Market Overview

Everest Re Group Reports Second Quarter 2018 Results

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Everest Re Group, Ltd. (NYSE:RE) today reported second quarter 2018 net
income of $69.9 million, or $1.70 per diluted common share, compared to
net income of $245.7 million, or $5.95 per diluted common share for the
second quarter of 2017. After-tax operating income1 was $40.4
million, or $0.98 per diluted common share, for the second quarter of
2018, compared to after-tax operating income¹ of $233.7 million, or
$5.66 per diluted common share, for the same period last year.

For the six months ended June 30, 2018, net income was $280.2 million,
or $6.81 per diluted common share, compared to net income of $537.3
million, or $13.02 per diluted common share, for the six months ended
June 30, 2017. After-tax operating income¹ was $260.1 million, or $6.32
per diluted common share, compared to after-tax operating income¹ of
$500.8 million or $12.13 per diluted common share, for the same period
in 2017.

Commenting on the Company's results, President and Chief Executive
Officer, Dominic J. Addesso said, "Everest generated an annualized, net
income return on equity of 7%, despite the previously announced charge
for net reserve adjustments. The underlying results were quite strong
with an attritional combined ratio of 85.3% year to date. We continue to
see positive momentum across the underwriting operations, with
profitable growth opportunities materializing for both our insurance and
reinsurance segments."

Effective this year, the Company changed its reporting of operating
income, a non-GAAP financial measure. Historically operating income
represented net income, excluding realized capital gains and losses and
the tax impact related to the enactment of the Tax Cuts and Jobs Act in
2017. Starting in first quarter 2018, the Company further adjusted
operating income to exclude foreign exchange gains and losses as it
believes the impact of foreign currency movements on income is not
indicative of the performance of the underlying business in a particular
period.

Operating highlights for the second quarter of 2018 included the
following:

  • Gross written premiums for the quarter were $2.1 billion, an increase
    of 29% compared to the second quarter of 2017. Worldwide reinsurance
    premiums were up 38% to $1.4 billion, with growth across each segment
    primarily driven by increased casualty and property pro-rata premium,
    rate improvement, increased shares on existing business and profitable
    new opportunities. Direct insurance premiums were up 13%, from second
    quarter 2017, to $645.9 million, continuing with the growth trends
    noted in recent years.
  • The combined ratio was 105.1% for the quarter compared to 90.5% in the
    second quarter of 2017. Excluding catastrophe losses, reinstatement
    premiums and the favorable prior period loss development, the current
    quarter attritional combined ratio was 83.5% compared to 86.7% in the
    same period last year.
  • Catastrophe losses, net of reinsurance and reinstatement premiums,
    amounted to $464.8 million in the quarter, with $399.8 million
    primarily related to the 2017 storm events and $65.0 million of
    current year catastrophe losses from Cyclone Mekunu in Oman and Yemen
    and late winter storms in the United States.
  • Net investment income increased 5% for the quarter to $141.3 million.
  • Net after-tax realized gains amounted to $10.5 million and net
    after-tax unrealized capital losses were $41.5 million, for the
    quarter.
  • Cash flow from operations was $132.6 million for the six months ended
    June 30, 2018 compared to $634.4 million for the same period in 2017.
  • During the second quarter, the Company purchased 112,747 shares at a
    total cost of $25.3 million. The repurchases were made pursuant to a
    share repurchase authorization, provided by the Company's Board of
    Directors, under which there remains 1.7 million shares available.
  • Shareholders' equity ended the quarter at $8.2 billion compared to
    $8.4 billion at year end 2017. Book value per share was down from
    $204.95 at December 31, 2017 to $201.70 at June 30, 2018.

This news release contains forward-looking statements within the
meaning of the U.S. federal securities laws.
We intend these
forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements in the U.S. Federal securities laws.
These statements involve risks and uncertainties that could cause actual
results to differ materially from those contained in forward-looking
statements made on behalf of the Company.
These risks and
uncertainties include the impact of general economic conditions and
conditions affecting the insurance and reinsurance industry, the
adequacy of our reserves, our ability to assess underwriting risk,
trends in rates for property and casualty insurance and reinsurance,
competition, investment market fluctuations, trends in insured and paid
losses, catastrophes, regulatory and legal uncertainties and other
factors described in our latest Annual Report on Form 10-K.
The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.

