Everest Re Group, Ltd. (“Everest”) (NYSE: RE) today reported
fourth quarter 2018 net loss of $382.3 million, or $9.50 per common
share, compared to net income of $571.0 million, or $13.85 per
diluted common share for the fourth quarter of 2017. After-tax
operating loss1 was $236.9 million, or $5.89 per common share, for
the fourth quarter of 2018, compared to after-tax operating income¹
of $535.5 million, or $12.98 per diluted common share, for the same
period last year.
For the year ended December 31, 2018, net income was $103.6
million, or $2.53 per diluted common share, compared to net income
of $469.0 million, or $11.36 per diluted common share, for the year
ended December 31, 2017. After-tax operating income¹ was $190.7
million, or $4.65 per diluted common share, compared to after-tax
operating income¹ of $412.6 million or $10.00 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, “During 2018 there were
nearly $90 billion of insured industry losses, the fourth highest
on record. Despite these events, Everest had both positive net
income and operating income for the year. This result is testament
to the diversification of our business across geographies, classes
of business, and sources of capital. Everest’s long term returns
remain impressive, with 5 and 10 year average returns on equity
still in excess of 10%.”
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. 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 fourth quarter of 2018 included the
following:
- Gross written premiums for the quarter
were $2.3 billion, an increase of 18% compared to the fourth
quarter of 2017. Worldwide reinsurance premiums were up 26% to $1.7
billion with growth across each segment including increased
casualty and property pro-rata premium, increased shares on
existing business and profitable new growth.
- The combined ratio was 134.1% for the
quarter and 108.8% for the year, compared to 70.0% and 103.5% for
the same periods in 2017. Excluding catastrophe losses,
reinstatement premiums and the favorable prior period loss
development, the current attritional combined ratio was 90.4% for
the quarter and 87.0% for the year, compared to 83.7% and 85.0% for
the same periods in 2017.
- Catastrophe losses, net of reinsurance
and reinstatement premiums, amounted to $875.0 million in the
quarter, primarily related to losses from Hurricane Michael, the
California Camp and Woolsey wildfires and an Australia hailstorm
event.
- Net investment income amounted to
$140.2 million for the quarter and $581.2 million for the full year
2018, up 7% over the full year 2017 results.
- Net after-tax realized losses amounted
to $143.9 million for the quarter. For the full year, net after-tax
realized capital losses were $109.1 million, while net after-tax
unrealized capital losses were $228.2 million.
- Cash flow from operations was $66.4
million for the quarter and $610.1 million for the full year 2018.
This compared to $118.5 million and $1.2 billion for the same
period, respectively, in 2017.
- Although no shares were repurchased
during the quarter, the Company repurchased 342,179 shares at a
total cost of $75.3 million for the year 2018. The repurchases were
made pursuant to a share repurchase authorization, provided by the
Company’s Board of Directors, under which there remains 1.4 million
shares available.
- Shareholders’ equity ended the year at
$7.9 billion compared to $8.4 billion at year end 2017. Book value
per share was down from $204.95 at December 31, 2017 to $194.43 at
December 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.
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 fourth quarter results will be
held at 10:30 a.m. Eastern Time on February 12, 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 Twelve
Months Ended December 31, December 31, (Dollars in thousands,
except per share amounts) 2018 2017 2018 2017
(unaudited) (unaudited) Per Diluted Per Diluted Per Diluted
Per Common Common Common Common Amount Share Amount
Share Amount Share Amount
Share Net income (loss) $ (382,274 ) $ (9.50 ) $ 571,025 $
13.85 $ 103,552 $ 2.53 $ 468,968 $ 11.36 After-tax net realized
capital gains (losses) (143,870 ) (3.58 ) 23,226 0.56 (109,149 )
(2.66 ) 101,806 2.47 After-tax net foreign exchange income
