EX-99.1 2 newsrelease4q18.htm NEWS RELEASE 4Q18
 
 
 
 
 
NEWS RELEASE
 
 
                 


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




Everest Re Group Reports Fourth Quarter and Full Year 2018 Results


HAMILTON, Bermuda -- (BUSINESS WIRE --February 11, 2019)

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.

1
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.

2
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.


Contact:
Everest Re Group, Ltd.
Jon Levenson, Head of Investor Relations
Investor.relations@everestre.com
Phone (908) 604-3169



--Financial Details Follow--

3

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
)
    
-