Everest Re Group, Ltd. (NYSE:RE) today reported second quarter
2016 net income of $155.7 million, or $3.67 per diluted common
share, compared to net income of $209.1 million, or $4.68 per
diluted common share, for the second quarter of 2015. After-tax
operating income1, excluding realized capital gains and losses, was
$134.2 million, or $3.17 per diluted common share, for the second
quarter of 2016, compared to after-tax operating income1 of $224.5
million, or $5.03 per diluted common share, for the same period
last year.
For the six months ended June 30, 2016, net income was $327.4
million, or $7.68 per diluted common share, compared to $532.0
million, or $11.88 per diluted common share, for the first six
months of 2015. After-tax operating income1, excluding realized
capital gains and losses, was $356.9 million, or $8.37 per diluted
common share, compared to $554.4 million or $12.38 per diluted
common share, for the same period in 2015.
Commenting on the Company’s results, President and Chief
Executive Officer, Dominic J. Addesso said, “Everest’s six month
annualized operating return on equity of 9.4% is an excellent
result given the number of catastrophe loss events, the impact of
foreign currency movements around the world, and the continued low
interest rate environment. It remains a challenging environment but
the strategic actions we have taken to position Everest for
continued success are borne out by these results.”
Operating highlights for the second quarter of 2016 included the
following:
- Gross written premiums for the quarter
were $1.4 billion, an increase of 8% compared to the second quarter
of 2015. Eliminating the unfavorable effects of foreign currency
fluctuations, premiums were actually up 10% for the quarter.
Worldwide, reinsurance premiums were up 1%, on a constant dollar
basis, and insurance premiums were up 32%, quarter over
quarter.
- The combined ratio for the quarter was
95.1% compared to 88.0% in the second quarter of 2015. Excluding
catastrophe losses, reinstatement premiums, and prior period loss
development, the current quarter attritional combined ratio was
86.1% compared to 85.9% in the same period last year.
- Catastrophe losses, net of reinsurance,
amounted to $123.8 million in the quarter, with current quarter
catastrophe losses for the Fort McMurray, Canada wildfires, Ecuador
earthquake, and Texas hailstorms totaling $149.1 million, offset by
reserve releases on several 2011 events. The net impact of these
losses, after reinstatement premiums and taxes was $105.4
million.
- Net investment income for the quarter
was $132.7 million, including income of $23.0 million on limited
partnership investments.
- Net after-tax realized and unrealized
capital gains amounted to $21.5 million and $122.9 million,
respectively, for the quarter.
- Cash flow from operations was $307.3
million compared to $181.1 million for the same period in
2015.
- Through the first six months, the
annualized after-tax operating income¹ return on average adjusted
shareholders’ equity² was 9.4%.
- During the quarter, the Company
repurchased 544,728 of its common shares at an average price of
$184.37 and a total cost of $100.4 million. The repurchases were
made pursuant to a share repurchase authorization, provided by the
Company’s Board of Directors, under which there remains 3.1 million
shares available.
- Shareholders’ equity ended the quarter
at $8.0 billion, up 5% compared to year end 2015. Book value per
share increased 7% from $178.21 at December 31, 2015 to $190.66 at
June 30, 2016.
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), Limited provides reinsurance to
non-life insurers in Europe. Everest National Insurance Company and
Everest Security Insurance Company provide property and casualty
insurance to policyholders in the U.S. Everest Indemnity Insurance
Company offers excess and surplus lines insurance in the U.S.
Everest Insurance Company of Canada provides property and casualty
insurance to policyholders in Canada. 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 26, 2016. 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) as the following
reconciliation displays:
Three Months Ended Six Months Ended
June 30, June 30, (Dollars in thousands, except per share amounts)
2016
2015 2016 2015 (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) $ 155,692 $ 3.67 $ 209,057 $ 4.68 $
327,378 $ 7.68 $ 532,035 $ 11.88 After-tax net realized capital
gains (losses) 21,462 0.51
(15,448 ) (0.35 ) (29,517 )
(0.69 ) (22,344 ) (0.50 )
After-tax operating income (loss) $ 134,230 $
3.17 $ 224,505 $ 5.03 $ 356,895
$ 8.37 $ 554,379 $ 12.38
(Some amounts may not reconcile due to rounding.)