(expense) (2,235 ) (0.06 ) 20,595 0.50 21,289 0.52 (37,194 ) (0.90
) Impact of TCJA enactment 703 0.02
(8,246 ) (0.20 ) 703 0.02
(8,246 ) (0.20 ) After-tax operating income (loss) $
(236,872 ) $ (5.89 ) $ 535,450 $ 12.98 $ 190,709
$ 4.65 $ 412,602 $ 10.00 (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 Twelve Months Ended
December 31, December 31, (Dollars in thousands, except per share
amounts) 2018 2017 2018
2017 (unaudited) (unaudited) REVENUES: Premiums
earned $ 1,850,975 $ 1,657,187 $ 6,931,699 $ 5,937,840 Net
investment income 140,204 149,128 581,183 542,898 Net realized
capital gains (losses): Other-than-temporary impairments on fixed
maturity securities (3,327 ) (1,905 ) (8,110 ) (7,093 )
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss) - - - - Other net
realized capital gains (losses) (169,488 ) 35,568
(119,026 ) 160,287 Total net realized
capital gains (losses) (172,815 ) 33,663 (127,136 ) 153,194 Net
derivative gain (loss) (4,965 ) 3,529 520 9,581 Other income
(expense) (18,702 ) 23,704 (9,060 )
(35,442 ) Total revenues 1,794,697
1,867,211 7,377,206 6,608,071
CLAIMS AND EXPENSES: Incurred losses and loss adjustment
expenses 2,001,054 680,436 5,651,403 4,522,581 Commission,
brokerage, taxes and fees 396,588 388,625 1,519,030 1,303,963 Other
underwriting expenses 84,216 90,916 371,541 318,817 Corporate
expenses 7,153 4,615 30,672 25,923 Interest, fees and bond issue
cost amortization expense 7,984 7,314
31,031 31,603 Total claims and expenses
2,496,995 1,171,906 7,603,677
6,202,887 INCOME (LOSS) BEFORE TAXES
(702,298 ) 695,305 (226,471 ) 405,184 Income tax expense (benefit)
(320,024 ) 124,280 (330,023 )
(63,784 ) NET INCOME (LOSS) $ (382,274 ) $ 571,025 $ 103,552
$ 468,968 Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities
arising during the period (974 ) (83,093 ) (255,656 ) (64,348 )
Reclassification adjustment for realized losses (gains) included in
net income (loss) 34,602 9,779
27,496 (6,950 ) Total URA(D) on securities arising
during the period 33,628 (73,314 ) (228,160 ) (71,298 )
Foreign currency translation adjustments (24,933 ) (3,207 ) (76,816
) 121,917 Benefit plan actuarial net gain (loss) for the
period (510 ) 1,027 (510 ) 1,027 Reclassification adjustment for
amortization of net (gain) loss included in net income (loss)
(425 ) 100 5,021 5,477
Total benefit plan net gain (loss) for the period
(935 ) 1,127 4,511 6,504
Total other comprehensive income (loss), net of tax 7,760
(75,394 ) (300,465 ) 57,123
COMPREHENSIVE INCOME (LOSS) $ (374,514 ) $ 495,631 $
(196,913 ) $ 526,091 EARNINGS PER COMMON SHARE: Basic
$ (9.50 ) $ 13.92 $ 2.54 $ 11.43 Diluted (9.50 ) 13.85 2.53 11.36
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS 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 $ 15,225,263 $ 14,756,834
(amortized cost: 2018, $15,406,572; 2017, $14,689,598) Fixed
maturities - available for sale, at Fair value 2,337 - Equity
securities, at market value (cost: 2018, $0; 2017, $130,287) -
129,530 Equity securities, at fair value 716,639 963,572 Short-term
investments (cost: 2018, $241,010; 2017, $509,682) 240,987 509,682
Other invested assets (cost: 2018, $1,591,745; 2017, $1,628,753)
1,591,745 1,631,850 Cash 656,095 635,067
Total investments and cash 18,433,066 18,626,535 Accrued
investment income 104,619 97,704 Premiums receivable 2,218,283
1,844,881 Reinsurance receivables 1,787,648 1,348,226 Funds held by
reinsureds 445,040 292,927 Deferred acquisition costs 511,573
411,587 Prepaid reinsurance premiums 343,343 288,211 Income taxes
592,385 299,438 Other assets 358,042 382,283
TOTAL ASSETS $ 24,793,999 $ 23,591,792
LIABILITIES: Reserve for losses and loss adjustment expenses $
13,119,090 $ 11,884,321 Future policy benefit reserve 46,778 51,014
Unearned premium reserve 2,517,612 2,000,556 Funds held under
reinsurance treaties 13,099 18,030 Other net payable to reinsurers
218,439 218,017 Senior notes due 6/1/2044 396,954 396,834 Long term
notes due 5/1/2067 236,659 236,561 Accrued interest on debt and
borrowings 3,093 2,727 Equity index put option liability 11,958
12,477 Unsettled securities payable 51,112 38,743 Other liabilities
275,401 363,280 Total liabilities
16,890,195 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) 69,202
and (2017) 69,044 outstanding before treasury shares 692 691
