Everest Re Group Ltd.'s stock slipped Tuesday after the insurer's profit shrank by nearly three-quarters in the first quarter, squeezed by slow premium growth and a steep loss on investments.
Everest Re earned $77.9 million, or $1.24 per share, in the first quarter, compared with profit of $297.6 million, or $4.59 per share, in the first quarter last year.
Operating income, which excludes investment losses and other costs insurers do not consider reflective of their business, sank 29 percent to $190.6 million.
Revenue slipped 24 percent to $916.8 million from $1.2 billion, dragged by lighter premiums and weaker income from investments. While Everest had been targeting a decline of 5 percent to 10 percent, premiums dwindled 14 percent.
Everest Re writes "reinsurance" policies, which are insurance policies promising to cover losses on insurance policies.
Like in the primary insurance industry, premium growth in the reinsurance industry has become difficult because of "increasingly competitive" conditions, the company said. Flush with cash from several years of profits, many insurers are cutting prices to try to win business.
"The situation most likely reflects a soft reinsurance market," said Lehman Brothers analyst Jay Gelb. "We can't fault the company for maintaining underwriting discipline."
Of each premium dollar collected, Everest Re spent 89.1 cents administering claims, compared with 82.4 cents on the dollar in the first quarter of 2007.
The company also recorded $136.4 million in investment losses.
Everest's stock fell $2.81, or 3 percent, to $91.68. The shares have traded in a range of $85.41 and $115.86 in the past year.
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