Market Overview

Everest Re Group Reports Second Quarter 2019 Results

Share:

Everest Re Group, Ltd. ("Everest") (NYSE:RE) today reported second quarter 2019 net income of $342.9 million, or $8.39 per diluted common share, compared to net income of $69.9 million, or $1.70 per diluted common share for the second quarter of 2018. After-tax operating income1 was $320.9 million, or $7.85 per diluted common share, for the second quarter of 2019, compared to after-tax operating income1 of $40.4 million, or $0.98 per diluted common share, for the same period last year.

For the six months ended June 30, 2019, net income was $691.8 million, or $16.93 per diluted common share, compared to net income of $280.2 million, or $6.81 per diluted common share for the six months ended June 30, 2018. After-tax operating income1 was $603.2 million, or $14.76 per diluted common share, for the six months ended June 30, 2019, compared to after-tax operating income1 of $260.1 million, or $6.32 per diluted common share, for the same period last year.

Commenting on the Company's results, President and Chief Executive Officer Dominic J. Addesso said: "Everest delivered outstanding results for the quarter, with a 16.1% annualized net income return on equity, driven by both solid underwriting and investment performance. With nearly $9 billion in common equity and strong franchises in both reinsurance and insurance, our ability to adjust the mix of business to optimize our portfolio was again evident this quarter, as Everest added top line in insurance and casualty reinsurance along with a strong property cat renewal to take advantage of the improved market conditions."

Operating highlights for the second quarter of 2019 included the following:

  • Gross written premiums for the quarter were $2.2 billion, an increase of 5% compared to the second quarter of 2018. Direct insurance premiums were up 17%, from second quarter 2018, to $757.1 million, continuing with the diversified growth trends noted in recent years. Worldwide reinsurance premiums were essentially flat at $1.4 billion for both the second quarter of 2019 and 2018.
  • The combined ratio was 89.2% for the quarter compared to 105.1% in the second quarter of 2018. Excluding catastrophe losses, reinstatement premiums and the favorable prior period loss development, the current quarter attritional combined ratio was 88.6% compared to 83.5% in the same period last year.
  • There were no current year catastrophe losses incurred in the quarter.
  • There was $30 million of adverse development recorded in the quarter related to prior year catastrophe events, mostly offset by $21 million of favorable prior year attritional losses.
  • Net investment income increased 27% for the quarter to $179.0 million.
  • Net after-tax realized capital gains amounted to $26.0 million for the quarter compared to $10.5 million during the second quarter of 2018.
  • Cash flow from operations was $853.5 million for the six months ended June 30, 2019 compared to $132.6 million for the same period in 2018.
  • During the quarter, the Company purchased 39,440 shares at a total cost of $8.5 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company's Board of Directors, under which there remains 1.3 million shares available.
  • Shareholders' equity ended the quarter at $8.9 billion compared to $7.9 billion at year end 2018. Book value per share was up from $194.43 at December 31, 2018 to $218.07 at June 30, 2019.

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.

About Everest Re Group, Ltd.

Everest Re Group, Ltd. ("Everest") is a leading global provider of reinsurance and insurance, operating for more than 40 years through subsidiaries in the U.S., Europe, Bermuda and other territories.

Everest offers property, casualty, and specialty products through its various operating affiliates located in key markets around the world.

Everest common stock (NYSE:RE) is a component of the S&P 500 index.

A conference call discussing the second quarter results will be held at 10:30 a.m. Eastern Time on July 30, 2019. The call will be available on the Internet through the Company's web site or at www.streetevents.com.

Additional information about Everest, our people, and our products can be found on our website at www.everestre.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.everestre.com in the "Financial Reports" section of the "Investor Center". The supplemental financial information may also be obtained by contacting the Company directly.

_______________________________________________

1 The 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 Three Months Ended
June 30, June 30,
(Dollars in thousands, except per share amounts)

2019

2018

2019

2018

(unaudited)

(unaudited)

 
Per Diluted Per Diluted Per Diluted Per Diluted
Common Common Common Common
Amount Share Amount Share Amount Share Amount Share
 
Net income (loss)

$

342,855

 

$

8.39

 

$

69,895

$

1.70

$

691,755

 

$

16.93

 

$

280,213

 

$

6.81

 

After-tax net realized capital gains (losses)

 

25,994

 

 

0.64

 

 

10,519

 

0.26

 

99,899

 

 

2.44

 

 

(8,836

)

 

(0.21

)

After-tax net foreign exchange income (expense)

 

(4,001

)

 

(0.10

)

 

19,026

 

0.46

 

(11,374

)

 

(0.28

)

 

28,959

 

 

0.70

 

 
After-tax operating income (loss)

$

320,862

 

$

7.85

 

$

40,350

$

0.98

$

603,230

 

$

14.76

 

$

260,090

 

$

6.32

 

 
(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.

