Everest Group (EG)

Total return at 5 years: 25.4%/year = 23.6% appreciation + 1.7% dividend. The target price ($1,100) is ex-dividend; the $49 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $1,417 · Multiples $926) exceeds the market price ($381).

Today — with margin of safety: at $381 trades ~58.9% below its value discounted to today (~$926) — the wide discount we require (≥38%, equivalent to a ~15% annual return); the risk is covered by the margin, not the rate.

At 5 years — Muy infravalorado: the target price ($1,100) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years comfortably exceeds the risk-free rate (4.5%) — and the discount reaches the required margin of safety.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($381) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-21.0%/year) than we project (6.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.6 bn of owner earnings in year 5 (vs ~$2.5 bn of our base case). It recalculates if the DCF assumptions are edited.

A bank is valued on equity (P/E × common earnings + price/tangible book), not EV: deposits and debt are funding. It returns capital via dividend + buyback —the buyback reduces the share count, so earnings per share grow faster than aggregate earnings—. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

Everest is valued on P/E over net income attributable to common shareholders (there is no active noncontrolling interest: the last fact for that item closes in 2015, and the current income statement runs directly from pre-tax income to net income, with no minority-interest line — the company stopped consolidating entities with a minority interest). TTM net income through Jun-2026 (US$1,913 million) already reflects a real improvement over 2025, a year that absorbed US$657 million of adverse reserve development in long-tail casualty lines; the model does not extrapolate the unadjusted first half of 2026 (that would reward a clean half-year as if it were the norm), but instead glides ROE from the implied TTM level toward a sustainable band of 14-15%, consistent with underwriting discipline and a reinsurance market still firm on pricing. Book value per share (excluding unrealized changes in the fixed-income portfolio, the metric the company itself prioritizes) grows through retained earnings and an aggressive, value-creating buyback: the stock trades below book value (P/B ~0.93x), so every dollar repurchased adds more value per share than it removes. The buyback rate used (an identical share count path across the three scenarios, by method) tempers the pace revealed in the half-year -- elevated by proceeds from the sale of renewal rights to AIG -- to a more sustainable long-term level. The 2Q26 release carries no numerical guidance for the fiscal year; year 1 starts from the normalized TTM trajectory, not from a published target.

Today's multiple compresses on its own going forward as the metric per share grows (accelerated by the buyback, which reduces the share count). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $1,100 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $381, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $1,100 in 5 years plus $49 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $926. Against the current market price ($381), the margin of safety is 58.9% (trades below the maximum → there is margin) and the total return at that price would be 25.4% annually.

• Entry multiple. 8× TTM net income, well below the floor of the insurance band (11x-15x).
• Price versus book value. P/B of ~0.93x, unusual for an A+ rated insurer with double-digit ROE.
• Margin of safety. There is a margin of safety: the market's perception is meaningfully worse than reality.

• Return on capital. Annualized ROE of 15.5% in the 2026 half, comfortably above the 10% bar, though with historical volatility tied to the catastrophe and reserve cycle.
• Cash generation. TTM operating cash flow (US$2,000 million) is positive and funds dividends and buybacks without additional leverage.
• Earnings quality. Earnings from one year to the next depend heavily on reserve development and catastrophe losses, components that are not entirely predictable and that dominate quarter-to-quarter variance.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Everest makes money through two simultaneous channels: underwriting result (premiums minus losses and expenses, measured by the combined ratio) and investment portfolio income on accumulated float. The driver that most determines earnings from one quarter to the next is not premium volume — which the company has been deliberately contracting for portfolio quality — but the absence or presence of adverse reserve development and of catastrophe losses above expectations, both with high quarter-to-quarter variance but stable medium-term expectations.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Premium volume. Core business gross premiums fell 7.1% year over year in the half, a deliberate portfolio-quality decision.
• Book value per share. Grew 7.4% in the half (from US$379.70 to US$407.67, ex-URA(D)), an annualized pace close to 15%.
• Earnings per share. Diluted EPS for the 2026 half (US$30.45) nearly doubled that of the 2025 half (US$20.93) on the absence of adverse reserve development.

