SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: Commission File Number:
JUNE 30, 2002 1-15731
- ---------------------- -----------------------
EVEREST RE GROUP, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Bermuda 98-0365432
- --------------------------- ----------------------------
(State or other juris- (IRS Employer Identification
diction of incorporation Number)
or organization)
c/o ABG Financial & Management Services, Inc.
Parker House
Wildey Business Park, Wildey Road
St. Michael, Barbados
(246) 228-7398
(Address,including zip code, and telephone number, including area
code, of registrant's principal executive office)
- --------------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
YES X NO
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Number of Shares Outstanding
Class at August 13, 2002
----- ----------------------------
COMMON SHARES, $.01 PAR VALUE 50,870,431
EVEREST RE GROUP, LTD.
INDEX TO FORM 10-Q
PART I
FINANCIAL INFORMATION
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Page
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ITEM 1. FINANCIAL STATEMENTS
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Consolidated Balance Sheets at June 30, 2002 (unaudited)
and December 31, 2001 3
Consolidated Statements of Operations and Comprehensive Income
for the three months and six months ended
June 30, 2002 and 2001 (unaudited) 4
Consolidated Statements of Changes in Shareholders'
Equity for the three months and six months ended
June 30, 2002 and 2001 (unaudited) 5
Consolidated Statements of Cash Flows for the three
months and six months ended
June 30, 2002 and 2001 (unaudited) 6
Notes to Consolidated Interim Financial Statements (unaudited) 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF
-------------------------------------
OPERATIONS 17
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
----------------------------------------
ABOUT MARKET RISK 30
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PART II
OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS 31
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None
-----------------------------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
-------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
----------------------------------
SECURITY HOLDERS None
----------------
ITEM 5. OTHER INFORMATION None
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 31
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Part I - Item 1
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value per share)
June 30, December 31,
------------ ------------
2002 2001
------------ ------------
(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value
(amortized cost: 2002, $5,721,680; 2001, $5,288,860) $ 5,861,756 $ 5,461,584
Equity securities, at market value (cost: 2002,
$56,384; 2001, $66,357) 52,641 67,311
Short-term investments 344,607 148,851
Other invested assets 34,639 33,899
Cash 124,931 71,878
------------ ------------
Total investments and cash 6,418,574 5,783,523
Accrued investment income 87,722 83,088
Premiums receivable 555,818 468,897
Reinsurance receivables 945,127 895,061
Funds held by reinsureds 129,416 149,969
Deferred acquisition costs 165,073 130,709
Prepaid reinsurance premiums 43,061 47,185
Deferred tax asset 192,709 178,507
Other assets 82,552 59,221
------------ ------------
TOTAL ASSETS $ 8,620,052 $ 7,796,160
============ ============
LIABILITIES:
Reserve for losses and adjustment expenses $ 4,438,562 $ 4,278,267
Future policy benefit reserve 243,294 238,753
Unearned premium reserve 658,221 489,171
Funds held under reinsurance treaties 277,938 267,105
Losses in the course of payment 60,697 89,492
Contingent commissions 3,372 2,119
Other net payable to reinsurers 53,830 66,462
Current federal income taxes (646) (30,459)
8.5% Senior notes due 3/15/2005 249,736 249,694
8.75% Senior notes due 3/15/2010 199,117 199,077
Revolving credit agreement borrowings 105,000 105,000
Accrued interest on debt and borrowings 11,910 11,944
Other liabilities 173,039 109,013
------------ ------------
Total liabilities 6,474,070 6,075,638
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $0.01; 50 million
shares authorized; no shares issued and outstanding - -
Common shares, par value: $0.01; 200 million shares
authorized; 51.3 million shares issued in 2002 and
46.3 million shares issued in 2001 513 463
Additional paid-in capital 617,880 269,945
Unearned compensation (103) (115)
Accumulated other comprehensive income, net of
deferred income taxes of $35.7 million in 2002 and
$40.8 million in 2001 85,082 113,880
Retained earnings 1,442,665 1,336,404
Treasury shares, at cost; 0.0 million shares in 2002 and
2001 (55) (55)
------------ ------------
Total shareholders' equity 2,145,982 1,720,522
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,620,052 $ 7,796,160
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
3
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
(unaudited) (unaudited)
REVENUES:
Premiums earned $ 502,330 $ 392,797 $ 993,538 $ 721,290
Net investment income 90,830 87,095 176,370 173,250
Net realized capital (loss) gain (31,008) 3,936 (34,863) (1,121)
Net derivative (expense) income (4,890) 43 (5,140) (684)
Other (expense) income (2,908) 1,120 (1,571) 1,988
---------- ---------- ---------- ----------
Total revenues 554,354 484,991 1,128,334 894,723
---------- ---------- ---------- ----------
CLAIMS AND EXPENSES:
Incurred loss and loss adjustment expenses 353,177 291,947 705,683 535,073
Commission, brokerage, taxes and fees 120,320 97,122 241,329 179,079
Other underwriting expenses 16,724 14,499 30,849 27,595
Interest expense on senior notes 9,728 9,726 19,456 19,450
Interest expense on credit facility 853 1,819 1,762 4,516
---------- ---------- ---------- ----------
Total claims and expenses 500,802 415,113 999,079 765,713
---------- ---------- ---------- ----------
INCOME BEFORE TAXES 53,552 69,878 129,255 129,010
Income tax expense 145 12,587 14,787 21,589
---------- ---------- ---------- ----------
NET INCOME $ 53,407 $ 57,291 $ 114,468 $ 107,421
========== ========== ========== ==========
Other comprehensive income (loss), net of tax 39,328 (30,726) (28,798) 16,346
---------- ---------- ---------- ----------
COMPREHENSIVE INCOME $ 92,735 $ 26,565 $ 85,670 $ 123,767
========== ========== ========== ==========
PER SHARE DATA:
Average shares outstanding (000's) 51,301 46,141 49,713 46,100
Net income per common share - basic $ 1.04 $ 1.24 $ 2.30 $ 2.33
========== ========== ========== ==========
Average diluted shares outstanding (000's) 52,177 47,088 50,633 47,046
Net income per common share - diluted $ 1.02 $ 1.22 $ 2.26 $ 2.28
========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
4
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- -------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
(unaudited) (unaudited)
COMMON SHARES (shares outstanding):
Balance, beginning of period 51,286,465 46,096,378 46,269,015 46,029,354
Issued during the period 33,074 109,255 5,050,524 176,279
------------ ------------ ------------ ------------
Balance, end of period 51,319,539 46,205,633 51,319,539 46,205,633
============ ============ ============ ============
COMMON SHARES (par value):
Balance, beginning of period $ 513 $ 461 $ 463 $ 460
Issued during the period - 1 50 2
------------ ------------ ------------ ------------
Balance, end of period 513 462 513 462
------------ ------------ ------------ ------------
ADDITIONAL PAID IN CAPITAL:
Balance, beginning of period 616,508 262,905 269,945 259,958
Common shares issued during the period 1,372 4,347 347,935 7,294
------------ ------------ ------------ ------------
Balance, end of period 617,880 267,252 617,880 267,252
------------ ------------ ------------ ------------
UNEARNED COMPENSATION:
Balance, beginning of period (115) (153) (115) (170)
Net increase during the period 12 17 12 34
------------ ------------ ------------ ------------
Balance, end of period (103) (136) (103) (136)