Although net realized capital gains (losses) are an integral
part of the Company’s insurance operations, the determination of
net realized capital gains (losses) is independent of the insurance
underwriting process. The Company believes that the level of net
realized capital gains (losses) 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
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)
2016 2015 2016
2015 (unaudited) (unaudited) REVENUES: Premiums earned $
1,288,860 $ 1,285,255 $ 2,507,727 $ 2,557,743 Net investment income
132,737 124,990 235,261 247,556 Net realized capital gains
(losses): Other-than-temporary impairments on fixed maturity
securities (1,470 ) (16,238 ) (30,263 ) (42,256 )
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss) - - - - Other net
realized capital gains (losses) 34,128 (7,940
) (11,338 ) 7,573 Total net realized capital
gains (losses) 32,658 (24,178 ) (41,601 ) (34,683 ) Net derivative
gain (loss) 1,996 6,445 (1,024 ) 6,203 Other income (expense)
(28,367 ) (2,064 ) (30,433 ) 49,217
Total revenues 1,427,884 1,390,448
2,669,930 2,826,036
CLAIMS AND EXPENSES: Incurred losses and loss adjustment expenses
857,816 778,184 1,558,565 1,493,339 Commission, brokerage, taxes
and fees 295,502 290,520 570,508 573,614 Other underwriting
expenses 72,077 61,902 144,187 120,643 Corporate expenses 7,117
5,925 15,003 11,388 Interest, fees and bond issue cost amortization
expense 9,073 9,026 18,301
18,016 Total claims and expenses
1,241,585 1,145,557 2,306,564
2,217,000 INCOME (LOSS) BEFORE TAXES 186,299
244,891 363,366 609,036 Income tax expense (benefit) 30,607
35,834 35,988 77,001
NET INCOME (LOSS) $ 155,692 $ 209,057 $ 327,378 $
532,035 Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities
arising during the period 124,356 (136,481 ) 267,318 (53,276 )
Reclassification adjustment for realized losses (gains) included in
net income (loss) (1,448 ) 12,747
30,933 34,930 Total URA(D) on securities
arising during the period 122,908 (123,734 ) 298,251 (18,346 )
Foreign currency translation adjustments 5,050 54,337 14,823
(48,003 ) Benefit plan actuarial net gain (loss) for the
period - - - - Reclassification adjustment for amortization of net
(gain) loss included in net income (loss) 1,341
1,609 2,681 3,213 Total
benefit plan net gain (loss) for the period 1,341
1,609 2,681 3,213 Total
other comprehensive income (loss), net of tax 129,299
(67,788 ) 315,755 (63,136 )
COMPREHENSIVE INCOME (LOSS) $ 284,991 $ 141,269 $
643,133 $ 468,899 EARNINGS PER COMMON SHARE
Basic $ 3.70 $ 4.72 $ 7.73 $ 11.99 Diluted 3.67 4.68 7.68 11.88
Dividends declared 1.15 0.95 2.30 1.90
EVEREST RE GROUP, LTD. CONSOLIDATED BALANCE SHEETS
June 30, December 31, (Dollars and share amounts in
thousands, except par value per share) 2016
2015 (unaudited) ASSETS: Fixed maturities - available for
sale, at market value $ 14,058,965 $ 13,357,294 (amortized cost:
2016, $13,631,263; 2015, $13,276,206) Fixed maturities - available
for sale, at fair value - 2,102 Equity securities - available for
sale, at market value (cost: 2016, $124,699; 2015, $122,271)
118,740 108,940 Equity securities - available for sale, at fair
value 1,104,430 1,337,733 Short-term investments 531,511 799,684
Other invested assets (cost: 2016, $1,216,171; 2015, $786,994)
1,216,171 786,994 Cash 429,287 283,658
Total investments and cash 17,459,104 16,676,405 Accrued investment
income 96,772 100,942 Premiums receivable 1,461,563 1,483,090
Reinsurance receivables 950,323 894,037 Funds held by reinsureds
242,033 278,673 Deferred acquisition costs 319,781 372,351 Prepaid
reinsurance premiums 219,050 164,971 Income taxes 195,094 258,541
Other assets 338,455 316,408 TOTAL
ASSETS $ 21,282,175 $ 20,545,418 LIABILITIES:
Reserve for losses and loss adjustment expenses $ 10,263,267 $
9,951,798 Future policy benefit reserve 57,827 58,910 Unearned
premium reserve 1,495,838 1,613,390 Funds held under reinsurance
treaties 23,373 13,544 Commission reserves 85,670 60,098 Other net
payable to reinsurers 224,380 173,087 Losses in course of payment
124,703 112,170 4.868% Senior notes due 6/1/2044 396,654 396,594
6.6% Long term notes due 5/1/2067 236,413 236,364 Accrued interest
