EVEREST GROUP, LTD. (EG) stock intrinsic value fair value estimate & owner earnings analysis

Everest Group is a Bermuda-based global reinsurer and specialty insurer. Its larger Reinsurance segment takes on property catastrophe, casualty, mortgage and specialty risk from other insurers around the world; its Insurance segment writes commercial property, casualty and specialty policies, mainly in the United States. It earns money two ways: underwriting profit, and investment income on roughly $40 billion-plus of bonds and other assets held against claims it has not yet paid. Net investment income was $2.12 billion in 2025, up from $647 million in 2019, because both the portfolio and bond yields are much larger than they were. What has happened recently. Everest recorded $1.3 billion of unfavorable development on old loss reserves in 2024 and another $657 million in 2025, mainly from U.S. excess casualty and general liability business written in 2022-2024, where jury awards and litigation costs have run well ahead of what was priced, plus Russia/Ukraine aviation losses in reinsurance. In October 2025 it bought an adverse development cover protecting the affected U.S. reserves for 2024 and prior accident years (keeping a $100 million share in each of the two upper layers), and sold the renewal rights to its retail commercial lines. 2025 also carried $819 million of catastrophe losses, led by the Southern California wildfires ($512 million). In the first half of 2026 net income was $1.21 billion and prior-year development was a small $33 million favorable; operating cash flow was lower ($939 million vs $2.0 billion a year earlier) because unearned premium on the exited business is running off, which is the expected effect of shrinking that book rather than a weaker core. How we measure earnings. For an insurer, the growth of loss reserves and unearned premium is cash collected now that will be paid out later. We do not count that as earnings: our measure of owner earnings strips all of those balance-sheet movements out of operating cash flow and subtracts stock compensation (Everest has essentially no capital spending). What is left equals net income adjusted for non-cash investment items, and it reconciles exactly to operating cash flow in every year. On this measure owner earnings per share were about $26 (2016), $8 (2017), $6 (2018), $20 (2019), $8 (2020), $20 (2021), $31 (2022), $65 (2023), $26 (2024) and $34 (2025). Our previous estimate counted reserve growth during the 2021-2024 expansion as earnings; this one does not, so the previous figures are not comparable. The earnings level. We use 2021-2025 as the window, because the business has been rebuilt since 2020: premiums are nearly double, equity is $15.4 billion versus $9.7 billion, and the investment portfolio earns more than three times what it did in 2019. Earlier years describe a smaller company. The window still contains a heavy catastrophe year (2022, Hurricane Ian), a clean year (2023), and two reserve-charge years (2024, 2025). Its median is $30.75 per share, about $1.19 billion on today's 38.8 million diluted shares, well below the $65 earned in the unusually clean 2023. Owner earnings grew 32% in 2025, but that was a recovery from the 2024 reserve hit; we assume no growth in year one because Everest is deliberately shrinking its insurance book. Debt. Everest has $2.35 billion of senior notes against $15.4 billion of equity. Because borrowing and reserves are the raw material of an insurer, we value earnings after interest and do not subtract the debt separately. There is no maturity or covenant that would strain the company. Base case ($512 per share). Owner earnings hold at about $1.19 billion a year. We give no credit for growth: Everest's growth has come from writing more premium when prices were high, which depends on market pricing and is not secured, and the company is currently shrinking its retail insurance lines. Rising investment income as old, lower-yielding bonds roll over is a real tailwind, but it is offset by premiums falling as reinsurance property prices soften, so we treat the two as cancelling out. Bear case ($317 per share). This case includes one full downturn like the one Everest has already lived through. In 2017-2018 (Hurricanes Harvey, Irma and Maria, then the Camp Fire and Hurricane Michael) owner earnings fell to about $6-8 per share for two years against about $20-26 in normal years, a 70% drop. Then in 2024 a casualty reserve problem cost $1.3 billion in one year. The bear case assumes a year one loss of about $600 million (a 2024-sized reserve charge from the casualty years not fully covered by the October 2025 cover, combined with a heavy catastrophe year), then three years at $400-480 million as catastrophes and higher reinsurance costs keep earnings depressed, recovery to $700 million, and then a lasting level of about $900 million, below the current median because the book will be smaller. With $15.4 billion of equity against $2.35 billion of debt, we do not assume a share issue is needed, though one happened in 2023 to fund growth. This value is below book value of about $398 per share. Bull case ($704 per share). The October 2025 cover and the exit from retail commercial lines stop the reserve charges, as the first half of 2026 suggests, so earnings run near 2025 levels before catastrophes and reserve charges: about $1.45 billion in year one and $1.65 billion (about $42.50 per share) after that. This needs no new business, only that the reserve problem has ended and catastrophes average out. We do not credit the 2023 result ($65 per share) as repeatable, because it came from a single clean year at peak pricing. Margin-of-safety price ($330). How sure are we of the earnings level? Only moderately. Reinsurance earnings swing widely with catastrophes, and the 2024-2025 charges show the reserves on recent U.S. casualty business were understated. Book value of about $398 per share is a reasonable check, but it is only as good as those reserves. The worst plausible outcome is a 1-in-100-year Southeast U.S. hurricane (the company estimates a net loss of about $2.4 billion) in the same year as another casualty reserve strengthening. That could take a few years of earnings and 15-20% of book value. The balance sheet would survive it: debt is modest, the assets are high-quality bonds, and no single customer or regulator controls the outcome. The things we are most likely to be wrong about are whether casualty reserves are now adequate, and what the normal catastrophe load is in a warming climate with more urban exposure. If both go against our estimates, the shares are worth about the bear case, a little above $300. The $330 margin-of-safety price is about 83% of book value and roughly ten times median owner earnings, with a dividend (about $8 a year) and steady buybacks ($725 million in the first half of 2026) while waiting. The price assumes a three-to-four-year holding period; from that price, a return toward the base case plus the dividend implies about 20% a year, and the bear case implies a small loss. Above roughly $350, too much depends on the reserves being right.