Everest Re Group, Ltd. (NYSE: RE) today reported first quarter
2018 net income of $210.3 million, or $5.11 per diluted common
share, compared to net income of $291.6 million, or $7.07 per
diluted common share for the first quarter of 2017. After-tax
operating income1 was $219.7 million, or $5.34 per diluted common
share, for the first quarter of 2018, compared to after-tax
operating income¹ of $267.1 million, or $6.48 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 continues to
deliver a solid performance with double digit returns on equity.
Our diversified growth strategies, with premium up 21%, continue to
provide balance and stability to the overall portfolio. In fact,
excluding catastrophe losses, our net operating income was up 5%
and underwriting income was above $200 million. We are pleased with
our overall results and believe they once again demonstrate the
strength of the Everest franchise.”
Effective this quarter, 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 first quarter of 2018 included the
following:
- Gross written premiums for the quarter
were $1.9 billion, an increase of 21% compared to the first quarter
of 2017. On a constant dollar basis, premium was up 19%, quarter
over quarter. Worldwide reinsurance premiums were up 22% to $1.4
billion, with growth across each segment primarily driven by
increased pro-rata premium. Direct insurance premiums were up 16%,
from first quarter 2017, to $505 million, consistent with the
growth trends noted through 2017.
- The combined ratio was 93.3% for the
quarter compared to 86.0% in the first quarter of 2017. Excluding
the previously announced catastrophe losses arising from the 2017
Northern and Southern California wildfires, the attritional
combined ratio was 87.1% compared to 84.5% in the same period last
year. The higher attritional loss ratio is driven by changes in mix
of business as well as higher retrocessional costs in the
quarter.
- Net investment income increased 13% for
the quarter to $138.3 million.
- Net after-tax realized and unrealized
capital losses amounted to $19.4 million and $199.4 million,
respectively.
- Cash flow from operations was $195.6
million compared to $381.8 million for the same period in
2017.
- For the quarter, the annualized
after-tax operating income¹ return on average adjusted
shareholders’ equity² was 10.5%.
- Shareholders’ equity ended the quarter
at $8.3 billion, relatively flat compared to year end 2017. Book
value per share was modestly down from $204.95 at December 31, 2017
to $203.62 at March 31, 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 first quarter results will be
held at 10:30 a.m. Eastern Time on April 26, 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 March 31, (Dollars in
thousands, except per share amounts) 2018 2017
(unaudited) Per Diluted Per
Diluted Common Common Amount Share Amount
Share Net income (loss) $ 210,318 $ 5.11 $ 291,643 $
7.07 After-tax net realized capital gains (losses) (19,355) (0.47)
32,110 0.78 After-tax net foreign exchange income (expense) 9,933
0.24 (7,558) (0.18) Impact of TCJA enactment -
- - - After-tax operating
income (loss) $ 219,740 $ 5.34 $ 267,091
$ 6.48 (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 March 31, (Dollars in
thousands, except per share amounts) 2018 2017 (unaudited)
REVENUES: Premiums earned $ 1,619,427 $ 1,312,097 Net investment
income 138,294 122,289 Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities (70)
(1,229) Other-than-temporary impairments on fixed maturity
securities transferred to other comprehensive income (loss) - -
Other net realized capital gains (losses) (24,831)
53,957 Total net realized capital gains (losses) (24,901) 52,728
Net derivative gain (loss) 273 2,630 Other income (expense)
12,064 (4,966) Total revenues 1,745,157
1,484,778 CLAIMS AND EXPENSES: Incurred losses and loss
adjustment expenses 1,057,177 770,788 Commission, brokerage, taxes
and fees 357,639 282,269 Other underwriting expenses 96,284 75,887
Corporate expenses 8,996 8,457 Interest, fees and bond issue cost
amortization expense 7,418 8,964 Total claims and
expenses 1,527,514 1,146,365 INCOME (LOSS)
BEFORE TAXES 217,643 338,413 Income tax expense (benefit)
7,325 46,770 NET INCOME (LOSS) $ 210,318 $ 291,643
Other comprehensive income (loss), net of tax: Unrealized
appreciation (depreciation) ("URA(D)") on securities arising during
the period (190,624) 19,548 Reclassification adjustment for
realized losses (gains) included in net income (loss)
(8,772) (2,199) Total URA(D) on securities arising during
the period (199,396) 17,349 Foreign currency translation
adjustments 17,699 11,893 Reclassification adjustment for
amortization of net (gain) loss included in net income (loss)
1,815 2,004 Total benefit plan net gain (loss) for
the period 1,815 2,004 Total other comprehensive
income (loss), net of tax (179,882) 31,246
COMPREHENSIVE INCOME (LOSS) $ 30,436 $ 322,889 EARNINGS PER
COMMON SHARE: Basic $ 5.14 $ 7.12 Diluted 5.11 7.07 Dividends
declared 1.30 1.25
EVEREST RE GROUP, LTD. CONSOLIDATED BALANCE SHEETS
March 31, 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 $ 14,844,581 $
14,756,834 (amortized cost: 2018, $14,997,018; 2017, $14,689,598)