Return on equity calculations use adjusted shareholders' equity excluding 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)

2019

2018

2019

2018

(unaudited) (unaudited)
REVENUES:
Premiums earned

$

1,817,299

 

$

1,729,818

 

$

3,549,996

 

$

3,349,245

 

Net investment income

 

179,028

 

 

141,322

 

 

320,004

 

 

279,616

 

Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities

 

(5,157

)

 

(888

)

 

(8,090

)

 

(958

)

Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss)

 

-

 

 

-

 

 

-

 

 

-

 

Other net realized capital gains (losses)

 

35,429

 

 

16,664

 

 

130,594

 

 

(8,167

)

Total net realized capital gains (losses)

 

30,272

 

 

15,776

 

 

122,504

 

 

(9,125

)

Net derivative gain (loss)

 

353

 

 

2,987

 

 

3,584

 

 

3,260

 

Other income (expense)

 

(7,977

)

 

3,036

 

 

(17,030

)

 

15,100

 

Total revenues

 

2,018,975

 

 

1,892,939

 

 

3,979,058

 

 

3,638,096

 

 
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses

 

1,094,630

 

 

1,341,314

 

 

2,143,180

 

 

2,398,491

 

Commission, brokerage, taxes and fees

 

420,950

 

 

383,402

 

 

810,424

 

 

741,041

 

Other underwriting expenses

 

104,833

 

 

93,099

 

 

203,818

 

 

189,383

 

Corporate expenses

 

7,535

 

 

6,633

 

 

14,187

 

 

15,629

 

Interest, fees and bond issue cost amortization expense

 

8,434

 

 

7,728

 

 

16,065

 

 

15,146

 

Total claims and expenses

 

1,636,382

 

 

1,832,176

 

 

3,187,674

 

 

3,359,690

 

 
INCOME (LOSS) BEFORE TAXES

 

382,593

 

 

60,763

 

 

791,384

 

 

278,406

 

Income tax expense (benefit)

 

39,738

 

 

(9,132

)

 

99,629

 

 

(1,807

)

 
NET INCOME (LOSS)

$

342,855

 

$

69,895

 

$

691,755

 

$

280,213

 

 
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period

 

197,759

 

 

(41,776

)

 

430,824

 

 

(232,400

)

Reclassification adjustment for realized losses (gains) included in net income (loss)

 

(1,869

)

 

249

 

 

(3,691

)

 

(8,523

)

Total URA(D) on securities arising during the period

 

195,890

 

 

(41,527

)

 

427,133

 

 

(240,923

)

 
Foreign currency translation adjustments

 

(25,832

)

 

(63,652

)

 

(11,780

)

 

(45,953

)

 
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)

 

1,151

 

 

1,815

 

 

2,302

 

 

3,630

 

Total benefit plan net gain (loss) for the period

 

1,151

 

 

1,815

 

 

2,302

 

 

3,630

 

Total other comprehensive income (loss), net of tax

 

171,209

 

 

(103,364

)

 

417,655

 

 

(283,246

)

 
COMPREHENSIVE INCOME (LOSS)

$

514,064

 

$

(33,469

)

$

1,109,410

 

$

(3,033

)

 
EARNINGS PER COMMON SHARE:
Basic

$

8.42

 

$

1.71

 

$

16.98

 

$

6.85

 

Diluted

 

8.39

 

 

1.70

 

 

16.93

 

 

6.81

 

 
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
 
 
June 30, December 31,
(Dollars and share amounts in thousands, except par value per share)

2019

2018

(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value

$

15,804,524

 

$

15,225,263

 

(amortized cost: 2019, $15,506,555; 2018, $15,406,572)
Fixed maturities - available for sale, at fair value

 

-

 

 

2,337

 

Equity securities, at fair value

 

914,654

 

 

716,639

 

Short-term investments (cost: 2019, $744,486; 2018, $241,010)

 

744,602

 

 

240,987

 

Other invested assets (cost: 2019, $1,668,705; 2018, $1,591,745)

 

1,668,705

 

 

1,591,745

 

Cash

 

661,367

 

 

656,095

 

Total investments and cash

 

19,793,852

 

 

18,433,066

 

Accrued investment income

 

109,273

 

 

104,619

 

Premiums receivable

 

2,389,943

 

 

2,218,283

 

Reinsurance receivables

 

1,797,866

 

 

1,787,648

 

Funds held by reinsureds

 

498,043

 

 

445,040

 

Deferred acquisition costs

 

510,861

 

 

511,573

 

Prepaid reinsurance premiums

 

476,429

 

 

343,343

 

Income taxes

 

358,457

 

 

592,385

 

Other assets

 

453,067

 

 

358,042

 

TOTAL ASSETS

$

26,387,791

 

$

24,793,999

 

 
LIABILITIES:
Reserve for losses and loss adjustment expenses

$

13,249,488

 