------------ ------------ ------------ ------------
ACCUMULATED OTHER COMPREHENSIVE INCOME,
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period 45,754 119,918 113,880 72,846
Net increase (decrease) during the period 39,328 (30,726) (28,798) 16,346
------------ ------------ ------------ ------------
Balance, end of period 85,082 89,192 85,082 89,192
------------ ------------ ------------ ------------
RETAINED EARNINGS:
Balance, beginning of period 1,393,363 1,297,218 1,336,404 1,250,313
Net income 53,407 57,291 114,468 107,421
Dividends declared ($0.08 and $0.16 per share in 2002
and $0.07 and $0.14 per share in 2001) (4,105) (3,228) (8,207) (6,453)
------------ ------------ ------------ ------------
Balance, end of period 1,442,665 1,351,281 1,442,665 1,351,281
------------ ------------ ------------ ------------
TREASURY SHARES AT COST:
Balance, beginning of period (55) (55) (55) (55)
------------ ------------ ------------ ------------
Balance, end of period (55) (55) (55) (55)
------------ ------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY, END OF PERIOD $ 2,145,982 $ 1,707,996 $ 2,145,982 $ 1,707,996
============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
5
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited) (unaudited)
Net income $ 53,407 $ 57,291 $ 114,468 $ 107,421
Adjustments to reconcile net income to net cash provided
by operating activities:
(Increase) in premiums receivable (19,091) (26,118) (85,355) (42,802)
Decrease in funds held, net 12,931 21,969 32,911 17,928
(Increase) in reinsurance receivables (13,370) (50,382) (42,924) (67,116)
(Increase) in deferred tax asset (34,238) (35,018) (9,080) (31,901)
Increase in reserve for losses and loss adjustment expenses 70,680 65,484 138,207 71,460
(Decrease) increase in future policy benefit reserve (171) 7,354 4,541 22,975
Increase in unearned premiums 93,237 37,183 168,015 105,355
(Increase) decrease in other assets and liabilities (22,710) 8,387 (76,592) (36,767)
Non cash compensation expense 12 17 12 34
Accrual of bond discount/amortization of bond premium (2,157) (1,938) (4,068) (3,998)
Amortization of underwriting discount on senior notes 41 37 82 75
Realized capital losses (gains) 31,008 (3,936) 34,863 1,121
----------- ----------- ----------- ----------
Net cash provided by operating activities 169,579 80,330 275,080 143,785
----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called -
available for sale 128,401 225,087 275,995 295,094
Proceeds from fixed maturities sold - available for sale 629,259 136,881 1,045,831 215,453
Proceeds from equity securities sold 14,570 28,949 19,940 28,949
Proceeds from other invested assets sold 4 15 3,265 23
Cost of fixed maturities acquired - available for sale (914,099) (430,817) (1,773,159) (841,738)
Cost of equity securities acquired (71) (20,027) (9,298) (20,027)
Cost of other invested assets acquired (3,148) (1,439) (3,476) (1,807)
Net (purchases) sales of short-term securities (57,677) (119,072) (194,896) 156,099
Net increase in unsettled securities transactions 49,919 47,690 68,798 72,826
----------- ----------- ----------- ----------
Net cash (used in) investing activities (152,842) (132,733) (567,000) (95,128)
----------- ----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period 1,372 4,348 347,985 7,296
Dividends paid to shareholders (4,105) (3,228) (8,207) (6,453)
Borrowing on revolving credit agreement - 2,000 20,000 22,000
Repayments on revolving credit agreement - - (20,000) (123,000)
----------- ---------- ----------- ----------
Net cash (used in) provided by financing activities (2,733) 3,120 339,778 (100,157)
----------- ---------- ----------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 9,174 (2,619) 5,195 (7,202)
----------- ---------- ----------- ----------
Net increase (decrease) in cash 23,178 (51,902) 53,053 (58,702)
Cash, beginning of period 101,753 70,023 71,878 76,823
----------- ---------- ----------- ----------
Cash, end of period $ 124,931 $ 18,121 $ 124,931 $ 18,121
=========== ========== =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH TRANSACTIONS:
Income taxes paid, net $ 10,804 $ 51,914 $ (6,593) $ 54,517
Interest paid $ 871 $ 1,911 $ 21,170 $ 24,657
NON-CASH FINANCING TRANSACTION:
Issuance of common shares $ 12 $ 17 $ 12 $ 34
The accompanying notes are an integral part of the consolidated financial
statements.
6
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
1. GENERAL
As used in this document, "Group" means Everest Re Group, Ltd., "Holdings" means
Everest Reinsurance Holdings, Inc., "Everest Re" means Everest Reinsurance
Company and the "Company" means Everest Re Group, Ltd. and its subsidiaries.
The consolidated financial statements of the Company for the three and six
months ended June 30, 2002 and 2001 include all adjustments, consisting of
normal recurring accruals, which, in the opinion of management, are necessary
for a fair presentation of the results on an interim basis. Certain financial
information, which is normally included in annual financial statements prepared
in accordance with generally accepted accounting principles in the United States
of America, has been omitted since it is not required for interim reporting
purposes. The year-end consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles in the United States of America. The results for
the three and six months ended June 30, 2002 and 2001 are not necessarily
indicative of the results for a full year. These financial statements should be
read in conjunction with the audited consolidated financial statements and notes
thereto for the years ended December 31, 2001, 2000 and 1999 included in the
Company's most recent Form 10-K filing.
2. SECONDARY COMMON SHARE ISSUANCE
On November 7, 2001, the Company filed a shelf registration statement on Form
S-3 with the Securities and Exchange Commission, which provided for the issuance
of up to $575 million of common equity. On February 27, 2002, pursuant to this
registration statement, the Company completed a secondary offering of 5,000,000
of its common shares at a price of $69.25 per share, which resulted in $346.3
million of proceeds, before expense of approximately $0.5 million related to the
offering. The Company has used the net proceeds for working capital and general
corporate purposes. The remaining amount available under this shelf registration
statement as of June 30, 2002 was $228.7 million. See also Footnote 12B.
7
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
3. EARNINGS PER SHARE
Net income per common share has been computed as follows:
(shares and dollar amounts in
thousands except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-------------------------------------------------------------
Net income (numerator) $ 53,407 $ 57,291 $ 114,468 $ 107,421
=============================================================
Weighted average common and effect of
dilutive shares used in the computation of
net income per share:
Average shares outstanding -
basic (denominator) 51,301 46,141 49,713 46,100
Effect of dilutive shares 876 947 920 946
-------------------------------------------------------------
Average shares outstanding -
diluted (denominator) 52,177 47,088 50,633 47,046
Net income per common share:
Basic $ 1.04 $ 1.24 $ 2.30 $ 2.33
Diluted $ 1.02 $ 1.22 $ 2.26 $ 2.28
Options to purchase 207,000 shares of common stock and 2,000 shares of common
stock were outstanding for the three months and six months ended June 30, 2002,
respectively, but were not included in the computation of diluted earnings per
share for the three and six month periods ended on such dates, because the
options' exercise price was greater than the average market price of the common
shares during the period. As of June 30, 2001, all outstanding options to
purchase common shares were included in the computation of diluted earnings per
share for the three and six month periods ended on such dates, because the
average market price of the common shares was greater than the exercise price of
the options during these periods.
