Everest Re Group, Ltd. (NYSE:RE) today reported second quarter
2017 net income of $245.7 million, or $5.95 per diluted common
share, compared to net income of $155.7 million, or $3.67 per
diluted common share, for the second quarter of 2016. After-tax
operating income1, excluding realized capital gains and losses, was
$227.5 million, or $5.51 per diluted common share, for the second
quarter of 2017, compared to after-tax operating income1 of $134.2
million, or $3.17 per diluted common share, for the same period
last year.
For the six months ended June 30, 2017, net income was $537.3
million, or $13.02 per diluted common share, compared to $327.4
million, or $7.68 per diluted common share, for the first six
months of 2016. After-tax operating income1, excluding realized
capital gains and losses, was $487.0 million, or $11.80 per diluted
common share, compared to $356.9 million or $8.37 per diluted
common share, for the same period in 2016.
Commenting on the Company’s results, President and Chief
Executive Officer, Dominic J. Addesso said, “Everest continues to
generate double digit ROE’s, while steadily growing its capital
base. Strong underwriting results, with an attritional combined
ratio of 86.7% for the quarter, coupled with stable investment
income are providing for solid growth in book value per share. We
seek out opportunities for profitable growth in both our
reinsurance and insurance books and have been successful as borne
out by these excellent results.”
Operating highlights for the second quarter of 2017 included the
following:
- Gross written premiums for the quarter
were $1.6 billion, an increase of 17% compared to the second
quarter of 2016. Worldwide, reinsurance premiums were up 14%, with
growth coming from the new crop reinsurance program, increased
shares on property pro-rata treaties, and growth in financial lines
business. Insurance premiums were up 25%, quarter over quarter,
with continued growth on new initiatives. Excluding the HCI crop
business that was sold in 2016, the insurance segment premium was
up 41%, quarter over quarter.
- The combined ratio for the quarter was
90.5% compared to 95.1% in the second quarter of 2016. Excluding
catastrophe losses, reinstatement premiums, and nominal prior
period loss development, the current quarter attritional combined
ratio was 86.7% compared to 86.1% in the same period last
year.
- Catastrophe losses, net of reinsurance,
amounted to $53.5 million in the quarter, with current quarter
catastrophe losses from the South African (Knysna) fires, Colorado
hailstorms, and Peru flooding. The net impact of these losses,
after reinstatement premiums and taxes was $46.6 million.
- Net investment income was up 1% for the
quarter to $134.5 million.
- Net after-tax realized capital gains
amounted to $18.2 million and net after-tax unrealized losses were
$4.1 million for the quarter.
- Cash flow from operations was $252.6
million compared to $308.1 million for the same period in
2016.
- Through the first six months, the
annualized after-tax operating income1 return on average adjusted
shareholders’ equity2 was 11.9%.
- Shareholders’ equity ended the quarter
at $8.6 billion, up 6% compared to year end 2016. Book value per
share increased 6% from $197.45 at December 31, 2016 to $209.05 at
June 30, 2017.