• Scale and rating. Among the ten largest global reinsurers, rated A+ by A.M. Best and S&P across all active operations.
• Cyclicality of results. Net income ranged between US$597 million (2022) and US$2,517 million (2023) over four fiscal years, reflecting the volatile nature of catastrophe-risk underwriting.
• Counterparty diversification. No single client exceeded 3.6% of 2025 gross premiums; the ten largest brokers concentrate 60.9% of the Reinsurance segment.
• Improving portfolio quality. The deliberate contraction of Casualty XOL and Casualty Pro-Rata in Treaty Reinsurance, and the sale of the lower-margin retail insurance business to AIG, point to an improving mix going forward.

• !Underwriting profitability (combined ratio)Combined ratio 91.5%
• !Reserve adequacy (development)Adverse -0.5% pts
• ✓Catastrophe exposure3.2% pts of the combined ratio
• ✓Book value compounding+15%/yr · core ROE 16%
• ✓Float return (investment income)$2.2 bn on $44.9 bn of float

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Credit rating. A+ (Superior) from A.M. Best across all operating subsidiaries, equivalent at S&P, but with a negative outlook from all three agencies since October 2025-January 2026.
• Leverage. Total debt of US$3,589 million (senior notes, long-term notes and FHLB borrowings) against equity of US$15,430 million, ~23% leverage.
• Investment liquidity. US$44,863 million in investments and cash, with a short-duration fixed-income portfolio (3.4 years) versus a claims liability with an estimated 4.0-year duration.

• Stated focus. The CEO explicitly names underwriting discipline in the Core businesses and capital deployment as management's two priorities.
• Accretive buyback. Executes buybacks below book value per share, which adds value for remaining shareholders rather than destroying it.
• Ownership transparency. Director and institutional share-ownership detail could not be verified with the available data and remains pending the DEF 14A proxy.

• motivated-sellers
• missing-buyers

The source of the discount is identifiable and dual. On the forced-selling side: 2025 carried US$657 million of adverse reserve development in long-tail casualty lines — an event that sinks the year's GAAP result without necessarily sinking the business's value if it was, as the 2026 half suggests, the recognition of a specific cohort (accident years 2022-2024) rather than an ongoing trend — and all three rating agencies revised the outlook to negative in response, which pushes rating-sensitive investors out of the name. On the missing-buyers side: the deliberate contraction of premium volume (Treaty Reinsurance -9.1% on a comparable basis) reads superficially as a shrinking franchise, when in reality it is a portfolio-quality decision that improves margin. The cross-check is direct: the 2026 half — the most recent and the cleanest of reserve adjustments — ran with a 15.5% annualized ROE and a 90.0% combined ratio in the Core businesses, far above the earnings the current price (8×) is paying for.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +14%/year (+95% total): the margin of safety protects the downside. The bull (+33%/year, +315% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Reserve development. US$657 million of adverse development in 2025 in long-tail casualty lines; the risk of recurrence is the thesis's central disconfirmer.
• Rating outlook. Negative outlook from A.M. Best, S&P and Moody's since late 2025, with mechanical risk to treaty reinsurance business retention if an actual downgrade occurs.
• Bermuda regulation. The new group supervision framework in effect since January 2026 could impose additional capital and reporting requirements whose impact the company is still assessing.
• Catastrophes. Net catastrophe losses ranged between US$470 million and US$1,135 million over the last five fiscal years, a structural volatility of the business.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROE 16% above the 10% bar, with a +59% margin → a quality business at a good price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 6% at a PEG of 1.3 → reasonable for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -21% vs our 6%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +12%/yr, bull-scenario ceiling +31%/yr over 5y and a +59% margin → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, cost advantage, switching costs → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -21%, within what we project (6%) — the story squares with the numbers.