EX-99.1 2 earningsrelease1q2018.htm EARNINGS RELEASE 1Q2018

 
 
 
 
NEWS RELEASE 
  
                                            
 
 
EVEREST RE GROUP, LTD.
Seon Place, 141 Front Street, 4th Floor, Hamilton HM 19, Bermuda


Contact:  Elizabeth B. Farrell
Vice President, Investor Relations
Everest Global Services, Inc.
908.604.3169

For Immediate Release

Everest Re Group Reports First Quarter 2018 Results;
Annualized Return on Equity of 10%


HAMILTON, Bermuda – April 25, 2018 -- 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.

1
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
 
2
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--
3
 
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