TipRanks Smart Value #43: Resolute Capital
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Dear Investors,
Dear Investors,
Welcome to the 43rd edition of our recently launched TipRanks Smart Value Newsletter!
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This Week’s Top Value Pick: Everest Group (EG)
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 Prudence
Founded in 1973 as Prudential Reinsurance, a subsidiary of Prudential Financial, Everest Group began with a focus on property and casualty reinsurance. It went public with an IPO in 1995, rebranded as Everest Re in 1996, and in July 2023 adopted the name Everest Group, reflecting its evolution into a global insurance and reinsurance leader. Today, the company operates in over 100 countries across six continents through its Reinsurance and Insurance segments, guided by disciplined portfolio management, profitability, and strategic positioning.
Mergers and acquisitions have been limited and targeted. In contrast to peers pursuing aggressive M&A, Everest has prioritized organic growth, expanding selectively in high-margin property and specialty reinsurance while reducing exposure to lower-return segments, including U.S. Casualty and Sports and Leisure, the latter divested in October 2024. The 2011 acquisition of Heartland Crop Insurance strengthened its U.S. crop insurance presence, and ongoing exposure to this segment was maintained via a reinsurance agreement with CGB Diversified Services after the business was sold in 2016.
To streamline operations further, Everest sold renewal rights for roughly $2 billion of retail commercial insurance across the U.S., U.K., Europe, and Asia-Pacific to AIG earlier this year. This means Everest will stop renewing these policies, allowing them to eventually run off rather than managing them long term. The transaction, expected to generate a $250–$350 million pre-tax non-operating charge across 2025–2026, will release capital gradually as policies run off. The deal shifts Everest’s business mix toward its core strengths, increasing Reinsurance from 71% to 83% of total gross written premiums (GWP) and reducing Insurance from 28% to 16%. Management expects the capital benefits of these actions to become more visible in the second half of 2026.
Everest’s measured, long-term approach, marked by underwriting discipline, careful risk selection, and strategic divestments, has strengthened its global position, improved operational focus, and enhanced capital efficiency, positioning the company to generate sustainable shareholder value.
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Measured Reach
Everest Group operates a globally diversified business model anchored in two core segments: Reinsurance and Insurance. The company’s broad geographic and customer base allows Everest to maintain a well-balanced risk portfolio without reliance on any single market, region, or client.
Reinsurance, Everest’s largest segment at nearly 72% of GWP – before the full effects of the renewal rights sale – involves assuming risk from insurers in return for premiums, essentially acting as insurance for insurance companies. Although brokers help place this business, they cannot bind Everest to agreements; each submission is evaluated and underwritten independently. The direct reinsurance business remains an important channel for Everest, enabling the company to build and maintain close, direct relationships with its clients.
The Insurance segment, currently accounting for 28% of gross premiums, focuses on commercial property and casualty coverage. Business is sourced through a network of wholesale and retail brokers, surplus lines brokers, and program administrators.
In October 2024, Everest Group created an “Other” segment to manage legacy and run off 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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Refocused Ascent
Everest Group has taken a series of decisive actions to reduce legacy risk, simplify its business, and improve capital predictability. Central to this effort was the purchase of a $1.2 billion gross-limit adverse development cover (ADC)1 from Longtail Re, designed to provide finality on legacy North American Insurance casualty exposures from accidents that took place in 2024 and early, excluding asbestos and environmental claims. The transaction reflects several years of pressure in U.S. casualty lines, particularly excess casualty, general liability, and management liability – where social inflation, larger jury awards, and faster loss emergence during 2022–2024 continued to create earnings volatility despite prior reserve strengthening2 and completed re-underwriting.
The ADC applies to $5.4 billion of existing reserves and only begins paying claims after the company’s already-strengthened reserves are used, effectively shifting about $1.25 billion of higher-risk legacy exposures to Longtail Re. The protection provides $1 billion of net coverage with Everest retaining $200 million of shared risk, for a total cost of roughly $122 million, and became effective in October this year. While the ADC is expected to reduce net investment income by about $60 million annually, it meaningfully cuts downside risk from older U.S. casualty claims, smooths future earnings, and improves capital visibility.