On May 22, 2002, shareholders of the Company approved the 2002 Stock Incentive
Plan ("The 2002 Plan"), which replaces the 1995 stock incentive plan for key
employees ("The 1995 Employee Plan"). The 2002 Plan provides for a maximum of
4,000,000 shares of common stock to be awarded to employees of the Company and
with the adoption of the 2002 plan, no further awards will be granted under The
1995 Employee Plan. As of June 30, 2002, no awards had been granted under The
2002 Plan.
8
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
4. CONTINGENCIES
The Company continues to receive claims under expired contracts which assert
alleged injuries and/or damages relating to or resulting from toxic torts, toxic
waste and other hazardous substances, such as asbestos. The Company's asbestos
claims typically involve potential liability for bodily injury from exposure to
asbestos or for property damage resulting from asbestos or products containing
asbestos. The Company's environmental claims typically involve potential
liability for (a) the mitigation or remediation of environmental contamination
or (b) bodily injury or property damages caused by the release of hazardous
substances into the land, air or water.
The Company's reserves include an estimate of the Company's ultimate liability
for asbestos and environmental claims for which ultimate value cannot be
estimated using traditional reserving techniques. There are significant
uncertainties in estimating the amount of the Company's potential losses from
asbestos and environmental claims. Among the complications are: (a) potentially
long waiting periods between exposure and manifestation of any bodily injury or
property damage; (b) difficulty in identifying sources of asbestos or
environmental contamination; (c) difficulty in properly allocating
responsibility and/or liability for asbestos or environmental damage; (d)
changes in underlying laws and judicial interpretation of those laws; (e)
potential for an asbestos or environmental claim to involve many insurance
providers over many policy periods; (f) long reporting delays, both from
insureds to insurance companies and ceding companies to reinsurers; (g)
historical data concerning asbestos and environmental losses, which is more
limited than historical information on other types of casualty claims; (h)
questions concerning interpretation and application of insurance and reinsurance
coverage; and (i) uncertainty regarding the number and identity of insureds with
potential asbestos or environmental exposure.
Management believes that these factors continue to render reserves for asbestos
and environmental losses significantly less subject to traditional actuarial
methods than are reserves on other types of losses. Given these uncertainties,
management believes that no meaningful range for such ultimate losses can be
established. The Company establishes reserves to the extent that, in the
judgement of management, the facts and prevailing law reflect an exposure for
the Company or its ceding companies. In connection with the acquisition of Mt.
McKinley Insurance Company ("Mt. McKinley"), which has significant exposure to
asbestos and environmental claims, Prudential Property and Casualty Insurance
Company ("Prupac"), a subsidiary of The Prudential Insurance Company of America
"(The Prudential"), provided reinsurance to Mt. McKinley covering 80% ($160.0
million) of the first $200.0 million of any adverse development of Mt.
McKinley's reserves as of September 19, 2000 and The Prudential guaranteed
Prupac's obligations to Mt. McKinley. Through June 30, 2002, cessions under this
reinsurance agreement have reduced the available remaining limits to $126.4
million net of coinsurance. Due to the uncertainties discussed above, the
ultimate losses may vary materially from current loss reserves and, depending on
coverage under the Company's various reinsurance arrangements, could have a
material adverse effect on the Company's future financial condition, results of
operations and cash flows.
9
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
The following table shows the development of prior year asbestos and
environmental reserves on both a gross and net of retrocessional basis for the
three and six months ended June 30, 2002 and 2001:
(dollar amounts in thousands) Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
--------------------------------------------------------------
Gross basis:
Beginning of period reserves $ 631,778 $ 690,659 $ 644,390 $ 693,704
Incurred losses 20,000 5,000 30,000 17,110
Paid losses (12,676) (21,732) (35,288) (36,887)
--------------------------------------------------------------
End of period reserves $ 639,102 $ 673,927 $ 639,102 $ 673,927
==============================================================
Net basis:
Beginning of period reserves $ 550,576 $ 616,753 $ 568,592 $ 628,535
Incurred losses 4,832 817 7,309 2,703
Paid losses (11,209) (11,074) (31,702) (24,742)
--------------------------------------------------------------
End of period reserves $ 544,199 $ 606,496 $ 544,199 $ 606,496
==============================================================
At June 30, 2002, the gross reserves for asbestos and environmental losses were
comprised of $109.5 million representing case reserves reported by ceding
companies, $52.1 million representing additional case reserves established by
the Company on assumed reinsurance claims, $144.8 million representing case
reserves established by the Company on direct excess insurance claims, including
Mt. McKinley, and $332.7 million representing incurred but not reported ("IBNR")
reserves.
The Company is involved from time to time in ordinary routine litigation and
arbitration proceedings incidental to its business. The Company does not believe
that there are any other material pending legal proceedings to which it or any
of its subsidiaries or their properties are subject.
10
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
The Prudential sells annuities which are purchased by property and casualty
insurance companies to settle certain types of claim liabilities. In 1993 and
prior years, the Company, for a fee, accepted the claim payment obligation of
these property and casualty insurers, and, concurrently, became the owner of the
annuity or assignee of the annuity proceeds. In these circumstances, the Company
would be liable if The Prudential were unable to make the annuity payments. The
estimated cost to replace all such annuities for which the Company was
contingently liable at June 30, 2002 was $148.7 million.
The Company has purchased annuities from an unaffiliated life insurance company
with an A+ (Superior) rating from A.M. Best to settle certain claim liabilities
of the Company. Should the life insurance company become unable to make the
annuity payments, the Company would be liable for those claim liabilities. The
estimated cost to replace such annuities at June 30, 2002 was $14.2 million.
5. OTHER COMPREHENSIVE INCOME
The Company's other comprehensive (loss) income is comprised as follows:
(dollar amounts in thousands) Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-------------------------------------------------------------
Net unrealized
appreciation/(depreciation)
of investments, net of
deferred income taxes $ 36,196 ($ 32,613) ($ 30,943) $ 17,137
Currency translation
adjustments, net of deferred
income taxes 3,132 1,887 2,145 (791)
-------------------------------------------------------------
Other comprehensive income/(loss),
net of deferred
income taxes $ 39,328 ($ 30,726) ($ 28,798) $ 16,346
=============================================================
6. Credit Line
On December 21, 1999, Holdings entered into a three-year senior revolving credit
facility with a syndicate of lenders (the "Credit Facility"). First Union
National Bank is the administrative agent for the Credit Facility. The Credit
Facility is used for liquidity and general corporate purposes. The Credit
Facility provides for the borrowing of up to $150.0 million with interest at a
rate selected by the Company equal to either (i) the Base Rate (as defined
below) or (ii) an adjusted London InterBank Offered Rate ("LIBOR") plus a
margin. The Base Rate is the higher of the rate of interest established by First
Union National Bank from time to time as its prime rate or the Federal
Funds rate plus 0.5% per annum. On December 18, 2000, the Credit Facility was
11
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
amended to extend the borrowing limit to $235.0 million for a period of 120
days. This 120-day period expired during the three months ended March 31, 2001,
after which the limit reverted to $150.0 million. The amount of margin and the
fees payable for the Credit Facility depend upon Holdings' senior unsecured debt
rating. Group has guaranteed Holdings' obligations under the Credit Facility.
