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Everest Re Group Reports Third Quarter 2013 Earnings and Record Underwriting Income of $500 million through Nine Months



  Everest Re Group Reports Third Quarter 2013 Earnings and Record Underwriting
  Income of $500 million through Nine Months

Business Wire

HAMILTON, Bermuda -- October 23, 2013

Everest Re Group, Ltd. (NYSE:RE) today reported third quarter 2013 net income
available to common shareholders of $234.8 million, or $4.81 per diluted
common share, compared to net income of $250.9 million, or $4.82 per diluted
common share, for the third quarter of 2012. After-tax operating income^1
available to common shareholders, excluding realized capital gains and losses,
was $205.0 million, or $4.20 per diluted common share, for the third quarter
of 2013, compared to after-tax operating income^1 of $210.6 million, or $4.05
per diluted common share, for the same period last year. A significant item
impacting the quarter’s earnings was an increase in the annualized effective
tax rate, reducing operating income by $24.3 million, or $0.50 per diluted
common share. This change in the annualized effective tax rate was driven by
lower than planned catastrophe losses in the quarter.

For the nine months ended September 30, 2013, net income available to common
shareholders was $894.7 million, or $17.94 per diluted common share, compared
to $770.2 million, or $14.61 per diluted common share, for the first nine
months of 2012. After-tax operating income^1 available to common shareholders,
excluding realized capital gains and losses, was $759.2 million, or $15.22 per
diluted common share, compared to $673.5 million or $12.78 per diluted common
share, for the same period in 2012.

Commenting on the Company’s results, Chairman and Chief Executive Officer,
Joseph V. Taranto said, “Through the first nine months we had $895 million of
net income for a 19% return on equity and grew premium by 24%. Over the last
several years we have strategically focused on expanding our global footprint
and improving our risk adjusted returns. I want to thank our staff, which I
believe is the best in the business, for their terrific work that helped us
achieve these goals.”

Operating highlights for the third quarter of 2013 included the following:

  * Gross written premiums were $1.5 billion, an increase of 22% compared to
    the third quarter of 2012. Total Reinsurance premiums were up 24% to $1.1
    billion with continued strong growth emanating from expansion initiatives
    in the property reinsurance markets. Insurance premiums also rose with an
    increase of 12% for the quarter primarily driven by California workers’
    compensation and non-standard automobile business.
  * The combined ratio for the quarter was 88.0% compared to 87.2% in the
    third quarter of 2012. Excluding catastrophe losses, reinstatement
    premiums, and prior period loss development, the current quarter
    attritional combined ratio was 82.3% compared to 84.9% for the same period
    last year.
  * Catastrophe losses were $75.0 million for the quarter arising from the
    German hailstorms and flood events in Canada, including an increase in
    estimated losses for the flooding in Alberta, Canada due to an escalation
    of the industry loss. The net impact of these losses in the quarter, after
    reinstatement premiums and taxes, was $65.0 million.
  * Net investment income for the quarter was $127.9 million and includes $4.6
    million of limited partnership income.
  * Interest expense on debt has declined from $13.3 million in the third
    quarter of 2012 to $7.6 million in the current quarter as a result of the
    redemption of the 6.2% junior subordinated debt securities in May of this
    year.
  * Net after-tax realized capital gains amounted to $29.8 million in the
    quarter, offset, in part, by $22.5 million of unrealized losses, net of
    tax, on the fixed income portfolio.
  * Cash flow from operations was $380.4 million compared to $174.9 million
    for the same period in 2012.
  * The year-to-date effective tax rate on operating income increased from
    12.3% at June 30, 2013 to 15.0% at September 30, 2013 resulting in a $24.3
    million, or $0.50 per diluted common share, impact and an effective tax
    rate of 21.7% for the quarter. The increase in the effective tax rate was
    primarily attributable to lower than planned catastrophe losses, resulting
    in higher than expected income for the year.
  * Through nine months, the annualized after-tax operating income^1 return on
    average adjusted shareholders’ equity^2 was 16.1% compared to 15.3% in
    2012. For this same period, the annualized net income return on average
    adjusted shareholders’ equity^2 was 19.0% compared to 17.5% in 2012.
  * During the quarter, the Company repurchased 724,654 of its common shares
    at an average price of $137.98 and a total cost of $100.0 million. For the
    year, the Company repurchased 4.3 million of its common shares for a total
    cost of $550.0 million. The repurchases were made pursuant to a share
    repurchase authorization, provided by the Company’s Board of Directors,
    under which there remains 5.0 million shares available.
  * Shareholders’ equity ended the quarter at $6.7 billion, relatively flat to
    the level at December 31, 2012. Book value per share increased 7% from
    $130.96 at December 31, 2012 to $140.20 at September 30, 2013.

