S. crop insurance market. Although Everest later sold Heartland to CGB Diversified Services, it retained exposure to the crop insurance business through a reinsurance agreement with the acquirer, ensuring continuity in a niche, stable segment.
In contrast to peers that have pursued aggressive M&A strategies, Everest has prioritized organic growth and operational refinement. This approach was reaffirmed in recent years, as the company emphasized selective expansion in high-margin areas such as property and specialty reinsurance. At the same time, it has actively reduced exposure to lower-return segments, such as the U.S. casualty insurance business, and divested non-core assets, such as portions of its Sports and Leisure business. Everest Group divested its Sports and Leisure business in October 2024 via a sale, transferring ongoing business to the buyer while retaining responsibility for legacy policies written before the transaction
Everest’s measured, long-term approach, marked by underwriting excellence, careful risk selection, and strategic flexibility, has enabled it to strengthen its global position while maintaining financial discipline and sustainable value creation.
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Global Balance
Everest Group operates a globally diversified business model anchored in two core segments: Reinsurance and Insurance. Headquartered in Bermuda, the company serves clients across the U.S., Europe, Canada, and Asia, writing business in over 100 countries. This broad geographic and customer base allows Everest to maintain a well-balanced risk portfolio without reliance on any single market, region, or client. In 2024, no customer accounted for more than 3.9% of gross written premiums (GWP), highlighting the company’s resilience and breadth.
Reinsurance, Everest’s largest segment at nearly 71% GWP, involves assuming risk from insurers in return for premiums, essentially acting as insurance for insurance companies. Approximately 65% of Everest’s 2024 gross written premiums came from the brokered reinsurance market. Although brokers help place this business, they cannot bind Everest to agreements; each submission is evaluated and underwritten independently. The company’s top ten brokers accounted for 60.5% of this segment’s premiums in FY24. The direct reinsurance market, contributing 6.5% of gross premiums, remains a valuable channel, allowing Everest to build strong, direct relationships with companies.
Meanwhile, the Insurance segment, accounting for 28% of gross premiums in 2024, focuses on commercial property and casualty coverage. Business is sourced through a network of wholesale and retail brokers, surplus lines brokers, and program administrators. No single program administrator contributed more than 5.5% to this segment in 2024.
In October 2024, Everest Group created an “Other” segment to manage legacy and runoff business, including residual sports and leisure policies, asbestos and environmental exposures, and discontinued programs. The segment doesn’t generate new sales and focuses on managing existing obligations and claims.
Everest’s underwriting strategies prioritize profitability over scale. The company selectively partners with insurers that effectively manage their own risk and pricing cycles. In insurance, Everest leverages its broad expertise, global presence, and financial strength to adjust its mix by geography, coverage type, and line of business, ensuring agility in capturing high-margin opportunities while maintaining underwriting discipline.
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Disciplined Performance
Everest Group’s financial performance reflects its disciplined approach to underwriting, risk selection, and capital deployment. In Q1 2025, Reinsurance gross written premiums totaled $3.2 billion, with 11.5% growth in Property Pro-Rata lines, supported by strong risk-adjusted returns. The Insurance segment generated $1.1 billion in gross premiums, with property and specialty lines growing 19% and 16%, respectively. However, U.S. casualty lines were scaled back by 16.6% as part of an ongoing portfolio remediation1 to improve profitability.
In response to evolving market dynamics, Everest has shown restraint on rate-sensitive lines, such as Japanese property reinsurance, where pricing dropped 10% in 2025 following a steep 50% hike in 2023. Despite this correction, overall pricing remains favorable. The company continues to benefit from its reputation as a preferred partner, securing strong returns amid ongoing demand for reinsurance solutions.
Everest continues to demonstrate strong operational efficiency, particularly within its reinsurance segment, which operates with a lean cost structure. While expenses in the insurance segment have risen temporarily, this increase is linked to deliberate investments aimed at driving growth and optimizing the portfolio for long-term profitability.
In Q1 2025, the company faced a significant catastrophe loss of $461 million, largely due to wildfires in California. However, Everest’s impact was mitigated by its disciplined approach to loss estimation. Rather than relying on broad market share assumptions, the company uses a “ground-up” method that involves detailed, event-specific analysis. This approach enables Everest to assess each event by closely examining its own policies and exposures, resulting in more precise and reliable loss forecasts.
This focus on analytical rigor and operational discipline has allowed Everest to navigate volatility while continuing to invest strategically for future growth. These actions can temporarily reduce earned premiums, making the expense ratio look higher, even if actual expenses haven’t increased much. Meanwhile, its international insurance operations are beginning to turn a profit, thanks to smart investments in people and technology, signaling good progress in its global expansion.