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 25, 2017. 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) 2017 2016 2017
2016 (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) $ 245,674
$ 5.95 $ 155,692 $ 3.67 $ 537,317 $ 13.02 $ 327,378 $ 7.68
After-tax net realized capital gains (losses) 18,224
0.44 21,462 0.51 50,334 1.22
(29,517 ) (0.69 ) After-tax operating income (loss) $
227,450 $ 5.51 $ 134,230 $ 3.17 $ 486,983 $ 11.80 $ 356,895
$ 8.37 (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
--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) 2017 2016
2017 2016 (unaudited) (unaudited) REVENUES: Premiums earned $
1,369,681 $ 1,288,860 $ 2,681,778 $ 2,507,727 Net investment income
134,508 132,737 256,797 235,261 Net realized capital gains
(losses): Other-than-temporary impairments on fixed maturity
securities (2,475 ) (1,470 ) (3,703 ) (30,263 )
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss) - - - - Other net
realized capital gains (losses) 27,743 34,128
81,699 (11,338 ) Total net realized
capital gains (losses) 25,268 32,658 77,996 (41,601 ) Net
derivative gain (loss) 766 1,996 3,396 (1,024 ) Other income
(expense) 388 (28,367 ) (4,578 )
(30,433 ) Total revenues 1,530,611 1,427,884
3,015,389 2,669,930
CLAIMS AND EXPENSES: Incurred losses and loss adjustment expenses
861,275 857,816 1,632,063 1,558,565 Commission, brokerage, taxes
and fees 299,956 295,502 582,225 570,508 Other underwriting
expenses 78,869 72,077 154,756 144,187 Corporate expenses 6,919
7,117 15,376 15,003 Interest, fees and bond issue cost amortization
expense 8,059 9,073 17,023
18,301 Total claims and expenses
1,255,078 1,241,585 2,401,443
2,306,564 INCOME (LOSS) BEFORE TAXES 275,533
186,299 613,946 363,366 Income tax expense (benefit) 29,859
30,607 76,629 35,988
NET INCOME (LOSS) $ 245,674 $ 155,692 $ 537,317 $
327,378 Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities
arising during the period 4,868 124,356 24,416 267,318
Reclassification adjustment for realized losses (gains) included in
net income (loss) (8,993 ) (1,448 ) (11,192 )
30,933 Total URA(D) on securities arising during the
period (4,125 ) 122,908 13,224 298,251 Foreign currency
translation adjustments 35,667 5,050 47,560 14,823 Benefit
plan actuarial net gain (loss) for the period - - - -
Reclassification adjustment for amortization of net (gain) loss
included in net income (loss) 2,004 1,341
4,008 2,681 Total benefit plan
net gain (loss) for the period 2,004 1,341
4,008 2,681 Total other
comprehensive income (loss), net of tax 33,546
129,299 64,792 315,755
COMPREHENSIVE INCOME (LOSS) $ 279,220 $ 284,991 $
602,109 $ 643,133 EARNINGS PER COMMON SHARE:
Basic $ 5.98 $ 3.70 $ 13.10 $ 7.73 Diluted 5.95 3.67 13.02 7.68
Dividends declared 1.25 1.15 2.50 2.30 EVEREST RE GROUP,
LTD. CONSOLIDATED BALANCE
SHEETS June 30, December 31, (Dollars and share
amounts in thousands, except par value per share) 2017 2016
(unaudited) ASSETS: Fixed maturities - available for sale, at
market value $ 14,922,035 $ 14,107,408 (amortized cost: 2017,
$14,756,926; 2016, $13,932,613) Equity securities - available for
sale, at market value (cost: 2017, $110,724; 2016, $129,553)
107,430 119,067 Equity securities - available for sale, at fair
value 1,071,390 1,010,085 Short-term investments 326,585 431,478
Other invested assets (cost: 2017, $1,303,231; 2016, $1,333,069)
1,304,556 1,333,129 Cash 469,205 481,922
Total investments and cash 18,201,201 17,483,089 Accrued
investment income 96,928 96,473 Premiums receivable 1,830,520
1,485,990 Reinsurance receivables 1,036,998 1,018,325 Funds held by
reinsureds 272,526 260,644 Deferred acquisition costs 357,325
344,052 Prepaid reinsurance premiums 281,345 191,768 Income taxes
167,913 177,704 Other assets 277,135 263,459
TOTAL ASSETS $ 22,521,891 $ 21,321,504
LIABILITIES: Reserve for losses and loss adjustment expenses $
10,475,705 $ 10,312,313 Future policy benefit reserve 54,238 55,074
Unearned premium reserve 1,744,527 1,577,546 Funds held under
reinsurance treaties 23,276 21,278 Commission reserves 53,996
70,335 Other net payable to reinsurers 262,462 190,986 Losses in
course of payment 356,330 67,107 4.868% Senior notes due 6/1/2044
