EX-99.1 2 earningsrelease2q19.htm EARNINGS RELEASE 2Q2019
 
 
 
 
NEWS RELEASE
 
                           




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



Everest Re Group Reports Second Quarter 2019 Results


HAMILTON, Bermuda--(BUSINESS WIRE – July 29, 2019)

Everest Re Group, Ltd. (“Everest”) (NYSE: RE) today reported second quarter 2019 net income of $342.9 million, or $8.39 per diluted common share, compared to net income of $69.9 million, or $1.70 per diluted common share for the second quarter of 2018.  After-tax operating income1 was $320.9 million, or $7.85 per diluted common share, for the second quarter of 2019, compared to after-tax operating income¹ of $40.4 million, or $0.98 per diluted common share, for the same period last year.

For the six months ended June 30, 2019, net income was $691.8 million, or $16.93 per diluted common share, compared to net income of $280.2 million, or $6.81 per diluted common share for the six months ended June 30, 2018.  After-tax operating income1 was $603.2 million, or $14.76 per diluted common share, for the six months ended June 30, 2019, compared to after-tax operating income¹ of $260.1 million, or $6.32 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 delivered outstanding results for the quarter, with a 16.1% annualized net income return on equity, driven by both solid underwriting and investment performance. With nearly $9 billion in common equity and strong franchises in both reinsurance and insurance, our ability to adjust the mix of business to optimize our portfolio was again evident this quarter, as Everest added top line in insurance and casualty reinsurance along with a strong property cat renewal to take advantage of the improved market conditions.”

Operating highlights for the second quarter of 2019 included the following:

Gross written premiums for the quarter were $2.2 billion, an increase of 5% compared to the second quarter of 2018. Direct insurance premiums were up 17%, from second quarter 2018, to $757.1 million, continuing with the diversified growth trends noted in recent years. Worldwide reinsurance premiums were essentially flat at $1.4 billion for both the second quarter of 2019 and 2018.

The combined ratio was 89.2% for the quarter compared to 105.1% in the second quarter of 2018.  Excluding catastrophe losses, reinstatement premiums and the favorable prior period loss development, the current quarter attritional combined ratio was 88.6% compared to 83.5% in the same period last year.
There were no current year catastrophe losses incurred in the quarter.
There was $30 million of adverse development recorded in the quarter related to prior year catastrophe events, mostly offset by $21 million of favorable prior year attritional losses.
Net investment income increased 27% for the quarter to $179.0 million.
Net after-tax realized capital gains amounted to $26.0 million for the quarter compared to $10.5 million during the second quarter of 2018.
Cash flow from operations was $853.5 million for the six months ended June 30, 2019 compared to $132.6 million for the same period in 2018.
During the quarter, the Company purchased 39,440 shares at a total cost of $8.5 million.  The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 1.3 million shares available.
Shareholders’ equity ended the quarter at $8.9 billion compared to $7.9 billion at year end 2018.  Book value per share was up from $194.43 at December 31, 2018 to $218.07 at June 30, 2019.

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 second quarter results will be held at 10:30 a.m. Eastern Time on July 30, 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
   
Three Months Ended
 
 
 
March 31,
   
March 31,
 
(Dollars in thousands, except per share amounts)
 
2019
   
2018
   
2019
   
2018
 
 
       
(unaudited)
               
(unaudited)
       
 
                                               
 
       
Per
         
Per Diluted
         
Per Diluted
         
Per Diluted
 
 
       
Common
         
Common
         
Common
         
Common
 
 
 
Amount
   
Share
   
Amount
   
Share
   
Amount
   
Share
   
Amount
   
Share
 
 
                                               
Net income (loss)
 
$
342,855
   
$
8.39
   
$
69,895
   
$
1.70
   
$
691,755
   
$
16.93
   
$
280,213
   
$
6.81
 
After-tax net realized capital gains (losses)
   
25,994
     
0.64
     
10,519
     
0.26
     
99,899
     
2.44
     
(8,836
)
   
(0.21
)
After-tax net foreign exchange income (expense)
   
(4,001
)
   
(0.10
)
   
19,026
     
0.46
     
(11,374
)
   
(0.28
)
   
28,959
     
0.70
 
 
                                                               
After-tax operating income (loss)
 
$
320,862
   
$
7.85
   
$
40,350
   
$
0.98
   
$
603,230
   
$
14.76
   
$
260,090
   
$
6.32
 
 
                                                               
(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--




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)
 
2019
   
2018
   
2019
   
2018
 
   
(unaudited)
   
(unaudited)
 
REVENUES:
                       
Premiums earned
 
$
1,817,299
   
$
1,729,818
   
$
3,549,996
   
$
3,349,245
 
Net investment income
   
179,028
     
141,322
     
320,004
     
279,616
 
Net realized capital gains (losses):
                               
Other-than-temporary impairments on fixed maturity securities
   
(5,157
)
   