In the third quarter of 2025, Everest recorded $478 million of net pre-tax reserve strengthening after completing accelerated reserve reviews across its global portfolios. This process involved reassessing whether past loss estimates remained sufficient in light of newer claims data and recent loss trends.
The Insurance segment accounted for $361 million of the adverse development cover, largely tied to U.S. casualty lines. The Other segment added $146 million, mainly related to sports, leisure, and other U.S. casualty exposures. In contrast, Reinsurance generated $29 million of reserve release, reflecting claims experience that came in better than expected and prior loss reserves that proved more than sufficient. This highlights the separation between the legacy Insurance portfolio and the core reinsurance franchise.
Management emphasized that re-underwriting of the exited Insurance portfolio was completed by mid-2025, with approximately 80% of recent adverse development tied to policies that are no longer being issued. The company reiterated that casualty issues in Insurance are not spilling into Reinsurance, which continues to perform well. Property reinsurance pricing has eased modestly but continues to support attractive returns, enabling selective growth, while casualty reinsurance conditions remain stable, with pricing running ahead of expected losses and little recent need for reserve adjustments.
Following these actions, Everest is refocusing on two core pillars: a top-tier global property and casualty reinsurance franchise and a more disciplined global specialty and wholesale insurance platform. Management continues to target mid-teens returns on equity over the cycle, noting that 2026 may run slightly below that level due to transition effects, while emphasizing that social inflation risks are well understood, conservatively reserved, and not expected to constrain future growth or shareholder returns.
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1- A gross-limit adverse development cover (ADC) is a reinsurance contract that protects Everest Group against unexpected deterioration in previously established loss reserves on defined legacy casualty exposures. The gross-limit structure means the protection is written against gross reserves before recoveries, providing coverage once losses exceed Everest’s existing reserve levels.
2- 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.
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Measured Rise
Over the past three years, Everest Group has delivered strong top-line expansion, with revenue growing at a 13.2% CAGR, supported by premium growth and entry into new markets. That growth has not fully translated into earnings, however, as profits declined by 16.2% over the same period, largely due to elevated catastrophe losses and reserve strengthening tied to U.S. casualty lines. Over a longer horizon, the company’s operating history reflects consistent premium expansion alongside an emphasis on underwriting discipline. From 2021 to 2024, gross written premiums increased at a CAGR of roughly 12%, highlighting the scale and durability of the franchise.
Everest reported a mixed third quarter of 2025, with headline results shaped by reserve actions and portfolio repositioning rather than by any deterioration in core underwriting performance. Net investment income reached a record $540 million, benefiting from higher assets under management and strong contributions from alternative investments. At the same time, gross written premiums totaled $4.4 billion during the quarter, down 1.1% year-over-year. Operating income declined to $316 million, or $7.54 per diluted share, compared with $14.62 in the same period of the prior year and below consensus expectations.
Profitability was pressured by reserve strengthening, which added 12.4 points to the consolidated combined ratio,3 lifting it to 103.4%. Excluding these actions, the underlying attritional combined ratio4 was broadly stable year-over-year at 88.6% year to date in 2025 versus 87.6% in 2024. Total shareholder return was 12.3% year to date on an annualized basis. Shareholders’ equity totaled $15.4 billion, or $15.5 billion excluding unrealized items, equating to book value per share of $368.29. Meanwhile, catastrophe exposure declined relative to equity as capital was reallocated toward better-priced property and specialty lines.
Reinsurance segment delivered solid underlying performance in the third quarter. Reinsurance premiums were $3.2 billion, down modestly year-over-year as the company maintained pricing discipline, while underwriting remained strong with a combined ratio of 87% and an attritional combined ratio in the mid-80s. Growth was concentrated in property and specialty reinsurance, up about 5% year-over-year, while exposure to longer-tail casualty and financial lines was reduced by roughly 10%. Global specialty reinsurance contributed about $500 million of premium and more than $100 million of underwriting income, with reserve strength supported by property, mortgage, and international lines.
The Insurance segment continued its strategic reset. Gross written premiums rose 3.4% year-over-year to $1.1 billion, driven by specialty and accident and health growth, partly offset by lower casualty exposure. Reported results were pressured by reserve strengthening, lifting the combined ratio to 138.1%, but underlying performance was near breakeven, with an attritional combined ratio around 99%. Management reiterated its focus on global specialty and wholesale insurance as the clearest path to more consistent profitability.