Fixed maturities - available for sale, at fair value 1,821 - Equity
securities - available for sale, at market value (cost: 2018, $0;
2017, $130,287) - 129,530 Equity securities - available for sale,
at fair value 1,169,531 963,572 Short-term investments 338,694
509,682 Other invested assets (cost: 2018, $1,527,701; 2017,
$1,628,753) 1,527,701 1,631,850 Cash 700,586 635,067
Total investments and cash 18,582,914 18,626,535 Accrued investment
income 100,129 97,704 Premiums receivable 1,906,427 1,844,881
Reinsurance receivables 1,356,888 1,348,226 Funds held by
reinsureds 197,419 292,927 Deferred acquisition costs 420,724
411,587 Prepaid reinsurance premiums 321,203 288,211 Income taxes
265,228 299,438 Other assets 362,264 382,283 TOTAL
ASSETS $ 23,513,196 $ 23,591,792 LIABILITIES: Reserve for
losses and loss adjustment expenses $ 11,793,346 $ 11,884,321
Future policy benefit reserve 49,106 51,014 Unearned premium
reserve 2,089,628 2,000,556 Funds held under reinsurance treaties
16,965 18,030 Commission reserves 23,251 30,660 Other net payable
to reinsurers 244,280 218,017 4.868% Senior notes due 6/1/2044
396,864 396,834 6.6% Long term notes due 5/1/2067 236,585 236,561
Accrued interest on debt and borrowings 7,668 2,727 Equity index
put option liability 12,205 12,477 Unsettled securities payable
49,569 38,743 Other liabilities 249,549 332,620 Total
liabilities 15,169,016 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) 69,187
and (2017) 69,044 outstanding before treasury shares 692 691
Additional paid-in capital 2,163,519 2,165,768 Accumulated other
comprehensive income (loss), net of deferred income tax expense
(benefit) of ($11,933) at 2018 and $9,356 at 2017 (341,974)
(160,891) Treasury shares, at cost; 28,208 shares at 2018 and 2017
(3,322,244) (3,322,244) Retained earnings 9,844,187
9,685,908 Total shareholders' equity 8,344,180
8,369,232 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 23,513,196 $
23,591,792 EVEREST RE
GROUP, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, (Dollars in thousands) 2018 2017
(unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)
$ 210,318 $ 291,643 Adjustments to reconcile net income to net cash
provided by operating activities: Decrease (increase) in premiums
receivable (56,826) (220,367) Decrease (increase) in funds held by
reinsureds, net 95,416 1,211 Decrease (increase) in reinsurance
receivables 236 (30,158) Decrease (increase) in income taxes 55,905
37,010 Decrease (increase) in prepaid reinsurance premiums (32,194)
(23,704) Increase (decrease) in reserve for losses and loss
adjustment expenses (121,415) 99,095 Increase (decrease) in future
policy benefit reserve (1,907) 83 Increase (decrease) in unearned
premiums 85,598 125,614 Increase (decrease) in other net payable to
reinsurers 24,410 13,666 Increase (decrease) in losses in course of
payment 45,919 113,815 Change in equity adjustments in limited
partnerships (24,596) (10,998) Distribution of limited partnership
income 15,524 5,384 Change in other assets and liabilities, net
(142,935) 12,999 Non-cash compensation expense 8,336 7,501
Amortization of bond premium (accrual of bond discount) 8,950
11,746 Net realized capital (gains) losses 24,901
(52,728) Net cash provided by (used in) operating activities
195,640 381,812 CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale,
at market value 512,384 525,873 Proceeds from fixed maturities sold
- available for sale, at market value 364,288 428,491 Proceeds from
equity securities sold - available for sale, at market value -
18,802 Proceeds from equity securities sold - available for sale,
at fair value 199,875 140,315 Distributions from other invested
assets 1,061,894 1,165,905 Cost of fixed maturities acquired -
available for sale, at market value (1,150,718) (1,552,743) Cost of
fixed maturities acquired - available for sale, at fair value
(1,836) - Cost of equity securities acquired - available for sale,
at market value - (1,282) Cost of equity securities acquired -
available for sale, at fair value (310,426) (66,902) Cost of other
invested assets acquired (947,290) (1,184,270) Net change in
short-term investments 169,705 (45,178) Net change in unsettled
securities transactions 46,708 236,702 Net cash
provided by (used in) investing activities (55,416)
(334,287) CASH FLOWS FROM FINANCING ACTIVITIES: Common
shares issued during the period for share-based compensation, net
of expense (9,383) (6,629) Dividends paid to shareholders (53,240)
(51,281) Cost of shares withheld for taxes on settlements of
share-based compensation awards (14,245) (11,517) Net
cash provided by (used in) financing activities (76,868)
(69,427) EFFECT OF EXCHANGE RATE CHANGES ON CASH
2,163 8,220 Net increase (decrease) in cash
65,519 (13,682) Cash, beginning of period 635,067
481,922 Cash, end of period $ 700,586 $ 468,240 SUPPLEMENTAL
CASH FLOW INFORMATION: Income taxes paid (recovered) $ (51,253) $
9,593 Interest paid 2,422 105
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180425006667/en/
Everest Global Services, Inc.Elizabeth B. Farrell,
908-604-3169Vice President, Investor Relations
Everest Re (NYSE:RE)
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