Additional paid-in capital 2,188,777 2,165,768 Accumulated other
comprehensive income (loss), net of deferred income tax expense
(benefit) of ($20,697) at 2018 and $9,356 at 2017 (462,557 )
(160,891 ) Treasury shares, at cost; 28,551 shares (2018) and
28,208 shares (2017) (3,397,548 ) (3,322,244 ) Retained earnings
9,574,440 9,685,908 Total shareholders'
equity 7,903,804 8,369,232 TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY $ 24,793,999 $
23,591,792 EVEREST RE
GROUP, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended December 31, (Dollars in thousands) 2018
2017 (unaudited) CASH FLOWS FROM OPERATING
ACTIVITIES: Net income (loss) $ 103,552 $ 468,968 Adjustments to
reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable (392,981 ) (338,335 )
Decrease (increase) in funds held by reinsureds, net (159,344 )
(31,104 ) Decrease (increase) in reinsurance receivables (511,592 )
(238,485 ) Decrease (increase) in income taxes (263,865 ) (114,521
) Decrease (increase) in prepaid reinsurance premiums (65,925 )
(86,049 ) Increase (decrease) in reserve for losses and loss
adjustment expenses 1,377,711 1,376,321 Increase (decrease) in
future policy benefit reserve (4,236 ) (4,060 ) Increase (decrease)
in unearned premiums 542,023 401,174 Increase (decrease) in other
net payable to reinsurers 12,276 10,071 Increase (decrease) in
losses in course of payment 123,209 (105,371 ) Change in equity
adjustments in limited partnerships (102,052 ) (82,713 )
Distribution of limited partnership income 84,623 50,825 Change in
other assets and liabilities, net (322,107 ) (66,998 ) Non-cash
compensation expense 32,369 30,297 Amortization of bond premium
(accrual of bond discount) 29,272 45,867 Net realized capital
(gains) losses 127,136 (153,194 ) Net cash
provided by (used in) operating activities 610,069
1,162,693 CASH FLOWS FROM INVESTING
ACTIVITIES: Proceeds from fixed maturities matured/called -
available for sale, at market value 1,973,652 2,160,298 Proceeds
from fixed maturities sold - available for sale, at market value
3,148,428 2,401,844 Proceeds from fixed maturities sold - available
for sale, at fair value 1,751 - Proceeds from equity securities
sold, at market value - 19,574 Proceeds from equity securities
sold, at fair value 1,199,409 631,859 Distributions from other
invested assets 3,102,018 5,579,043 Cost of fixed maturities
acquired - available for sale, at market value (5,909,504 )
(5,131,098 ) Cost of fixed maturities acquired - available for
sale, at fair value (4,381 ) - Cost of equity securities acquired,
at market value - (22,033 ) Cost of equity securities acquired, at
fair value (921,937 ) (438,641 ) Cost of other invested assets
acquired (3,370,455 ) (5,829,271 ) Net change in short-term
investments 455,350 (73,923 ) Net change in unsettled securities
transactions 46,048 (30,229 ) Net cash
provided by (used in) investing activities (279,621 )
(732,577 ) CASH FLOWS FROM FINANCING ACTIVITIES: Common
shares issued during the period for share-based compensation, net
of expense (8,157 ) (5,310 ) Purchase of treasury shares (75,304 )
(50,000 ) Dividends paid to shareholders (216,221 ) (207,242 ) Cost
of shares withheld on settlements of share-based compensation
awards (16,912 ) (12,906 ) Net cash provided by (used
in) financing activities (316,594 ) (275,458 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH 7,174
(1,513 ) Net increase (decrease) in cash 21,028 153,145
Cash, beginning of period 635,067 481,922
Cash, end of period $ 656,095 $ 635,067
SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid (recovered) $
(65,064 ) $ 53,743 Interest paid 30,447 32,194 NON-CASH
TRANSACTIONS: Reclassification of investment balances due to
prospective consolidation of private placement
liquidity sweep facility effective July 1,
2018
Fixed maturities - available for sale, at market value $
143,656 $ - Short-term investments 243,864 - Other invested assets
(387,520 ) -
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version on businesswire.com: https://www.businesswire.com/news/home/20190211005708/en/
Everest Re Group, Ltd.Jon Levenson, Head of Investor
RelationsInvestor.relations@everestre.comPhone (908) 604-3169
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