Everest Re Group, Ltd.EGNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $1,545.58 per share(market-calibrated)

+361.2%

Upside to Fair Value

Current

$335.13

Pure Model

$1,731.28

Fair Value

$1,545.58

Bull Case

$2,021.13

Bear Case

$1,477.77

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $1,731.28.

What's Driving This Ratingfor EG

↓

CapEx normalizing toward maintenance

Historical CapEx is 3.93% of revenue (heavy investment phase). Model fades this to 1.50% by Year 10, freeing up ~$522M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 11.48% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $5.3B (24.54% margin).

→

Moderate revenue growth

Analyst consensus projects -2.13% revenue growth, fading to 2.50% by Year 10. Revenue reaches $21.5B (vs $17.3B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $2,240.77/share (34.2x terminal FCF) while exit multiple gives $1,221.79/share (15.9x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.41% indicates efficient cash generation. FCF reaches $3.9B by Year 10 (18.36% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.33

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)5.99%

Cost of Debt

Pre-tax Cost of Debt3.30%

Tax Rate17.57%

After-tax Cost of Debt2.72%

Equity Weight (E/V)79.45%

Debt Weight (D/V)20.55%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (79.45% × 5.99%) + (20.55% × 2.72%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$16.9B	$17.7B	$19.0B	$20.0B	$21.5B
EBIT	$1.9B	$2.0B	$3.3B	$4.2B	$5.3B
Tax	$342M	$357M	$582M	$745M	$927M
NOPAT	$1.6B	$1.7B	$2.7B	$3.5B	$4.4B
+ Depreciation	-$32M	-$34M	-$36M	-$38M	-$41M
- Capex	$666M	$600M	$542M	$461M	$323M
- Δ NWC	-$26M	$84M	$33M	$35M	$37M
Free Cash Flow	$931M	$956M	$2.1B	$3.0B	$3.9B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$883M	$814M	$1.6B	$2.0B	$2.3B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.9B

Terminal Growth Rate2.50%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$134.9B

PV of Terminal Value$79.0B

Exit Multiple Method

Year 10 EBITDA$5.2B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$62.8B

PV of Terminal Value$36.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$16.1B

PV of Terminal Value$79.0B

Enterprise Value$95.1B

(-) Net Debt$2.3B

Equity Value$92.8B

Shares Outstanding41M

Price per Share$2,240.77

Exit Multiple Method

PV of Projected FCFs$16.1B

PV of Terminal Value$36.8B

Enterprise Value$52.9B

(-) Net Debt$2.3B

Equity Value$50.6B

Shares Outstanding41M

Price per Share$1,221.79

Pure Model Fair Value

$1,731.28

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
3.50%	$2,638.56	$2,526.80	$2,420.31	$2,318.82	$2,222.06
4.50%	$1,885.61	$2,099.49	$2,420.31	$2,318.82	$2,222.06
5.50%	$1,485.89	$1,591.06	$1,731.28	$1,927.59	$2,222.06
6.50%	$1,230.30	$1,290.41	$1,365.54	$1,462.15	$1,590.96
7.50%	$1,048.78	$1,086.46	$1,131.68	$1,186.94	$1,256.01

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$1,477.77

341.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.41

Base Case

$1,731.28

416.6% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.33

Bull Case

$2,021.13

503.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.30

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-2.13%

Year 3 Revenue Growth7.16%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin11.48%

Terminal EBIT Margin28.00%

Tax Rate17.57%

Historical Capex / Rev3.93%

Terminal Capex / Rev1.50%

NWC / Revenue7.15%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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