Investment income remains a reliable pillar of Everest’s earnings performance. In Q1 2025, the company generated $491 million in investment income, primarily from its high-quality fixed income portfolio, which carries an “AA-“ rating and delivered a 4.7% book yield2. This conservative, well-rated portfolio reflects Everest’s focus on safety and stability, with investments concentrated in secure, income-generating assets such as government and investment-grade corporate bonds.
Strong operating cash flow of $928 million and a robust capital position further reinforce the company’s ability to support long-term earnings growth. These financial resources enable Everest to continue pursuing its core strategies: global expansion, disciplined underwriting, and consistent returns from a stable investment base.
The dependable nature of Everest’s investment income not only cushions earnings during periods of underwriting volatility but also provides a foundation for sustainable value creation across market cycles.
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- Remediation refers to actions taken to improve the quality and profitability of the insurance portfolio (for example, tightening underwriting standards or exiting unprofitable lines.
- Book yield is the average annual return Everest expects to earn on its investment portfolio, based on the cost of those investments (not just their current market value.
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Resilient Fundamentals
Everest Group has delivered solid financial performance, driven by strong global reinsurance and insurance operations. Over the past three years, revenue grew at a CAGR of 13.2%, fueled by premium growth and expansion into new markets. However, earnings declined by 16.2% over the same period, impacted by elevated catastrophe losses and reserve strengthening related to U.S. casualty lines. Reserve strengthening is when an insurer increases its reserves to cover future claims, usually due to new data, changing assumptions, or rising claim severity or frequency.
In Q1 FY25, Everest reported earnings of $6.45 per share, down sharply from $16.32 a year earlier, missing estimates due to catastrophe losses from California wildfires. The combined ratio3 rose to 102.7% from 88.8% in Q1 FY24, reflecting the impact of catastrophe and aviation claims. Excluding these, the attritional loss ratio4 stood at 62.2%, highlighting disciplined core underwriting.
Revenue for the quarter rose 2.8% year-over-year to $4.3 billion, falling short of expectations, while gross written premiums remained steady at $4.4 billion.
Everest ended Q1 FY25 with shareholders’ equity of $14.1 billion, or $14.6 billion when excluding $561 million in unrealized losses on its fixed income portfolio. Book value per share rose 3.5% year-over-year to $332.39, adjusted for dividends, underscoring steady value creation for shareholders.
The company’s net debt-to-equity ratio improved to 15.4%, highlighting its conservative approach to leverage and balance sheet strength. Everest also retains strong credit ratings, with an “A+” from S&P and “A1” from Moody’s. Although S&P has assigned a negative outlook, Everest remains confident in its financial position. Management continues to engage proactively with the rating agency, emphasizing the company’s sound fundamentals and disciplined capital management strategy.
Looking ahead, Everest is focused on high-margin property and specialty lines, global expansion, and conservative reserving. Its robust investment portfolio, rated AA-minus, supports the outlook for sustained earnings and free cash flow growth.
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3. Combined ratio is the sum of incurred losses and operating expenses as a percentage of earned premiums, key to evaluating profitability in insurance.
4. Attritional loss ratio measures recurring losses from normal claims activity.
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Shareholder Focus
Everest Group continues to emphasize shareholder value through a disciplined capital return strategy, backed by strong earnings and robust free cash flow. In Q1 FY25, the company repurchased $200 million in shares, reflecting management’s confidence in EG’s valuation and excess capital position. This buyback aligns with the company’s consistent approach, with leadership reiterating plans to continue repurchases throughout 2025, assuming normal business conditions, as stated in the Q1 earnings call.
The company’s operating cash flow of $928 million during the quarter provided ample flexibility to return capital while funding growth initiatives, particularly in high-margin property and specialty lines.
EG has paid dividends consistently since 1995 and has increased its payouts annually since 2014, except for a pause in 2020-2021 during the COVID-19 pandemic. Like many insurers at the time, EG opted for capital preservation amid economic uncertainty and heightened risk. Today, its dividend policy remains steady, with a quarterly payout of $2.00 per share, translating to an annual dividend of $8.00. This equates to a dividend yield of 2.38%, notably above the financial sector average. The company maintains a balanced payout ratio of 51.2%, allowing for reinvestment in core operations while rewarding shareholders.
Despite a return on equity (ROE) of around 6%, below the sector median, EG’s return on total assets of 1.55% exceeds industry peers, signaling efficient use of its asset base. With a price-to-book ratio of 1.01, EG remains attractively valued compared to peers like Reinsurance Group of America and Manulife Financial.
Overall, analysts maintain a positive outlook on the stock, with an average price target implying an upside of nearly 16% in the next 12 months. However, some analysts forecast an upside as high as 23%, driven by expectations for rising Property Reinsurance rates and strategic steps taken by EG’s new CEO to improve profitability. Discounted cash flow models suggest the stock may be undervalued by as much as 61%, pointing to further upside potential for investors.