$

13,119,090

 

Future policy benefit reserve

 

45,130

 

 

46,778

 

Unearned premium reserve

 

2,729,376

 

 

2,517,612

 

Funds held under reinsurance treaties

 

10,899

 

 

13,099

 

Other net payable to reinsurers

 

346,151

 

 

218,439

 

Senior notes due 6/1/2044

 

397,014

 

 

396,954

 

Long term notes due 5/1/2067

 

236,709

 

 

236,659

 

Accrued interest on debt and borrowings

 

3,063

 

 

3,093

 

Equity index put option liability

 

8,374

 

 

11,958

 

Unsettled securities payable

 

145,568

 

 

51,112

 

Other liabilities

 

331,859

 

 

275,401

 

Total liabilities

 

17,503,631

 

 

16,890,195

 

 
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; (2019) 69,406
and (2018) 69,202 outstanding before treasury shares

 

694

 

 

692

 

Additional paid-in capital

 

2,198,461

 

 

2,188,777

 

Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $32,754 at 2019 and ($20,697) at 2018

 

(44,902

)

 

(462,557

)

Treasury shares, at cost; 28,665 shares (2019) and 28,551 shares (2018)

 

(3,422,152

)

 

(3,397,548

)

Retained earnings

 

10,152,059

 

 

9,574,440

 

Total shareholders' equity

 

8,884,160

 

 

7,903,804

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

26,387,791

 

$

24,793,999

 

 
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Six Months Ended
June 30,
(Dollars in thousands)

2019

2018

(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)

$

691,755

 

$

280,213

 

Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable

 

(178,319

)

 

(126,355

)

Decrease (increase) in funds held by reinsureds, net

 

(56,180

)

 

(77,794

)

Decrease (increase) in reinsurance receivables

 

(19,319

)

 

(467,011

)

Decrease (increase) in income taxes

 

180,285

 

 

43,516

 

Decrease (increase) in prepaid reinsurance premiums

 

(137,092

)

 

(86,044

)

Increase (decrease) in reserve for losses and loss adjustment expenses

 

155,096

 

 

223,202

 

Increase (decrease) in future policy benefit reserve

 

(1,648

)

 

(2,169

)

Increase (decrease) in unearned premiums

 

219,263

 

 

151,528

 

Increase (decrease) in other net payable to reinsurers

 

132,474

 

 

101,970

 

Increase (decrease) in losses in course of payment

 

35,738

 

 

162,073

 

Change in equity adjustments in limited partnerships

 

(57,031

)

 

(45,898

)

Distribution of limited partnership income

 

41,321

 

 

42,269

 

Change in other assets and liabilities, net

 

(60,820

)

 

(111,220

)

Non-cash compensation expense

 

17,171

 

 

17,566

 

Amortization of bond premium (accrual of bond discount)

 

13,321

 

 

17,677

 

Net realized capital (gains) losses

 

(122,504

)

 

9,125

 

Net cash provided by (used in) operating activities

 

853,511

 

 

132,648

 

 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value

 

1,009,921

 

 

1,099,762

 

Proceeds from fixed maturities sold - available for sale, at market value

 

2,318,207

 

 

1,225,373

 

Proceeds from fixed maturities sold - available for sale, at fair value

 

2,706

 

 

1,065

 

Proceeds from equity securities sold, at fair value

 

149,233

 

 

576,382

 

Distributions from other invested assets

 

143,752

 

 

2,978,865

 

Cost of fixed maturities acquired - available for sale, at market value

 

(3,466,331

)

 

(2,163,331

)

Cost of fixed maturities acquired - available for sale, at fair value

 

-

 

 

(4,381

)

Cost of equity securities acquired, at fair value

 

(229,070

)

 

(722,797

)

Cost of other invested assets acquired

 

(207,323

)

 

(3,168,655

)

Net change in short-term investments

 

(499,983

)

 

213,242

 

Net change in unsettled securities transactions

 

88,531

 

 

(33,351

)

Net cash provided by (used in) investing activities

 

(690,357

)

 

2,174

 

 
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period for share-based compensation, net of expense

 

(7,485

)

 

(9,431

)

Purchase of treasury shares

 

(24,604

)

 

(25,304

)

Dividends paid to shareholders

 

(114,136

)

 

(106,480

)

Cost of shares withheld on settlements of share-based compensation awards

 

(11,748

)

 

(14,859

)

Net cash provided by (used in) financing activities

 

(157,973

)

 

(156,074

)

 
EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

91

 

 

5,678

 

 
Net increase (decrease) in cash

 

5,272

 

 

(15,574

)

Cash, beginning of period

 

656,095

 

 

635,067

 

Cash, end of period

$

661,367

 

$

619,493

 

 
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)

$

(83,995

)

$

(44,151

)

Interest paid

 

15,984

 

 

14,754

 

 

View Comments and Join the Discussion!