on debt and borrowings 3,537 3,537 Equity index put option
liability 41,729 40,705 Unsettled securities payable 86,003 15,314
Other liabilities 257,313 261,322 Total
liabilities 13,296,707 12,936,833
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; (2016)
68,805 and (2015) 68,606 outstanding before treasury shares 688 686
Additional paid-in capital 2,120,581 2,103,638 Accumulated other
comprehensive income (loss), net of deferred income tax expense
(benefit) of $57,700 at 2016 and ($15,863) at 2015 84,000 (231,755
) Treasury shares, at cost; 26,921 shares (2016) and 25,912 shares
(2015) (3,072,313 ) (2,885,956 ) Retained earnings 8,852,512
8,621,972 Total shareholders' equity
7,985,468 7,608,585 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 21,282,175 $ 20,545,418
EVEREST RE GROUP, LTD. CONSOLIDATED
STATEMENTS OF CASH FLOWS Six Months Ended June 30,
(Dollars in thousands) 2016 2015
(unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)
$ 327,378 $ 532,035 Adjustments to reconcile net income to net cash
provided by operating activities: Decrease (increase) in premiums
receivable 20,168 (56,849 ) Decrease (increase) in funds held by
reinsureds, net 45,656 (6,755 ) Decrease (increase) in reinsurance
receivables (68,284 ) (49,185 ) Decrease (increase) in income taxes
(10,424 ) (20,898 ) Decrease (increase) in prepaid reinsurance
premiums (51,243 ) (39,563 ) Increase (decrease) in reserve for
losses and loss adjustment expenses 352,147 113,567 Increase
(decrease) in future policy benefit reserve (1,083 ) (364 )
Increase (decrease) in unearned premiums (119,315 ) (160,849 )
Increase (decrease) in other net payable to reinsurers 46,508
16,712 Increase (decrease) in losses in course of payment 11,188
95,003 Change in equity adjustments in limited partnerships (16,518
) (12,840 ) Distribution of limited partnership income 41,296
18,332 Change in other assets and liabilities, net 17,012 32,728
Non-cash compensation expense 14,262 10,364 Amortization of bond
premium (accrual of bond discount) 24,125 25,514 Amortization of
underwriting discount on senior notes 2 2 Net realized capital
(gains) losses 41,601 34,683 Net cash
provided by (used in) operating activities 674,476
531,637 CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale,
at market value 923,832 1,172,211 Proceeds from fixed maturities
matured/called - available for sale, at fair value - - Proceeds
from fixed maturities sold - available for sale, at market value
594,764 731,673 Proceeds from fixed maturities sold - available for
sale, at fair value 1,587 1,613 Proceeds from equity securities
sold - available for sale, at market value 226 4,599 Proceeds from
equity securities sold - available for sale, at fair value 430,038
300,620 Distributions from other invested assets 2,261,682 27,705
Cost of fixed maturities acquired - available for sale, at market
value (1,932,527 ) (2,448,121 ) Cost of fixed maturities acquired -
available for sale, at fair value - (234 ) Cost of equity
securities acquired - available for sale, at market value (2,393 )
(5,541 ) Cost of equity securities acquired - available for sale,
at fair value (194,043 ) (317,650 ) Cost of other invested assets
acquired (2,711,306 ) (98,890 ) Net change in short-term
investments 271,913 207,879 Net change in unsettled securities
transactions 59,619 4,475 Net cash
provided by (used in) investing activities (296,608 )
(419,661 ) CASH FLOWS FROM FINANCING ACTIVITIES: Common
shares issued during the period, net 2,683 5,468 Purchase of
treasury shares (186,357 ) (124,981 ) Dividends paid to
shareholders (96,838 ) (84,207 ) Net cash provided by
(used in) financing activities (280,512 ) (203,720 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH 48,273
(6,829 ) Net increase (decrease) in cash 145,629
(98,573 ) Cash, beginning of period 283,658
437,474 Cash, end of period $ 429,287 $ 338,901
SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid
(recovered) $ 41,905 $ 93,352 Interest paid 18,192 17,907
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160725006255/en/
Everest Global Services, Inc.Elizabeth B. Farrell,
908-604-3169Vice President, Investor Relations
Everest Re (NYSE:RE)
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