Effective July 1, 2013, Mt. Logan Re established separate segregated accounts
and issued non-voting, redeemable preferred shares to capitalize the
segregated accounts. Mt. Logan Re meets the definition of a variable interest
entity. Accordingly, the financial position and operating results for Mt.
Logan Re are consolidated with the Company. The non-controlling interests in
Mt. Logan Re’s operating results and equity are presented as separate captions
in the Company’s financial statements. The Company’s financial supplement,
located on the website at www.everestregroup.com, now includes an additional
segment for the activities related to Mt. Logan Re to assist investors with
the impact of this new entity on the Company’s financials.

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), Limited provides reinsurance to non-life insurers in Europe. Mt.
Logan Re, a segregated cell company, capitalized by the Company and third
party investors, is a specialty reinsurer of catastrophe risks. Everest
National Insurance Company and Everest Security Insurance Company provide
property and casualty insurance to policyholders in the U.S. Everest Indemnity
Insurance Company offers excess and surplus lines insurance in the U.S.
Everest Insurance Company of Canada provides property and casualty insurance
to policyholders in Canada. 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 third quarter results will be held at 10:30
a.m. Eastern Time on October 24, 2013. 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.

___________________________

^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) as the following reconciliation displays:

             Three Months Ended                            Nine Months Ended
             September 30,                                 September 30,
(Dollars
in
thousands,   2013                  2012                    2013                  2012
except per
share
amounts)
             (unaudited)                                   (unaudited)
                                                                                            
                         Per                   Per                     Per                   Per
                         Diluted               Diluted                 Diluted               Diluted
                         Common                Common                  Common                Common
             Amount      Share     Amount      Share       Amount      Share     Amount      Share
                                                                                              
Net income   $ 234,759   $  4.81   $ 250,922   $  4.82     $ 894,744   $ 17.94   $ 770,177   $ 14.61
(loss)*
After-tax
net
realized       29,781       0.61     40,351       0.78       135,544     2.72      96,665      1.83
capital
gains
(losses)
                                                                                              
After-tax
operating    $ 204,978   $  4.20   $ 210,571   $  4.05     $ 759,200   $ 15.22   $ 673,512   $ 12.78
income
(loss)*
 
* attributable to common shareholders
(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.

^2 Adjusted 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              Nine Months Ended
                       September 30,                   September 30,
(Dollars in
thousands, except      2013            2012            2013            2012
per share amounts)
                       (unaudited)                     (unaudited)
REVENUES:
Premiums earned        $ 1,225,755     $ 1,009,454     $ 3,466,047     $ 3,045,232
Net investment           127,872         152,024         422,382         453,791
income
Net realized capital
gains (losses):
Other-than-temporary
impairments on fixed     -               (3,548    )     (191      )     (9,902    )
maturity securities
Other-than-temporary
impairments on fixed
maturity securities      -               -               -               -
transferred to other
comprehensive income
(loss)
Other net realized
capital gains            44,958          66,291          205,789         154,784    
(losses)
Total net realized
capital gains            44,958          62,743          205,598         144,882
(losses)
Net derivative gain      5,639           703             33,005          (9,420    )
(loss)
Other income             (2,726    )     (5,943    )     (3,318    )     15,675     
(expense)
Total revenues           1,401,498       1,218,981       4,123,714       3,650,160  
                                                                        