Everest Re Group, Ltd. is a Bermuda holding company that operates
through the following subsidiaries: Everest Reinsurance Company provides
reinsurance to property and casualty insurers in both the U.S. and
international markets. Everest Reinsurance (Bermuda), Ltd., including
through its branch in the United Kingdom, provides reinsurance and
insurance to worldwide property and casualty markets and reinsurance to
life insurers. Everest Reinsurance Company (Ireland), dac, provides
reinsurance to non-life insurers in Europe. Everest Insurance®
refers to the primary insurance operations of Everest Re Group, Ltd.,
and its affiliated companies which offer property, casualty and
specialty lines insurance on both an admitted and non-admitted basis in
the U.S. and internationally. The Company also operates within the
Lloyd's insurance market through Syndicate 2786. In addition, through
Mt. Logan Re, Ltd., the Company manages segregated accounts, capitalized
by the Company and third party investors that provide reinsurance for
property catastrophe risks. Additional information on Everest Re Group
companies can be found at the Group's web site at www.everestregroup.com.

A conference call discussing the second quarter results will be held at
10:30 a.m. Eastern Time on July 31, 2018. The call will be available on
the Internet through the Company's web site or at www.streetevents.com.

Recipients are encouraged to visit the Company's web site to view
supplemental financial information on the Company's results. The
supplemental information is located at www.everestregroup.com
in the "Financial Reports" section of the "Investor Center". The
supplemental financial information may also be obtained by contacting
the Company directly.

___________________________

1The Company generally uses after-tax operating income
(loss), a non-GAAP financial measure, to evaluate its performance.
After-tax operating income (loss) consists of net income (loss)
excluding after-tax net realized capital gains (losses), after-tax net
foreign exchange income (expense), and the tax charge related to the
enactment of the Tax Cuts and Jobs Act of 2017 (TCJA), as the following
reconciliation displays:

                   
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands, except per share amounts) 2018 2017 2018 2017
(unaudited) (unaudited)
 
Per Per Diluted Per Per Diluted
Common Common Common Common
Amount   Share Amount   Share Amount   Share Amount Share
 
Net income (loss) $ 69,895 $ 1.70 $ 245,674 $ 5.95 $ 280,213 $ 6.81 $ 537,317 $ 13.02
After-tax net realized capital gains (losses) 10,519 0.26 18,224 0.44 (8,836 ) (0.21 ) 50,334 1.22
After-tax net foreign exchange income (expense) 19,026 0.46 (6,267 ) (0.15 ) 28,959 0.70 (13,825 ) (0.33 )
Impact of TCJA enactment   -   -   -     -     -     -     -     -  
 
After-tax operating income (loss) $ 40,350 $ 0.98 $ 233,717   $ 5.66   $ 260,090   $ 6.32   $ 500,808   $ 12.13  
 
(Some amounts may not reconcile due to rounding.)
 

Although net realized capital gains (losses) and net foreign exchange
income (expense) are an integral part of the Company's insurance
operations, the determination of net realized capital gains (losses) and
foreign exchange income (expense) is independent of the insurance
underwriting process. The Company believes that the level of net
realized capital gains (losses) and net foreign exchange income
(expense) for any particular period is not indicative of the performance
of the underlying business in that particular period. Providing only a
GAAP presentation of net income (loss) makes it more difficult for users
of the financial information to evaluate the Company's success or
failure in its basic business, and may lead to incorrect or misleading
assumptions and conclusions. The Company understands that the equity
analysts who follow the Company focus on after-tax operating income
(loss) in their analyses for the reasons discussed above. The Company
provides after-tax operating income (loss) to investors so that they
have what management believes to be a useful supplement to GAAP
information concerning the Company's performance.