The Credit Facility requires Group to maintain a debt to capital ratio of not
greater than 0.35 to 1, Holdings to maintain a minimum interest coverage ratio
of 2.5 to 1 and Everest Re to maintain its statutory surplus at $850.0 million
plus 25% of aggregate net income and 25% of aggregate capital contributions.
During the three and six months ended June 30, 2002, Holdings made payments on
the Credit Facility of $0.0 million and $20.0 million, respectively, compared to
$0.0 million and $123.0 million during the three and six months ended June 30,
2001. During the three and six months ended June 30, 2002, Holdings had Credit
Facility borrowings of $0.0 million and $20.0 million, respectively, compared to
$2.0 million and $22.0 million during the three and six months ended June 30,
2001. As of June 30, 2002 and 2001, Holdings had outstanding Credit Facility
borrowings of $105.0 million and $134.0 million, respectively. Interest expense
incurred in connection with these borrowings was $0.9 million and $1.8 million
for the three months ended June 30, 2002 and 2001, respectively, and $1.7
million and $4.5 million for the six months ended June 30, 2002 and 2001,
respectively.
7. SENIOR NOTES
During the first quarter of 2000, Holdings completed a public offering of $200.0
million principal amount of 8.75% senior notes due March 15, 2010 and $250.0
million principal amount of 8.5% senior notes due March 15, 2005.
Interest expense incurred in connection with these senior notes was $9.7 million
for the three months ended June 30, 2002 and 2001, and $19.5 million for the six
months ended June 30, 2002 and 2001.
8. SEGMENT REPORTING
The Company, through its subsidiaries, operates in five segments: U.S.
Reinsurance, U.S. Insurance, Specialty Reinsurance, International Reinsurance
and Bermuda. The U.S. Reinsurance operation writes property and casualty treaty
reinsurance through reinsurance brokers as well as directly with ceding
companies within the United States, in addition to property, casualty and
specialty facultative reinsurance through brokers and directly with ceding
companies within the United States. The U.S. Insurance operation writes property
and casualty insurance primarily through general agent relationships and surplus
lines brokers within the United States. The Specialty Reinsurance operation
writes accident and health, marine, aviation and surety business within
the United States and worldwide through brokers and directly with
12
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
ceding companies. The International Reinsurance operation writes property and
casualty reinsurance through the Company's branches in London, Canada and
Singapore, in addition to foreign "home-office" business. The Bermuda operation
writes property, casualty, life and annuity business through brokers and
directly with ceding companies.
The non-Bermuda segments are managed in a carefully coordinated fashion with
strong elements of central control, including with respect to capital,
investments and support operations. The Bermuda segment is managed independently
with strong alignment with respect to capital, investment and support operation
strategies. As a result, management monitors and evaluates the financial
performance of all of the Company's operating segments principally based upon
their underwriting gain or loss ("underwriting results"). The Company utilizes
inter-affiliate reinsurance and such reinsurance does not impact segment results
as business is reported in the unit responsible for the business as initially
written with third parties, generally within the segment in which the business
was first produced. Underwriting results include earned premium less incurred
loss and loss adjustment expenses, commission and brokerage expenses and other
underwriting expenses.
The following tables present the relevant underwriting results for the operating
segments for the three and six months ended June 30, 2002 and 2001, with all
dollar values presented in thousands.
U.S. REINSURANCE
- ----------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------------------------------------------------------------
Earned premiums $ 140,628 $ 138,554 $ 317,186 $ 247,664
Incurred losses and loss adjustment
expenses 96,482 108,031 220,056 183,392
Commission and brokerage 37,145 37,322 83,134 63,852
Other underwriting expenses 4,474 4,095 8,643 7,335
------------------------------------------------------------
Underwriting gain (loss) $ 2,527 ($ 10,894) $ 5,353 ($ 6,915)
============================================================
U.S. INSURANCE
- ----------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------------------------------------------------------------
Earned premiums $ 133,787 $ 68,357 $ 242,632 $ 120,498
Incurred losses and loss adjustment
expenses 99,259 49,065 179,956 86,264
Commission and brokerage 27,496 13,990 51,193 27,528
Other underwriting expenses 5,925 3,952 10,665 7,917
------------------------------------------------------------
Underwriting gain (loss) $ 1,107 $ 1,350 $ 818 ($ 1,211)
============================================================
13
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
SPECIALTY REINSURANCE
- ---------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
----------------------------------------------------------
Earned premiums $ 116,280 $ 99,070 $ 230,649 $ 192,808
Incurred losses and loss adjustment
expenses 88,086 73,548 174,679 148,097
Commission and brokerage 33,504 23,630 66,746 47,565
Other underwriting expenses 1,526 1,577 2,892 2,949
----------------------------------------------------------
Underwriting (loss) gain ($ 6,836) $ 315 ($ 13,668) ($ 5,803)
==========================================================
INTERNATIONAL REINSURANCE
- ---------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-----------------------------------------------------------
Earned premiums $ 108,497 $ 83,401 $ 195,772 $ 156,404
Incurred losses and loss adjustment
expenses 66,270 57,897 123,562 113,236
Commission and brokerage 20,613 21,884 37,493 39,734
Other underwriting expenses 3,312 3,446 6,321 6,613
-----------------------------------------------------------
Underwriting gain (loss) $ 18,302 $ 174 $ 28,396 ($ 3,179)
===========================================================
BERMUDA
- ---------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-----------------------------------------------------------
Earned premiums $ 3,138 $ 3,415 $ 7,299 $ 3,916
Incurred losses and loss adjustment
expenses 3,080 3,406 7,430 4,084
Commission and brokerage 1,562 296 2,763 400
Other underwriting expenses 453 (65) 827 741
-----------------------------------------------------------
Underwriting (loss) ($ 1,957) ($ 222) ($ 3,721) ($ 1,309)
===========================================================
14
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
The following table reconciles the underwriting results for the operating
segments to income before tax as reported in the consolidated statements of
operations and comprehensive income, with all dollar values presented in
thousands:
--------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
--------------------------------------------------------------------
Underwriting gain (loss) $ 13,143 ($ 9,277) $ 17,178 ($ 18,417)
Net investment income 90,830 87,095 176,370 173,250
Realized (loss) gain (31,008) 3,936 (34,863) (1,121)
Net derivative (expense)
income (4,890) 43 (5,140) (684)
Corporate expenses (1,034) (1,494) (1,501) (2,040)
Interest expense (10,581) (11,545) (21,218) (23,966)
Other (expense) income (2,908) 1,120 (1,571) 1,988
--------------------------------------------------------------------
Income before taxes $ 53,552 $ 69,878 $ 129,255 $ 129,010
====================================================================
The Company writes premium in the United States, Bermuda and international
markets. The revenues, net income and identifiable assets of the individual
foreign countries in which the Company writes business are not material to the
Company's financial condition, results of operations and cash flows.