CLAIMS AND EXPENSES:
Incurred losses and
loss adjustment          770,102         603,654         2,074,336       1,813,990
expenses
Commission,
brokerage, taxes and     248,587         221,082         723,700         724,374
fees
Other underwriting       59,860          55,762          167,707         153,932
expenses
Corporate expenses       4,758           5,947           16,643          16,683
Interest, fees and
bond issue cost          7,637           13,331          38,480          39,753     
amortization expense
Total claims and         1,090,944       899,776         3,020,866       2,748,732  
expenses
                                                                        
INCOME (LOSS) BEFORE     310,554         319,205         1,102,848       901,428
TAXES
Income tax expense       72,027          68,283          204,336         131,251    
(benefit)
                                                                        
NET INCOME (LOSS)      $ 238,527       $ 250,922       $ 898,512       $ 770,177
Net (income) loss
attributable to          (3,768    )     -               (3,768    )     -          
noncontrolling
interests
NET INCOME (LOSS)
ATTRIBUTABLE TO        $ 234,759       $ 250,922       $ 894,744       $ 770,177
EVEREST RE GROUP
                                                                        
Other comprehensive
income (loss), net
of tax:
Unrealized
appreciation
(depreciation)           (20,925   )     116,694         (340,267  )     202,229
("URA(D)") on
securities arising
during the period
Less:
reclassification
adjustment for           (1,592    )     1,512           (7,511    )     (5,702    )
realized losses
(gains) included in
net income (loss)
Total URA(D) on
securities arising       (22,517   )     118,206         (347,778  )     196,527
during the period
Foreign currency
translation              (5,913    )     36,252          (13,228   )     27,125
adjustments
Pension adjustments      1,470           1,199           4,161           3,166      
Total other
comprehensive income     (26,960   )     155,657         (356,845  )     226,818    
(loss)
Other comprehensive
(income) loss
attributable to          -               -               -               -          
noncontrolling
interests
Total other
comprehensive income
(loss), net of tax       (26,960   )     155,657         (356,845  )     226,818    
attributable to
Everest Re Group
                                                                        
COMPREHENSIVE INCOME   $ 207,799       $ 406,579       $ 537,899       $ 996,995    
(LOSS)
                                                                        
EARNINGS PER COMMON
SHARE ATTRIBUTABLE
TO EVEREST RE GROUP:
Basic                  $ 4.85          $ 4.84          $ 18.09         $ 14.66
Diluted                  4.81            4.82            17.94           14.61
Dividends declared       0.48            0.48            1.44            1.44
 

EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
                                                               
                                               September 30,    December 31,
(Dollars and share amounts in thousands,       2013             2012
except par value per share)
                                               (unaudited)
ASSETS:
Fixed maturities - available for sale, at      $ 12,690,506     $ 13,141,657
market value
(amortized cost: 2013, $12,380,972; 2012,
$12,444,880)
Fixed maturities - available for sale, at        19,780           41,470
fair value
Equity securities - available for sale, at
market value (cost: 2013, $143,131; 2012,        139,471          143,493
$131,630)
Equity securities - available for sale, at       1,417,398        1,255,557
fair value
Short-term investments                           867,356          860,379
Other invested assets (cost: 2013, $523,811;     523,811          596,590
2012, $596,590)
Cash                                             589,534          537,050     
Total investments and cash                       16,247,856       16,576,196
Accrued investment income                        120,955          130,209
Premiums receivable                              1,635,693        1,237,859
Reinsurance receivables                          724,232          659,081
Funds held by reinsureds                         226,294          228,375
Deferred acquisition costs                       353,815          303,268
Prepaid reinsurance premiums                     90,642           71,107
Deferred tax asset                               208,141          262,024
Income taxes recoverable                         51,579           68,442
Other assets                                     368,713          241,346     
TOTAL ASSETS                                   $ 20,027,920     $ 19,777,907  
                                                                 