(888
)
   
(8,090
)
   
(958
)
Other-than-temporary impairments on fixed maturity securities
                               
transferred to other comprehensive income (loss)
   
-
     
-
     
-
     
-
 
Other net realized capital gains (losses)
   
35,429
     
16,664
     
130,594
     
(8,167
)
Total net realized capital gains (losses)
   
30,272
     
15,776
     
122,504
     
(9,125
)
Net derivative gain (loss)
   
353
     
2,987
     
3,584
     
3,260
 
Other income (expense)
   
(7,977
)
   
3,036
     
(17,030
)
   
15,100
 
Total revenues
   
2,018,975
     
1,892,939
     
3,979,058
     
3,638,096
 
                                 
CLAIMS AND EXPENSES:
                               
Incurred losses and loss adjustment expenses
   
1,094,630
     
1,341,314
     
2,143,180
     
2,398,491
 
Commission, brokerage, taxes and fees
   
420,950
     
383,402
     
810,424
     
741,041
 
Other underwriting expenses
   
104,833
     
93,099
     
203,818
     
189,383
 
Corporate expenses
   
7,535
     
6,633
     
14,187
     
15,629
 
Interest, fees and bond issue cost amortization expense
   
8,434
     
7,728
     
16,065
     
15,146
 
Total claims and expenses
   
1,636,382
     
1,832,176
     
3,187,674
     
3,359,690
 
                                 
INCOME (LOSS) BEFORE TAXES
   
382,593
     
60,763
     
791,384
     
278,406
 
Income tax expense (benefit)
   
39,738
     
(9,132
)
   
99,629
     
(1,807
)
                                 
NET INCOME (LOSS)
 
$
342,855
   
$
69,895
   
$
691,755
   
$
280,213
 
                                 
Other comprehensive income (loss), net of tax:
                               
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
   
197,759
     
(41,776
)
   
430,824
     
(232,400
)
Reclassification adjustment for realized losses (gains) included in net income (loss)
   
(1,869
)
   
249
     
(3,691
)
   
(8,523
)
Total URA(D) on securities arising during the period
   
195,890
     
(41,527
)
   
427,133
     
(240,923
)
                                 
Foreign currency translation adjustments
   
(25,832
)
   
(63,652
)
   
(11,780
)
   
(45,953
)
                                 
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
   
1,151
     
1,815
     
2,302
     
3,630
 
Total benefit plan net gain (loss) for the period
   
1,151
     
1,815
     
2,302
     
3,630
 
Total other comprehensive income (loss), net of tax
   
171,209
     
(103,364
)
   
417,655
     
(283,246
)
                                 
COMPREHENSIVE INCOME (LOSS)
 
$
514,064
   
$
(33,469
)
 
$
1,109,410
   
$
(3,033
)
                                 
EARNINGS PER COMMON SHARE:
                               
Basic
 
$
8.42
   
$
1.71
   
$
16.98
   
$
6.85
 
Diluted
   
8.39
     
1.70
     
16.93
     
6.81
 




EVEREST RE GROUP, LTD.
           
CONSOLIDATED BALANCE SHEETS
           
             
             
   
June 30,
   
December 31,
 
(Dollars and share amounts in thousands, except par value per share)
 
2019
   
2018
 
   
(unaudited)
       
ASSETS:
           
Fixed maturities - available for sale, at market value
 
$
15,804,524
   
$
15,225,263
 
(amortized cost: 2019, $15,506,555; 2018, $15,406,572)
               
Fixed maturities - available for sale, at fair value
   
-
     
2,337
 
Equity securities, at fair value
   
914,654
     
716,639
 
Short-term investments (cost: 2019, $744,486; 2018, $241,010)
   
744,602
     
240,987
 
Other invested assets (cost: 2019, $1,668,705; 2018, $1,591,745)
   
1,668,705
     
1,591,745
 
Cash
   
661,367
     
656,095
 
Total investments and cash
   
19,793,852
     
18,433,066
 
Accrued investment income
   
109,273
     
104,619
 
Premiums receivable
   
2,389,943
     
2,218,283
 
Reinsurance receivables
   
1,797,866
     
1,787,648
 
Funds held by reinsureds
   
498,043
     
445,040
 
Deferred acquisition costs
   
510,861
     
511,573
 
Prepaid reinsurance premiums
   
476,429
     
343,343
 
Income taxes
   
358,457
     
592,385
 
Other assets
   
453,067
     
358,042
 
TOTAL ASSETS
 
$
26,387,791
   
$
24,793,999
 
                 
LIABILITIES:
               