9. DERIVATIVES
The Company has in its product portfolio three credit default swaps, which it no
longer offers, and five specialized equity put options. These products meet the
definition of a derivative under Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). The
Company's position in these contracts is unhedged and is accounted for as a
derivative in accordance with FAS 133. Accordingly, these contracts are carried
at fair value with changes in fair value recorded in the statement of
operations.
15
EVEREST RE GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
10. NEW ACCOUNTING PRONOUNCEMENT
In June 2001, the Financial Accounting Standards Board ("FASB") issued FAS 142,
"Goodwill and Other Intangible Assets". FAS 142 established new accounting and
reporting standards for acquired goodwill and other intangible assets. It
requires that an entity determine if the goodwill or other intangible asset has
an indefinite useful life or a finite useful life. Those with indefinite useful
lives are not subject to amortization and must be tested annually for
impairment. Those with finite useful lives are subject to amortization and must
be tested annually for impairment. This statement is effective for all fiscal
quarters of all fiscal years beginning after December 15, 2001. The Company
adopted FAS 142 on January 1, 2002. The implementation of this statement has not
had a material impact on the financial position, results of operations or cash
flows of the Company.
11. RELATED-PARTY TRANSACTIONS
During the normal course of business, the Company, through its affiliates,
engages in what management believes to be arm's-length reinsurance and brokerage
and commission business transactions with companies controlled by or affiliated
with its outside directors. Such transactions, individually and in the
aggregate, are immaterial to the Company's financial condition, results of
operations and cash flows.
12. SUBSEQUENT EVENTS
A. Between July 1, 2002 and August 6, 2002, Holdings repurchased 450,000
shares of Group's common stock at an average price of $50.86 per share. The
Company has 1.73 million shares remaining under its existing repurchase
authorization.
B. On July 30, 2002, the Company filed a shelf registration statement on
Form S-3 with the Securities and Exchange Commission, which provides for
the issuance of up to $475.0 million of securities. Generally, under this
shelf registration statement, Group may issue common shares, preferred
shares, debt, warrants and hybrid securities, Holdings may issue debt
securities and warrants and Everest Re Capital Trust may issue trust
preferred securities. This shelf registration statement, once effective,
will replace the existing common equity shelf registration statement of the
Company.
16
Part I - Item 2
EVEREST RE GROUP, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FINANCIAL STATEMENT CERTIFICATION
Pursuant to Section 21(a)(1) of the Securities Exchange Act of 1934 No. 4-460,
the Staff of the Securities and Exchange Commission has issued an Order
requiring the principal executive officer and the principal accounting officer
of certain companies to issue sworn statements certifying that the financial
statements are materially truthful and complete. Although the Company is not
among those companies required to submit such statements, the Company intends to
voluntarily file such certifications on Form 8-K on or before August 14, 2002.
INDUSTRY CONDITIONS
The worldwide reinsurance and insurance businesses are highly competitive yet
cyclical by product and market. The terrorist attacks on September 11, 2001
resulted in losses which reduced industry capacity and were of sufficient
magnitude to cause most individual companies to reassess their capital position,
tolerance for risk, exposure control mechanisms and the pricing terms and
conditions at which they are willing to take on risk. The gradual and variable
improving trend that had been apparent through 2000 and earlier in 2001 firmed
significantly. This firming generally took the form of immediate and significant
upward pressure on prices, more restrictive terms and conditions and a reduction
of coverage limits and capacity availability. Such pressures were widespread
with variability depending on the product and markets involved, but mainly
depending on the characteristics of the underlying risk exposures. The magnitude
of the changes was sufficient to create temporary disequilibrium in some markets
as individual buyers and sellers adapted to changes in both their internal and
market dynamics. Thus far in 2002, our markets have generally continued to firm.
These changes reflect a reversal of the general trend from 1987 through 1999
toward increasingly competitive global market conditions across most lines of
business as reflected by decreasing prices and broadening contract terms. The
earlier trend resulted from a number of factors, including the emergence of
significant reinsurance capacity in Bermuda, changes in the Lloyds market,
consolidation and increased capital levels in the insurance and reinsurance
industries, as well as the emergence of new reinsurance and financial products
addressing traditional exposures in alternative fashions. Many of these factors
continue to exist and may be amplified as the result of market changes since the
September 11th attacks. As a result, although the Company is encouraged by the
recent improvements, and more generally, current market conditions, the Company
cannot predict with any reasonable certainty whether and to what extent these
improvements will persist.
17
SEGMENT INFORMATION
The Company, through its subsidiaries, operates in five segments: U.S.
Reinsurance, U.S. Insurance, Specialty Reinsurance, International Reinsurance
and Bermuda. The U.S. Reinsurance operation writes property and casualty treaty
reinsurance through reinsurance brokers as well as directly with ceding
companies within the United States, in addition to property, casualty and
specialty facultative reinsurance through brokers and directly with ceding
companies within the United States. The U.S. Insurance operation writes property
and casualty insurance primarily through general agent relationships and surplus
lines brokers within the United States. The Specialty Reinsurance operation
writes accident and health ("A&H"), marine, aviation and surety business within
the United States and worldwide through brokers and directly with ceding
companies. The International Reinsurance operation writes property and casualty
reinsurance through the Company's branches in London, Canada and Singapore, in
addition to foreign "home-office" business. The Bermuda operation writes
property, casualty, life and annuity business through brokers and directly with
ceding companies.
The non-Bermuda segments are managed in a carefully coordinated fashion with
strong elements of central control, including with respect to capital,
investments and support operations. The Bermuda segment is managed independently
with strong alignment with respect to capital, investment and support operation
strategies. As a result, management monitors and evaluates the financial
performance of all of the Company's operating segments principally based upon
their underwriting results. The Company utilizes inter-affiliate reinsurance and
such reinsurance does not impact segment results as business is reported in the
unit responsible for the business as initially written with third parties,
generally within the segment in which the business was first produced.
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001
PREMIUMS. Gross premiums written increased 30.1% to $630.1 million in the three
months ended June 30, 2002 from $484.3 million in the three months ended June
30, 2001 as the Company took advantage of selected growth opportunities, while
continuing to maintain a disciplined underwriting approach. Premium growth areas
included a 78.0% ($97.1 million) increase in the U.S. Insurance operation,
principally attributable to growth in workers' compensation insurance, a 40.4%
($35.9 million) increase in the International Reinsurance operation, mainly
attributable to growth in the London, Canada and Latin American markets, a 15.3%
($15.9 million) increase in the Specialty Reinsurance operation, principally
attributable to growth in A&H medical stop loss business, and a $6.7 million
increase in the Bermuda operation. These increases were partially offset by a
5.9% ($9.7 million) decrease in the U.S. Reinsurance operation principally
attributable to the non-renewal of business during 2001 and early 2002. The
Company continued to decline business that did not meet its objectives regarding
underwriting profitability.