LIABILITIES:
Reserve for losses and loss adjustment         $ 9,737,917      $ 10,069,055
expenses
Future policy benefit reserve                    65,255           66,107
Unearned premium reserve                         1,622,098        1,322,525
Funds held under reinsurance treaties            2,592            2,755
Commission reserves                              67,047           65,533
Other net payable to reinsurers                  224,873          162,778
Losses in course of payment                      595,304          191,076
5.4% Senior notes due 10/15/2014                 249,945          249,907
6.6% Long term notes due 5/1/2067                238,360          238,357
Junior subordinated debt securities payable      -                329,897
Accrued interest on debt and borrowings          12,092           4,781
Equity index put option liability                46,462           79,467
Unsettled securities payable                     52,536           48,830
Other liabilities                                304,721          213,372     
Total liabilities                                13,219,202       13,044,440  
                                                                 
NONCONTROLLING INTERESTS:
Redeemable noncontrolling interests - Mt.        91,268           -           
Logan Re
                                                                 
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; (2013) 67,863 and (2012)      679              671
67,105 outstanding before treasury shares
Additional paid-in capital                       2,013,191        1,946,439
Accumulated other comprehensive income
(loss), net of deferred income tax expense       180,204          537,049
(benefit) of $59,848 at 2013 and $119,629 at
2012
Treasury shares, at cost; 19,949 shares          (1,913,914 )     (1,363,958 )
(2013) and 15,687 shares (2012)
Retained earnings                                6,437,290        5,613,266   
Total shareholders' equity attributable to       6,717,450        6,733,467   
Everest Re Group, Ltd.
TOTAL LIABILITIES, NONCONTROLLING INTERESTS    $ 20,027,920     $ 19,777,907  
AND SHAREHOLDERS' EQUITY
 

EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                 Three Months Ended            Nine Months Ended
                 September 30,                 September 30,
(Dollars in      2013           2012           2013             2012
thousands)
                 (unaudited)                   (unaudited)
CASH FLOWS
FROM OPERATING
ACTIVITIES:
Net income       $ 238,527      $ 250,922      $ 898,512        $ 770,177
(loss)
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Decrease
(increase) in      (181,317 )     (227,333 )     (401,623   )     (119,923   )
premiums
receivable
Decrease
(increase) in
funds held by      12,729         37,682         485              46,089
reinsureds,
net
Decrease
(increase) in      (11,187  )     (22,945  )     (77,165    )     (35,972    )
reinsurance
receivables
Decrease
(increase) in      15,641         19,927         16,730           21,386
current income
taxes
Decrease
(increase) in      57,638         14,935         113,278          48,896
deferred tax
asset
Decrease
(increase) in
prepaid            (14,605  )     (27,524  )     (21,513    )     (18,401    )
reinsurance
premiums
Increase
(decrease) in
reserve for
losses and         (100,751 )     (138,310 )     (275,893   )     (405,540   )
loss
adjustment
expenses
Increase
(decrease) in
future policy      (285     )     (535     )     (852       )     (1,454     )
benefit
reserve
Increase
(decrease) in      178,193        121,344        304,728          (52,225    )
unearned
premiums
Increase
(decrease) in
other net          33,937         138,239        63,702           165,142
payable to
reinsurers
Increase
(decrease) in
losses in          174,701        76,527         404,836          87,337
course of
payment
Change in
equity
adjustments in     (4,343   )     (18,274  )     (40,693    )     (46,766    )
limited
partnerships
Change in
other assets
and                6,754          (11,280  )     (68,112    )     96,913
liabilities,
net
Non-cash
compensation       4,923          9,452          15,088           22,826
expense
Amortization
of bond
premium            14,773         14,829         50,280           45,795
(accrual of
bond discount)
Amortization
of
underwriting       14             13             41               38
discount on
senior notes
Net realized
capital            (44,958  )     (62,743  )     (205,598   )     (144,882   )
(gains) losses
Net cash
provided by
(used in)          380,384        174,926        776,231          479,436     
operating
activities
                                                                 