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Investing Takeaway
Everest Group’s disciplined approach to underwriting, risk management, and capital deployment positions it well for sustainable growth. By focusing on high-margin property and specialty lines while carefully managing exposures in more volatile segments, the company balances profitability with measured expansion. Its diversified global footprint and conservative investment strategy provide financial resilience amid market uncertainties. Despite recent catastrophe-related challenges, Everest’s operational efficiency and steady cash flows support ongoing shareholder returns and strategic investments, making it a compelling choice for investors seeking a financially strong, growth-oriented insurer with a long-term value focus.
Dividend Investor Portfolio
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Portfolio News
▣ BlackRock (BLK) is set to acquire about 10% of the shares in Circle Internet’s upcoming IPO, signaling deepening ties between traditional finance and crypto, according to Bloomberg. Circle, the issuer of the USDC stablecoin, aims to raise up to $624 million, according to its SEC filing. CEO Jeremy Allaire and other shareholders are participating in the offering. Ark Invest, led by Cathie Wood, has also expressed interest in purchasing up to $150 million worth of shares.
▣ Bank of Nova Scotia (BNS) announced lackluster results in fiscal Q2 as it boosted provisions for credit losses to $1.021 billion, exceeding expectations amid a weakening economic outlook. CEO Scott Thomson pointed to deteriorating conditions in Canada, the U.S., and Mexico as key drivers of the increase, including reserves for loans still in good standing. Adjusted EPS fell to $1.10 from $1.14 a year ago but matched estimates. Revenue rose 8.8% year-over-year to $6.6 billion, also in line with forecasts. BNS raised its quarterly dividend by $0.04 to $0.80 and announced a buyback of up to 20 million shares.
▣ EOG Resources (EOG) announced the acquisition of Encino Acquisition Partners (EAP) for $5.6 billion, including net debt, in a deal backed by the Canada Pension Plan Investment Board and Encino Energy. The purchase will be funded with $3.5 billion in debt and $2.1 billion in cash. This deal is expected to close in the second half of this year and will mark a strategic expansion for EOG into Ohio’s Utica shale play. The transaction is immediately accretive to EOG’s net asset value and all per-share financial metrics. For 2025, it is expected to boost EBITDA by 10% and increase both operating and free cash flow by 9%. EOG also anticipates over $150 million in first-year synergies from lower capital, operating, and financing costs.
In another development, the company raised its quarterly dividend by 5% to $1.02 per share payable on October 31 to stockholders of record as of October 17, 2025.
▣ Exxon Mobil (XOM) has entered exclusive talks to sell its 82.89% stake in French subsidiary Esso SAF, including a key refinery, to North Atlantic France SAS for about $350 million, according to Bloomberg. If completed, the deal would significantly reduce Exxon’s footprint in France, following last year’s announcement to close part of its petrochemical operations in the country. The move aligns with Exxon’s broader strategy to streamline operations and focus on higher-return assets.
1- BNS numbers are in USD.
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Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.99% | +6.64% | $6,009.10 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Jun 12, 2025 | Jul 01, 2025 | 2.46% | $6.16 |
| Amgen (AMGN) | Aug 18, 2025 | Sep 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Sep 09, 2025 | Sep 23, 2025 | 2.61% | $20.84 |
| Bank of Nova Scotia (BNS) | Jul 03, 2025 | Jul 29, 2025 | 5.98% | $3.2 |
| EOG Resources (EOG) | Jul 17, 2025 | Jul 31, 2025 | 3.06% | $3.92 |
| ExxonMobil (XOM) | Aug 15, 2025 | Sep 10, 2025 | 3.64% | $3.96 |
| IBM (IBM) | Aug 11, 2025 | Sep 10, 2025 | 3.14% | $6.72 |
| JPMorgan Chase (JPM) | Jul 08, 2025 | Jul 31, 2025 | 3.2% | $5.60 |
| Kroger (KR) | Aug 15, 2025 | Sep 01, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Aug 26, 2025 | Sep 03, 2025 | 5.74% | $5.48 |
| PepsiCo (PEP) | Sep 09, 2025 | Sep 30, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Jun 23, 2025 | Jul 17, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | Sep 05, 2025 | Sep 26, 2025 | 2.36% | $3.56 |
| VICI Properties (VICI) | Jun 18, 2025 | Jul 03, 2025 | 5.22% | $1.73 |
| Verizon (VZ) | Jul 10, 2025 | Aug 05, 2025 | 6.09% | $2.71 |
NameEX-Dividend DatePayment DateYield on Cost Annual DPS
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Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
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