2Adjusted shareholders' equity excludes net after-tax
unrealized (appreciation) depreciation of investments

--Financial Details Follow--

 
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
         
 
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands, except per share amounts) 2018 2017 2018 2017
(unaudited) (unaudited)
REVENUES:
Premiums earned $ 1,729,818 $ 1,369,681 $ 3,349,245 $ 2,681,778
Net investment income 141,322 134,508 279,616 256,797
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities (888 ) (2,475 ) (958 ) (3,703 )
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss) - - - -
Other net realized capital gains (losses)   16,664     27,743     (8,167 )   81,699  
Total net realized capital gains (losses) 15,776 25,268 (9,125 ) 77,996
Net derivative gain (loss) 2,987 766 3,260 3,396
Other income (expense)   3,036     388     15,100     (4,578 )
Total revenues   1,892,939     1,530,611     3,638,096     3,015,389  
 
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses 1,341,314 861,275 2,398,491 1,632,063
Commission, brokerage, taxes and fees 383,402 299,956 741,041 582,225
Other underwriting expenses 93,099 78,869 189,383 154,756
Corporate expenses 6,633 6,919 15,629 15,376
Interest, fees and bond issue cost amortization expense   7,728     8,059     15,146     17,023  
Total claims and expenses   1,832,176     1,255,078     3,359,690     2,401,443  
 
INCOME (LOSS) BEFORE TAXES 60,763 275,533 278,406 613,946
Income tax expense (benefit)   (9,132 )   29,859     (1,807 )   76,629  
 
NET INCOME (LOSS) $ 69,895 $ 245,674 $ 280,213 $ 537,317
 
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities
arising during the period
(41,776 ) 4,868 (232,400 ) 24,416
Reclassification adjustment for realized losses (gains) included in
net income (loss)
  249     (8,993 )   (8,523 )   (11,192 )
Total URA(D) on securities arising during the period (41,527 ) (4,125 ) (240,923 ) 13,224
 
Foreign currency translation adjustments (63,652 ) 35,667 (45,953 ) 47,560
 
Reclassification adjustment for amortization of net (gain) loss
included in net income (loss)
  1,815     2,004     3,630     4,008  
Total benefit plan net gain (loss) for the period   1,815     2,004     3,630     4,008  
Total other comprehensive income (loss), net of tax   (103,364 )   33,546     (283,246 )   64,792  
 
COMPREHENSIVE INCOME (LOSS) $ (33,469 ) $ 279,220   $ (3,033 ) $ 602,109  
 
EARNINGS PER COMMON SHARE:
Basic $ 1.71 $ 5.98 $ 6.85 $ 13.10
Diluted 1.70 5.95 6.81 13.02
Dividends declared 1.30 1.25 2.60 2.50
 
     
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
 
 
June 30, December 31,
(Dollars and share amounts in thousands, except par value per share) 2018 2017
(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value $ 14,242,890 $ 14,756,834
(amortized cost: 2018, $14,435,792; 2017, $14,689,598)
Fixed maturities - available for sale, at fair value 3,192 -
Equity securities - available for sale, at market value (cost: 2018,
$0; 2017, $130,287)
- 129,530
Equity securities - available for sale, at fair value 1,220,770 963,572
Short-term investments 293,191 509,682
Other invested assets (cost: 2018, $1,826,148; 2017, $1,628,753) 1,826,148 1,631,850
Cash   619,493     635,067  
Total investments and cash 18,205,684 18,626,535
Accrued investment income 98,585 97,704
Premiums receivable 1,961,388 1,844,881
Reinsurance receivables 1,779,581 1,348,226
Funds held by reinsureds 368,680 292,927
Deferred acquisition costs 418,167 411,587
Prepaid reinsurance premiums 368,665 288,211
Income taxes 280,696 299,438
Other assets   404,439     382,283  
TOTAL ASSETS $ 23,885,885   $ 23,591,792  
 
LIABILITIES:
Reserve for losses and loss adjustment expenses $ 12,043,334 $ 11,884,321
Future policy benefit reserve 48,845 51,014
Unearned premium reserve 2,141,399 2,000,556
Funds held under reinsurance treaties 17,087 18,030
Other net payable to reinsurers 312,474 218,017
4.868% Senior notes due 6/1/2044 396,894 396,834
6.6% Long term notes due 5/1/2067 236,610 236,561
Accrued interest on debt and borrowings 3,010 2,727
Equity index put option liability 9,218 12,477
Unsettled securities payable 54,563 38,743
Other liabilities   381,102     363,280  
Total liabilities   15,644,536     15,222,560  
 