CASH FLOWS
FROM INVESTING
ACTIVITIES:
Proceeds from
fixed
maturities
matured/called     594,260        503,303        1,912,978        1,294,896
- available
for sale, at
market value
Proceeds from
fixed
maturities
matured/called     -              1,300          7,213            1,300
- available
for sale, at
fair value
Proceeds from
fixed
maturities
sold -             214,173        217,983        845,357          639,301
available for
sale, at
market value
Proceeds from
fixed
maturities
sold -             1,056          11,783         18,398           72,926
available for
sale, at fair
value
Proceeds from
equity
securities
sold -             326            76,000         45,749           130,792
available for
sale, at
market value
Proceeds from
equity
securities
sold -             101,176        89,311         459,945          386,917
available for
sale, at fair
value
Distributions
from other         10,874         32,015         128,422          53,032
invested
assets
Cost of fixed
maturities
acquired -         (671,876 )     (889,195 )     (2,794,035 )     (2,143,771 )
available for
sale, at
market value
Cost of fixed
maturities
acquired -         (2,092   )     (1,658   )     (4,798     )     (7,164     )
available for
sale, at fair
value
Cost of equity
securities
acquired -         (1,097   )     (7,472   )     (54,584    )     (20,126    )
available for
sale, at
market value
Cost of equity
securities
acquired -         (180,308 )     (111,767 )     (424,252   )     (305,046   )
available for
sale, at fair
value
Cost of other
invested           (3,762   )     (21,089  )     (15,063    )     (49,681    )
assets
acquired
Net change in
short-term         (139,544 )     (24,466  )     (7,408     )     (287,196   )
investments
Net change in
unsettled          (70,186  )     59,991         (14,518    )     65,957      
securities
transactions
Net cash
provided by
(used in)          (147,000 )     (63,961  )     103,404          (167,863   )
investing
activities
                                                                 
CASH FLOWS
FROM FINANCING
ACTIVITIES:
Common shares
issued during      5,103          1,913          51,672           19,868
the period,
net
Purchase of
treasury           (100,001 )     (25,026  )     (549,956   )     (250,025   )
shares
Revolving
credit             (40,000  )     -              -                -
borrowings
Net cost of
junior
subordinated       -              -              (329,897   )     -
debt
securities
maturing
Third party
investment in
redeemable         87,500         -              87,500           -
noncontrolling
interest
Dividends paid
to                 (23,174  )     (24,897  )     (70,720    )     (75,667    )
shareholders
Net cash
provided by
(used in)          (70,572  )     (48,010  )     (811,401   )     (305,824   )
financing
activities
                                                                 
EFFECT OF
EXCHANGE RATE      (12,414  )     16,752         (15,750    )     24,158      
CHANGES ON
CASH
                                                                 
Net increase
(decrease) in      150,398        79,707         52,484           29,907
cash
Cash,
beginning of       439,136        398,851        537,050          448,651     
period
Cash, end of     $ 589,534      $ 478,558      $ 589,534        $ 478,558     
period
                                                                 
SUPPLEMENTAL
CASH FLOW
INFORMATION:
Income taxes
paid             $ (1,820   )   $ 30,662       $ 64,918         $ 54,463
(recovered)
Interest paid      243            5,851          23,524           31,936
                                                                 
Non-cash
transaction:
Conversion of
equity
securities -
available for
sale, at
market value,
to fixed
maturity
securities -       -              -              -                92,981
available for
sale, at
market value,
including
accrued
interest at
time of
conversion

Contact:

Everest Global Services, Inc.
Elizabeth B. Farrell, 908-604-3169
Vice President, Investor Relations
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