396,774 396,714 6.6% Long term notes due 5/1/2067 236,511 236,462
Accrued interest on debt and borrowings 2,632 3,537 Equity index
put option liability 18,662 22,059 Unsettled securities payable
86,931 27,927 Other liabilities 225,049
264,770 Total liabilities 13,937,093
13,246,108 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; (2017) 69,037 and (2016) 68,871 outstanding before
treasury shares 691 689 Additional paid-in capital 2,150,659
2,140,783 Accumulated other comprehensive income (loss), net of
deferred income tax expense (benefit) of $758 at 2017 and $8,240 at
2016 (151,972 ) (216,764 ) Treasury shares, at cost; 27,972 shares
2017 and 2016 (3,272,244 ) (3,272,244 ) Retained earnings
9,857,664 9,422,932 Total shareholders' equity
8,584,798 8,075,396 TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 22,521,891 $ 21,321,504
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS Six
Months Ended June 30, (Dollars in thousands) 2017 2016 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 537,317 $
327,378 Adjustments to reconcile net income to net cash provided by
operating activities: Decrease (increase) in premiums receivable
(337,069 ) 20,168 Decrease (increase) in funds held by reinsureds,
net (7,980 ) 45,656 Decrease (increase) in reinsurance receivables
8,270 (68,284 ) Decrease (increase) in income taxes 18,362 (10,424
) Decrease (increase) in prepaid reinsurance premiums (87,091 )
(51,243 ) Increase (decrease) in reserve for losses and loss
adjustment expenses 97,493 352,147 Increase (decrease) in future
policy benefit reserve (836 ) (1,083 ) Increase (decrease) in
unearned premiums 161,009 (119,315 ) Increase (decrease) in other
net payable to reinsurers 65,929 46,508 Increase (decrease) in
losses in course of payment 288,557 11,188 Change in equity
adjustments in limited partnerships (31,032 ) (16,518 )
Distribution of limited partnership income 22,992 41,296 Change in
other assets and liabilities, net (61,765 ) 26,102 Non-cash
compensation expense 15,725 14,262 Amortization of bond premium
(accrual of bond discount) 22,475 24,125 Amortization of
underwriting discount on senior notes 2 2 Net realized capital
(gains) losses (77,996 ) 41,601 Net cash
provided by (used in) operating activities 634,362
683,566 CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale,
at market value 1,145,162 923,832 Proceeds from fixed maturities
sold - available for sale, at market value 991,209 594,764 Proceeds
from fixed securities sold - available for sale, at fair value -
1,587 Proceeds from equity securities sold - available for sale, at
market value 18,802 226 Proceeds from equity securities sold -
available for sale, at fair value 258,226 430,038 Distributions
from other invested assets 2,476,399 2,261,682 Cost of fixed
maturities acquired - available for sale, at market value
(2,880,188 ) (1,932,527 ) Cost of equity securities acquired -
available for sale, at market value (2,610 ) (2,393 ) Cost of
equity securities acquired - available for sale, at fair value
(258,543 ) (194,043 ) Cost of other invested assets acquired
(2,431,281 ) (2,711,306 ) Net change in short-term investments
105,566 271,913 Net change in unsettled securities transactions
47,800 59,619 Net cash provided by
(used in) investing activities (529,458 ) (296,608 )
CASH FLOWS FROM FINANCING ACTIVITIES: Common shares issued
during the period, net (5,847 ) 2,683 Purchase of treasury shares -
(186,357 ) Dividends paid to shareholders (102,585 ) (96,838 ) Cost
of shares withheld for taxes on settlements of share-based
compensation awards (12,407 ) (9,090 ) Net cash
provided by (used in) financing activities (120,839 )
(289,602 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH
3,218 48,273 Net increase (decrease) in
cash (12,717 ) 145,629 Cash, beginning of period 481,922
283,658 Cash, end of period $ 469,205 $
429,287 SUPPLEMENTAL CASH FLOW INFORMATION: Income
taxes paid (recovered) $ 57,772 $ 41,905 Interest paid 16,704
18,192
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170724006170/en/
Everest Global Services, Inc.Elizabeth B. Farrell,
908-604-3169Vice President, Investor Relations
Everest Re (NYSE:RE)
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