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $0.01; 50,000 shares authorized;
no shares issued and outstanding - -
Common shares, par value: $0.01; 200,000 shares authorized; (2018)
69,181
and (2017) 69,044 outstanding before treasury shares 692 691
Additional paid-in capital 2,172,701 2,165,768
Accumulated other comprehensive income (loss), net of deferred
income tax expense
(benefit) of ($15,938) at 2018 and $9,356 at 2017 (445,338 ) (160,891 )
Treasury shares, at cost; 28,321 shares (2018) and 28,208 shares
(2017)
(3,347,548 ) (3,322,244 )
Retained earnings   9,860,842     9,685,908  
Total shareholders' equity   8,241,349     8,369,232  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 23,885,885   $ 23,591,792  
 
     
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Six Months Ended
June 30,
(Dollars in thousands) 2018 2017
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 280,213 $ 537,317
Adjustments to reconcile net income to net cash provided by
operating activities:
Decrease (increase) in premiums receivable (126,355 ) (337,069 )
Decrease (increase) in funds held by reinsureds, net (77,794 ) (7,980 )
Decrease (increase) in reinsurance receivables (467,011 ) 8,270
Decrease (increase) in income taxes 43,516 18,362
Decrease (increase) in prepaid reinsurance premiums (86,044 ) (87,091 )
Increase (decrease) in reserve for losses and loss adjustment
expenses
223,202 97,493
Increase (decrease) in future policy benefit reserve (2,169 ) (836 )
Increase (decrease) in unearned premiums 151,528 161,009
Increase (decrease) in other net payable to reinsurers 101,970 65,929
Increase (decrease) in losses in course of payment 162,073 288,557
Change in equity adjustments in limited partnerships (45,898 ) (31,032 )
Distribution of limited partnership income 42,269 22,992
Change in other assets and liabilities, net (111,220 ) (61,763 )
Non-cash compensation expense 17,566 15,725
Amortization of bond premium (accrual of bond discount) 17,677 22,475
Net realized capital (gains) losses   9,125     (77,996 )
Net cash provided by (used in) operating activities   132,648     634,362  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale,
at market value
1,099,762 1,145,162
Proceeds from fixed maturities sold - available for sale, at market
value
1,225,373 991,209
Proceeds from fixed maturities sold - available for sale, at fair
value
1,065 -
Proceeds from equity securities sold - available for sale, at market
value
- 18,802
Proceeds from equity securities sold - available for sale, at fair
value
576,382 258,226
Distributions from other invested assets 2,978,865 2,476,399
Cost of fixed maturities acquired - available for sale, at market
value
(2,163,331 ) (2,880,188 )
Cost of fixed maturities acquired - available for sale, at fair value (4,381 ) -
Cost of equity securities acquired - available for sale, at market
value
- (2,610 )
Cost of equity securities acquired - available for sale, at fair
value
(722,797 ) (258,543 )
Cost of other invested assets acquired (3,168,655 ) (2,431,281 )
Net change in short-term investments 213,242 105,566
Net change in unsettled securities transactions   (33,351 )   47,800  
Net cash provided by (used in) investing activities   2,174     (529,458 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period for share-based compensation,
net of expense
(9,431 ) (5,847 )
Purchase of treasury shares (25,304 ) -
Dividends paid to shareholders (106,480 ) (102,585 )
Cost of shares withheld for taxes on settlements of share-based
compensation awards
  (14,859 )   (12,407 )
Net cash provided by (used in) financing activities   (156,074 )   (120,839 )
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH   5,678     3,218  
 
Net increase (decrease) in cash (15,574 ) (12,717 )
Cash, beginning of period   635,067     481,922  
Cash, end of period $ 619,493   $ 469,205  
 
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered) $ (44,151 ) $ 57,772
Interest paid 14,754 17,818
 

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