Everest Re likely to get involved in M&A: CreditSights

Bermuda-based Everest Re is likely to get involved in mergers and acquisitions as reinsurers operating in the US are under significant pressure to grow, according to CreditSights analysts.

Premium rates in reinsurance have been falling in recent years, particularly in property/catastrophe.

The reinsurance sector is facing unprecedented challenges due to the combination of tepid demand growth, oversupply among traditional reinsurers, and the influx of alternative capital.

“We have no reason to believe that independent reinsurers like Everest Re will remain on the sidelines indefinitely,” Rob Haines and Josh Esterov wrote in a note.

“Instead, we believe the company will seek options to increase its size in an attempt to enhance scope, scale, and relevance among brokers. Alternatively, the company’s size and recent run of strong underwriting performance may make it an acquisition target itself.”

The company made a net profit of $996.3 million in 2016 compared with $977.9 million in 2015. Everest Re’s combined ratio was 87 percent for the year, compared to 85.1 percent in 2015.

The property/casualty sector drove the majority of insurance M&A deals in the US in 2016 with around $16.6 billion of the total sector’s deal value of about $20.7 billion, according to CreditSights. The largest deal in 2016 was Sompo’s acquisition of Endurance for around $6.3 billion.

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