Reserve for losses and loss adjustment expenses
 
$
13,249,488
   
$
13,119,090
 
Future policy benefit reserve
   
45,130
     
46,778
 
Unearned premium reserve
   
2,729,376
     
2,517,612
 
Funds held under reinsurance treaties
   
10,899
     
13,099
 
Other net payable to reinsurers
   
346,151
     
218,439
 
Senior notes due 6/1/2044
   
397,014
     
396,954
 
Long term notes due 5/1/2067
   
236,709
     
236,659
 
Accrued interest on debt and borrowings
   
3,063
     
3,093
 
Equity index put option liability
   
8,374
     
11,958
 
Unsettled securities payable
   
145,568
     
51,112
 
Other liabilities
   
331,859
     
275,401
 
Total liabilities
   
17,503,631
     
16,890,195
 
                 
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; (2019) 69,406
               
and (2018) 69,202 outstanding before treasury shares
   
694
     
692
 
Additional paid-in capital
   
2,198,461
     
2,188,777
 
Accumulated other comprehensive income (loss), net of deferred income tax expense
               
(benefit) of $32,754 at 2019 and ($20,697) at 2018
   
(44,902
)
   
(462,557
)
Treasury shares, at cost; 28,665 shares (2019) and 28,551 shares (2018)
   
(3,422,152
)
   
(3,397,548
)
Retained earnings
   
10,152,059
     
9,574,440
 
Total shareholders' equity
   
8,884,160
     
7,903,804
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 
$
26,387,791
   
$
24,793,999
 




EVEREST RE GROUP, LTD.
           
CONSOLIDATED STATEMENTS OF CASH FLOWS
           
             
             
   
Six Months Ended
 
   
June 30,
 
(Dollars in thousands)
 
2019
   
2018
 
   
(unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income (loss)
 
$
691,755
   
$
280,213
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Decrease (increase) in premiums receivable
   
(178,319
)
   
(126,355
)
Decrease (increase) in funds held by reinsureds, net
   
(56,180
)
   
(77,794
)
Decrease (increase) in reinsurance receivables
   
(19,319
)
   
(467,011
)
Decrease (increase) in income taxes
   
180,285
     
43,516
 
Decrease (increase) in prepaid reinsurance premiums
   
(137,092
)
   
(86,044
)
Increase (decrease) in reserve for losses and loss adjustment expenses
   
155,096
     
223,202
 
Increase (decrease) in future policy benefit reserve
   
(1,648
)
   
(2,169
)
Increase (decrease) in unearned premiums
   
219,263
     
151,528
 
Increase (decrease) in other net payable to reinsurers
   
132,474
     
101,970
 
Increase (decrease) in losses in course of payment
   
35,738
     
162,073
 
Change in equity adjustments in limited partnerships
   
(57,031
)
   
(45,898
)
Distribution of limited partnership income
   
41,321
     
42,269
 
Change in other assets and liabilities, net
   
(60,820
)
   
(111,220
)
Non-cash compensation expense
   
17,171
     
17,566
 
Amortization of bond premium (accrual of bond discount)
   
13,321
     
17,677
 
Net realized capital (gains) losses
   
(122,504
)
   
9,125
 
Net cash provided by (used in) operating activities
   
853,511
     
132,648
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Proceeds from fixed maturities matured/called - available for sale, at market value
   
1,009,921
     
1,099,762
 
Proceeds from fixed maturities sold - available for sale, at market value
   
2,318,207
     
1,225,373
 
Proceeds from fixed maturities sold - available for sale, at fair value
   
2,706
     
1,065
 
Proceeds from equity securities sold, at fair value
   
149,233
     
576,382
 
Distributions from other invested assets
   
143,752
     
2,978,865
 
Cost of fixed maturities acquired - available for sale, at market value
   
(3,466,331
)
   
(2,163,331
)
Cost of fixed maturities acquired - available for sale, at fair value
   
-
     
(4,381
)
Cost of equity securities acquired, at fair value
   
(229,070
)
   
(722,797
)
Cost of other invested assets acquired
   
(207,323
)
   
(3,168,655
)
Net change in short-term investments
   
(499,983
)
   
213,242
 
Net change in unsettled securities transactions
   
88,531
     
(33,351
)
Net cash provided by (used in) investing activities
   
(690,357
)
   
2,174
 
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Common shares issued during the period for share-based compensation, net of expense
   
(7,485
)
   
(9,431
)
Purchase of treasury shares
   
(24,604
)
   
(25,304
)
Dividends paid to shareholders
   
(114,136
)
   
(106,480
)
Cost of shares withheld on settlements of share-based compensation awards
   
(11,748
)
   
(14,859
)
Net cash provided by (used in) financing activities
   
(157,973
)
   
(156,074
)
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
   
91
     
5,678
 
                 
Net increase (decrease) in cash
   
5,272
     
(15,574
)
Cash, beginning of period
   
656,095
     
635,067
 
Cash, end of period
 
$
661,367
   
$
619,493
 
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
               
Income taxes paid (recovered)
 
$
(83,995
)
 
$
(44,151
)
Interest paid
   
15,984
     
14,754