Ceded premiums decreased to $29.4 million in the three months ended June 30,
2002 from $65.8 million in the three months ended June 30, 2001. This decrease
was principally attributable to a decrease in ceded premiums in the U.S.
Insurance operation as a result of changes in this segment's specific
reinsurance programs. Ceded premiums for the three months ended June 30, 2001
included $15.4 million in adjustment premiums relating to claims made under the
1999 accident year aggregate excess of loss element of the Company's corporate
retrocessional program.
18
Net premiums written increased by 43.5% to $600.7 million in the three months
ended June 30, 2002 from $418.5 million in the three months ended June 30, 2001.
This increase was consistent with the increase in gross premiums written and the
decrease in ceded premiums.
PREMIUM REVENUES. Net premiums earned increased by 27.9% to $502.3 million in
the three months ended June 30, 2002 from $392.8 million in the three months
ended June 30, 2001. Contributing to this increase was a 95.7% ($65.4 million)
increase in the U.S. Insurance operation, a 30.1% ($25.1 million) increase in
the International Reinsurance operation, a 17.4% ($17.2 million) increase in the
Specialty Reinsurance operation and a 1.5% ($2.1 million) increase in the U.S.
Reinsurance operation. These increases were partially offset by a $0.3 million
decrease in the Bermuda operation. All of these changes reflect period to period
changes in net written premiums and business mix together with normal
variability in earnings patterns. Business mix changes occur not only as the
Company shifts emphasis between products, lines of business, distribution
channels and markets but also as individual contracts renew or non-renew, almost
always with changes in coverage, structure, prices and/or terms, and as new
contracts are accepted with coverages, structures, prices and/or terms different
from those of expiring contracts. As premium reporting and earnings and loss and
commission characteristics derive from the provisions of individual contracts,
the continuous turnover of individual contracts, arising from both strategic
shifts and day to day underwriting, can and does introduce appreciable
background variability in various underwriting line items.
EXPENSES. Incurred loss and loss adjustment expenses ("LAE") increased by 21.0%
to $353.2 million in the three months ended June 30, 2002 from $291.9 million in
the three months ended June 30, 2001. The increase in incurred losses and LAE
was principally attributable to the increase in net premiums earned and also
reflects the impact of changes in the Company's mix of business. Incurred losses
and LAE include catastrophe losses, which include the impact of both current
period events and favorable and unfavorable development on prior period events,
and are net of reinsurance. A catastrophe is an event that causes a pre-tax loss
on property exposures of at least $5.0 million and has an event date of January
1, 1988 or later. Catastrophe losses, net of contract specific cessions but
before cessions under the corporate retrocessional program, were $0.3 million in
the three months ended June 30, 2002 compared to net catastrophe losses of $13.9
million in the three months ended June 30, 2001. Incurred losses and LAE for the
three months ended June 30, 2002 reflected ceded losses and LAE of $34.9 million
compared to ceded losses and LAE in the three months ended June 30, 2001 of
$74.4 million. The ceded losses and LAE for the three months ended June 30, 2001
included $29.0 million of losses ceded under the 1999 accident year aggregate
excess of loss component of the Company's corporate retrocessional program.
Contributing to the increase in incurred losses and LAE in the three months
ended June 30, 2002 from the three months ended June 30, 2001 were a 102.3%
($50.2 million) increase in the U.S. Insurance operation principally reflecting
increased premium volume coupled with changes in this segment's specific
reinsurance programs, a 19.8% ($14.5 million) increase in the Specialty
Reinsurance operation principally attributable to increased premium volume in
A&H business and a 14.5% ($8.4 million) increase in the International operation
reflecting increased premium volume, partially offset by lower catastrophe
losses. These increases were partially offset by a 10.7% ($11.5 million)
decrease in the U.S. Reinsurance operation, principally reflecting lower
catastrophe losses and a $0.3 million decrease in the Bermuda operation.
19
Incurred losses and LAE for each operation were also impacted by variability
relating to changes in the level of premium volume and mix of business by class
and type.
The Company's loss and LAE ratio ("loss ratio"), which is calculated by dividing
incurred losses and LAE by premiums earned, decreased by 4.0 percentage points
to 70.3% in the three months ended June 30, 2002 from 74.3% in the three months
ended June 30, 2001 reflecting the incurred losses and LAE discussed above. The
following table shows the loss ratios for each of the Company's operating
segments for the three months ended June 30, 2002 and 2001. The loss ratios for
all operations were impacted by the factors noted above.
Operating Segment Loss Ratios
- --------------------------------------------------------------------------------------------
Segment 2002 2001
- --------------------------------------------------------------------------------------------
U.S. Reinsurance 68.6% 78.0%
U.S. Insurance 74.2% 71.8%
Specialty Reinsurance 75.8% 74.2%
International Reinsurance 61.1% 69.4%
Bermuda 98.2% 99.7%
Underwriting expenses increased by 22.8% to $137.0 million in the three months
ended June 30, 2002 from $111.6 million in the three months ended June 30, 2001.
Commission, brokerage, taxes and fees increased by $23.2 million, principally
reflecting increases in premium volume and changes in the mix of business. Other
underwriting expenses increased by $2.2 million as the Company expanded
operations to support its increased business volume. Contributing to these
underwriting expense increases were a 86.3% ($15.5 million) increase in the U.S.
Insurance operation, a 39.0% ($9.8 million) increase in the Specialty
Reinsurance operation and a $1.8 million increase in the Bermuda operation.
These increases were partially offset by a 5.5% ($1.4 million) decrease in the
International operation and a 0.5% ($0.2 million) decrease in the U.S.
Reinsurance operation. The changes for each operation's expenses principally
resulted from changes in commission expenses related to changes in premium
volume and business mix by class and type and, in some cases, changes in the use
of specific reinsurance and the underwriting performance of the underlying
business. The Company's expense ratio, which is calculated by dividing
underwriting expenses by premiums earned, was 27.3 % for the three months ended
June 30, 2002 compared to 28.4% for the three months ended June 30, 2001.
The Company's combined ratio, which is the sum of the loss and expense ratios,
decreased by 5.1 percentage points to 97.6% in the three months ended June 30,
2002 compared to 102.7% in the three months ended June 30, 2001. The following
table shows the combined ratios for each of the Company's operating segments for
the three months ended June 30, 2002 and 2001. The combined ratios for all
operations were impacted by the loss and expense ratio variability noted above.