Overall, management characterized the quarter as a reset that strengthens the company’s foundation for future performance. The investment portfolio continues to provide stable support, with existing holdings earning approximately 4.5% and new investments yielding about 4.8%. The portfolio remains conservatively positioned, with an average maturity just over three years and high credit quality at “AA-,” balancing income generation with capital preservation and liquidity.
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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-The attritional combined ratio measures an insurer’s core underwriting profitability by excluding catastrophe losses, reserve development, and other non-recurring items, thereby isolating routine claims and expenses. For Everest Group, it is a critical indicator of pricing discipline and portfolio quality, as it reveals whether the underlying business is profitable independent of catastrophe volatility and long-tail casualty reserve risk.
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Upside Altitude
Everest Group continues to emphasize shareholder value through a disciplined capital return strategy supported by solid earnings and strong free cash flow generation. While the company did not repurchase shares during the third quarter, it has returned $400 million to shareholders through buybacks year to date, reflecting management’s willingness to deploy capital opportunistically.
Dividends remain a central pillar of Everest’s shareholder return framework. The company has paid dividends consistently since 1995 and increased its payout every year from 2014 until a temporary pause in 2020 and 2021, when it prioritized capital preservation amid the uncertainty of the COVID-19 pandemic. Since then, Everest has resumed a steady dividend policy, currently paying $2.00 per share quarterly, or $8.00 annually. This equates to a dividend yield of approximately 2.41%, which is meaningfully above the broader financial sector average. With a payout ratio of around 62%, the company balances returning cash to shareholders with retaining flexibility to reinvest in its core insurance and reinsurance businesses.
Everest Group’s shares have declined by roughly 7% over the past year as near-term earnings were pressured by underwriting challenges and reserve strengthening in casualty lines amid a difficult insurance environment.
This pullback has left the stock trading at a meaningful discount to its own history, with the non-GAAP forward P/E more than 10% below its historical averages and the forward price-to-book ratio over 20% lower than historical averages. Relative to peers such as Manulife Financial and Reinsurance Group of America, Everest also sits toward the lower end of valuation ranges based on forward price-to-earnings and book value multiples, reflecting conservative market expectations.
While Everest’s current ROE, ROA, and ROIC trail its peers, this largely reflects intentional reserve actions and portfolio repositioning rather than structural weakness. Management is prioritizing balance-sheet resilience, disciplined underwriting, and capital flexibility over short-term returns. With a strong global reinsurance franchise, improving underlying attritional performance, and excess capital available for redeployment and shareholder returns, Everest is well-positioned for return expansion as underwriting margins normalize.
Analysts remain optimistic about EG as its renewal rights deal with AIG is expected to accelerate the turnaround of its Insurance segment by sharpening focus and freeing up capital. At the same time, global demand trends remain favorable, with end-market demand growing at around 10% and a positive outlook pointing to sustained strength ahead.
Consensus estimates imply roughly 8% upside from current levels, with the most bullish forecasts calling for gains of up to 48%, reflecting differing assumptions around the pace of underwriting normalization, the extent of reserve stability in U.S. casualty lines, and how quickly excess capital can be redeployed into higher-return opportunities. A discounted cash flow analysis aligns with this view, indicating that the stock may be trading at about a 72% discount to its estimated intrinsic value.
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Investing Takeaway
Everest Group presents a compelling value opportunity for patient investors willing to look past near-term earnings noise. The stock price reflects skepticism tied to legacy casualty issues and reserve actions, yet these challenges are being addressed head-on through decisive cleanup, portfolio simplification, and tighter underwriting discipline. Beneath the surface, Everest retains a high-quality global reinsurance franchise with stable underlying profitability, strong capital flexibility, and a conservative balance sheet. The company’s focus on disciplined risk selection, shareholder-friendly capital returns, and long-term margin normalization suggests that current valuation does not fully reflect its earning power once transition effects fade. As legacy exposures run off and capital is redeployed into better-priced property and specialty lines, Everest appears positioned for gradual multiple expansion. For value-oriented investors, the disconnect between market perception and underlying fundamentals creates an attractive margin of safety.
