Everest Re stock jump 7% as hurricane loss estimates are less than feared

Shares of reinsurer Everest Re Group Ltd. surged 7% Friday, after the company released estimates of the losses it expects to incur from Hurricanes Harvey, Irma and Maria and the recent earthquake in Mexico that were at the low end of what analysts were expecting.

The Bermuda-based company said it expects losses to come to $900 million after taxes, assuming that aggregate industry losses will come to about $100 billion. It made the calculation using modeled information, underwriter analysis, client discussions and a profile of exposed limits in the affected areas.

“Losses are arising from both the reinsurance and insurance segments,” the company said in a statement. “There is considerable uncertainty in these estimates and it is expected that it will be several months before relative clarity emerges with respect to the underlying losses from these multiple events.”

Investors have been prepared for major insured losses from the many natural disasters of the past month. While Houston remained underwater from the flooding caused by Harvey, AccuWeather said it could create losses of $190 billion, which would have made it the worst-ever U.S. natural disaster.

Everest Re RE, +6.63%  is a leading sponsor of catastrophe bonds via its Kilimanjaro Re series, and has $2.8 billion of multiyear collateralized capacity for specific risk, as well as protection for losses stemming from specific territories, including Texas, Florida and Puerto Rico, all of which were hit by the recent storms.

The company’s capital market facility, called Mt. Logan Re, has almost $1 billion of assets under management, that further support its exposure to catastrophes, the company said.

Separately, Arch Capital Group Ltd. ACGL, -0.02% another Bermuda-based reinsurer, said it expects its losses to come to $285 million to $345 million, also based on an assumption that aggregate losses will total up to $100 billion.

J.P. Morgan analysts said the estimates for both companies were in line with investor expectations and at the low end of losses for the companies they cover.

Read now: AIG estimates Q3 pretax catastrophe losses of about $3 billion

Also: Chubb sees net losses from Hurricane Maria of $200 million

“The preannouncement reinforces our view that ACGL could have manageable 3Q hurricane losses and is well positioned to benefit from potentially hard markets in both mortgage insurance and reinsurance,” they wrote in a note.

In Everest’s case, they wrote it is a global reinsurer with a strong management team, that has helped it generate strong returns in a highly competitive market.

See also: 4 things that might surprise investors this earnings season

Arch Capital shares were up 0.2% Friday and have gained about 14.5% in 2017.

Everest shares have gained 12% in 2017.

The PowerShares KBW Property & Casualty ETF KBWP, +1.01%   has gained 6% in 2017, while the S&P 500 SPX, +0.24%   has gained 14% and the Dow Jones Industrial Average DJIA, +0.22%  has gained about 16%.

Read: Insurance companies are getting creative with disaster response

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