20
Operating Segment Combined Ratios
- --------------------------------------------------------------------------------------------
Segment 2002 2001
- --------------------------------------------------------------------------------------------
U.S. Reinsurance 98.2% 107.9%
U.S. Insurance 99.2% 98.0%
Specialty Reinsurance 105.9% 99.7%
International Reinsurance 83.1% 99.8%
Bermuda 162.4% 106.5%
INVESTMENT RESULTS. Net investment income increased 4.3% to $90.8 million in the
three months ended June 30, 2002 from $87.1 million in the three months ended
June 30, 2001, principally reflecting the effects of investing the $537.3
million of cash flow from operations in the twelve months ended June 30, 2002,
and $345.8 million of net proceeds from a secondary stock offering in February
2002, partially offset by the effects of the lower interest rate environment.
The following table shows a comparison of various investment yields as of June
30, 2002 and December 31, 2001, respectively, and for the periods ended June 30,
2002 and 2001, respectively.
2002 2001
------------------------
Imbedded pre-tax yield of cash and invested
assets at June 30, 2002 and December 31, 2001 5.8% 6.0%
Imbedded after-tax yield of cash and invested
assets at June 30, 2002 and December 31, 2001 4.9% 5.0%
Annualized pre-tax yield on average cash and
invested assets for the three months ended June 30,
2002 and 2001 5.9% 6.5%
Annualized after-tax yield on average cash and
invested assets for the three months ended June 30,
2002 and 2001 4.9% 5.2%
Net realized capital losses were $31.0 million in the three months ended June
30, 2002, reflecting realized capital losses on the Company's investments of
$65.8 million, which included $61.2 million relating to write-downs in the value
of securities, of which $33.0 million were for WorldCom, deemed to be impaired
on an other than temporary basis, partially offset by $34.8 million of realized
capital gains, compared to net realized capital gains of $3.9 million in the
three months ended June 30, 2001. The net realized capital gains in the three
months ended June 30, 2001 reflected realized capital gains of $20.8 million,
partially offset by $16.9 million of realized capital losses, which included
$12.0 million relating to write-downs in the value of securities deemed to be
impaired on an other than temporary basis.
Interest expense for the three months ended June 30, 2002 was $10.6 million
compared to $11.5 million for the three months ended June 30, 2001. Interest
expense for the three months ended June 30, 2002 reflects $9.7 million relating
to Holdings' issuance of senior notes and $0.9 million relating to Holdings'
borrowings under it's revolving credit facility. Interest expense for the three
months ended June 30, 2001 reflects $9.7 million relating to Holdings' issuance
of senior notes and $1.8 million relating to Holdings' borrowings under its
revolving credit facility.
21
Other expense for the three months ended June 30, 2002 was $2.9 million compared
to other income of $1.1 million for the three months ended June 30, 2001.
Significant contributors to other expense for the three months ended June 30,
2002 were foreign exchange losses, normal provision for uncollectible audit
premium in the U.S. Insurance operation and the amortization of deferred
expenses relating to Holdings' issuance of senior notes, partially offset by fee
income. Other income for the three months ended June 30, 2001 principally
included foreign exchange gains and fee income, partially offset by the
amortization of deferred expenses relating to Holdings' issuance of senior
notes. The foreign exchange gains and losses for both periods are attributable
to fluctuations in foreign currency exchange rates.
The Company has a small number of credit default swaps, which it no longer
offers, and specialized equity put options in its product portfolio. These
products meet the definition of a derivative under FAS 133. Net derivative
expense, essentially reflecting changes in fair value, from these transactions
for the three months ended June 30, 2002 was $4.9 million compared to $0.0
million for the three months ended June 30, 2001. Net after tax exposure
remaining on these agreements is $2.0 million.
INCOME TAXES. The Company recognized income tax expense of $0.1 million in the
three months ended June 30, 2002 compared to $12.6 million in the three months
ended June 30, 2001 principally reflecting increased taxable realized capital
losses, offset by improved underwriting and investment results and decreased
interest expense.
NET INCOME. Net income was $53.4 million in the three months ended June 30, 2002
compared to $57.3 million in the three months ended June 30, 2001. This decrease
generally reflects the increase in realized capital losses, partially offset by
improved underwriting and investment results and decreased interest expense.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001
PREMIUMS. Gross premiums written increased 35.7% to $1,226.4 million in the six
months ended June 30, 2002 from $903.7 million in the six months ended June 30,
2001 as the Company took advantage of selected growth opportunities, while
continuing to maintain a disciplined underwriting approach. Premium growth areas
included a 67.0% ($168.7 million) increase in the U.S. Insurance operation,
principally attributable to growth in workers' compensation insurance, a 33.9%
($55.6 million) increase in the International Reinsurance operation, mainly
attributable to growth in the London, Canada and Latin American markets, a 18.8%
($37.5 million) increase in the Specialty Reinsurance operation, principally
attributable to growth in A&H medical stop loss business, a 17.9% ($51.1
million) increase in the U.S. Reinsurance operation primarily reflecting growth
across property and casualty lines, and a $9.7 million increase in the Bermuda
operation. The Company continued to decline business that did not meet its
objectives regarding underwriting profitability.
Ceded premiums decreased to $60.7 million in the six months ended June 30, 2002
from $97.9 million in the six months ended June 30, 2001. This decrease was
principally attributable to a decrease in ceded premiums in the U.S. Insurance
operation as a result of changes in this segment's specific reinsurance
programs. Ceded premiums for the three months ended June 30, 2001 included $15.4
million in adjustment premiums relating to claims made under the 1999 accident
year aggregate excess of loss element of the Company's corporate retrocessional
program.
22
Net premiums written increased by 44.7% to $1,165.7 million in the six months
ended June 30, 2002 from $805.8 million in the six months ended June 30, 2001.
This increase was consistent with the increase in gross premiums written and the
decrease in ceded premiums.
PREMIUM REVENUES. Net premiums earned increased by 37.7% to $993.5 million in
the six months ended June 30, 2002 from $721.3 million in the six months ended
June 30, 2001. Contributing to this increase were a 101.4% ($122.1 million)
increase in the U.S. Insurance operation, a 28.1% ($69.5 million) increase in
the U.S. Reinsurance operation, a 25.2% ($39.4 million) increase in the
International Reinsurance operation, a 19.6% ($37.8 million) increase in the
Specialty Reinsurance operation and a $3.4 million increase in the Bermuda
operation. All of these changes reflect period to period changes in net written
premiums and business mix together with normal variability in earnings patterns.
EXPENSES. Incurred loss and LAE increased by 31.9% to $705.7 million in the six
months ended June 30, 2002 from $535.1 million in the six months ended June 30,
2001. The increase in incurred losses and LAE was principally attributable to
the increase in net premiums earned and also reflects the impact of changes in
the Company's mix of business. Incurred losses and LAE include catastrophe
losses, which include the impact of both current period events, and favorable
and unfavorable development on prior period events and are net of reinsurance. A
catastrophe is an event that causes a pre-tax loss on property exposures of at
least $5.0 million and has an event date of January 1, 1988 or later.
Catastrophe losses, net of contract specific cessions but before cessions under
the corporate retrocessional program, were $1.6 million in the six months ended
June 30, 2002 compared to net catastrophe losses of $28.7 million in the six
months ended June 30, 2001. Incurred losses and LAE for the six months ended
June 30, 2002 reflected ceded losses and LAE of $72.9 million compared to ceded
losses and LAE in the six months ended June 30, 2001 of $106.6 million. The
ceded losses and LAE for the three months ended June 30, 2001 included $29.0
million of losses ceded under the 1999 accident year aggregate excess of loss
component of the Company's corporate retrocessional program.
Contributing to the increase in incurred losses and LAE in the six months ended
June 30, 2002 from the six months ended June 30, 2001 were a 108.6% ($93.7
million) increase in the U.S. Insurance operation principally reflecting
increased premium volume coupled with changes in this segment's specific
reinsurance programs, a 20.0% ($36.7 million) increase in the U.S. Reinsurance
operation and a 17.9% ($26.6 million) increase in the Specialty Reinsurance
operation, both principally attributable to increased premium volume, a 9.1%
($10.3 million) increase in the International operation reflecting increased
premium volume, partially offset by lower catastrophe losses and a $3.3 million
increase in the Bermuda operation. Incurred losses and LAE for each operation
were also impacted by variability relating to changes in the level of premium
volume and mix of business by class and type.
The Company's loss ratio decreased by 3.2 percentage points to 71.0% in the six
months ended June 30, 2002 from 74.2% in the six months ended June 30, 2001
reflecting the incurred losses and LAE discussed above. The following table
shows the loss ratios for each of the Company's operating segments for the six
months ended June 30, 2002 and 2001. The loss ratios for all operations were
impacted by the factors noted above.
23
Operating Segment Loss Ratios
- --------------------------------------------------------------------------------------------
Segment 2002 2001
- --------------------------------------------------------------------------------------------
U.S. Reinsurance 69.4% 74.0%
U.S. Insurance 74.2% 71.6%
Specialty Reinsurance 75.7% 76.8%
International Reinsurance 63.1% 72.4%
Bermuda 101.8% 104.3%
Underwriting expenses increased by 31.7% to $272.2 million in the six months
ended June 30, 2002 from $206.7 million in the six months ended June 30, 2001.
Commission, brokerage, taxes and fees increased by $62.3 million, principally
reflecting increases in premium volume and changes in the mix of business. Other
underwriting expenses increased by $3.3 million as the Company expanded its
operations to support its increased business volume. Contributing to these
underwriting expense increases were a 74.5% ($26.4 million) increase in the U.S.
Insurance operation, a 37.9% ($19.1 million) increase in the Specialty
Reinsurance operation, a 28.9% ($20.6 million) increase in the U.S. Reinsurance
operation and a $2.4 million increase in the Bermuda operation. These increases
were partially offset by a 5.5% ($2.5 million) decrease in the International
operation. The changes for each operation's expenses principally resulted from
changes in commission expenses related to changes in premium volume and business
mix by class and type and, in some cases, changes in the use of specific
reinsurance and the underwriting performance of the underlying business. The
Company's expense ratio was 27.4% for the six months ended June 30, 2002
compared to 28.6% for the six months ended June 30, 2001.
The Company's combined ratio decreased by 4.4 percentage points to 98.4% in the
six months ended June 30, 2002 compared to 102.8% in the six months ended June
30, 2001. The following table shows the combined ratios for each of the
Company's operating segments for the six months ended June 30, 2002 and 2001.
The combined ratios for all operations were impacted by the loss and expense
ratio variability noted above.
Operating Segment Combined Ratios
- --------------------------------------------------------------------------------------------
Segment 2002 2001
- --------------------------------------------------------------------------------------------
U.S. Reinsurance 98.3% 102.8%
U.S. Insurance 99.7% 101.0%
Specialty Reinsurance 105.9% 103.0%
International Reinsurance 85.5% 102.0%
Bermuda 151.0% 133.4%
INVESTMENT RESULTS. Net investment income increased 1.8% to $176.4 million in
the six months ended June 30, 2002 from $173.3 million in the six months ended
June 30, 2001, principally reflecting the effects of investing the $537.3
million of cash flow from operations in the twelve months ended June 30, 2002,
and $345.8 million of net proceeds from a secondary stock offering in February
2002, partially offset by the effects of the lower interest rate environment.
The following table shows a comparison of various investment yields as of June
30, 2002 and December 31, 2001, respectively, and for the periods ended June 30,
2002 and 2001, respectively.
24
2002 2001
------------------------
Imbedded pre-tax yield of cash and invested
assets at June 30, 2002 and December 31, 2001 5.8% 6.0%
Imbedded after-tax yield of cash and invested
assets at June 30, 2002 and December 31, 2001 4.9% 5.0%
Annualized pre-tax yield on average cash and
invested assets for the six months ended June 30,
2002 and 2001 5.9% 6.4%
Annualized after-tax yield on average cash and
invested assets for the six months ended June 30,
2002 and 2001 4.9% 5.2%
Net realized capital losses were $34.9 million in the six months ended June 30,
2002, reflecting realized capital losses on the Company's investments of $75.5
million, which included $65.1 million relating to write-downs in the value of
securities, of which $33.0 million were for WorldCom, deemed to be impaired on
an other than temporary basis, partially offset by $40.6 million of realized
capital gains, compared to net realized capital losses of $1.1 million in the
six months ended June 30, 2001. The net realized capital gains in the six months
ended June 30, 2001 reflected realized capital losses of $22.6 million, which
included $12.0 million relating to write-downs in the value of securities deemed
to be impaired on an other than temporary basis, partially offset by $21.5
million of realized capital gains.
Interest expense for the six months ended June 30, 2002 was $21.2 million
compared to $24.0 million for the six months ended June 30, 2001. Interest
expense for the six months ended June 30, 2002 reflects $19.5 million relating
to Holdings' issuance of senior notes and $1.7 million relating to Holdings'
borrowings under it's revolving credit facility. Interest expense for the six
months ended June 30, 2001 reflects $19.5 million relating to Holdings' issuance
of senior notes and $4.5 million relating to Holdings' borrowings under its
revolving credit facility.
Other expense for the six months ended June 30, 2002 was $1.6 million compared
to other income of $2.0 million for the six months ended June 30, 2001.
Significant contributors to other expense for the six months ended June 30, 2002
were foreign exchange losses, normal provision for uncollectible audit premium
in the U.S. Insurance operation and the amortization of deferred expenses
relating to Holdings' issuance of senior notes, partially offset by fee income.
Other income for the six months ended June 30, 2001 principally included foreign
exchange gains and fee income, partially offset by the amortization of deferred
expenses relating to Holdings' issuance of senior notes. The foreign exchange
gains and losses for both periods are attributable to fluctuations in foreign
currency exchange rates.
The Company has a small number of credit default swaps, which it no longer
offers, and specialized equity put options in its product portfolio. These
products meet the definition of a derivative under FAS 133. Net derivative
expense, essentially reflecting changes in fair value, from these transactions
for the six months ended June 30, 2002 was $5.1 million compared to $0.7 million
for the six months ended June 30, 2001. Net after tax exposure remaining on
these agreements is $2.0 million.
25
INCOME TAXES. The Company recognized income tax expense of $14.8 million in the
six months ended June 30, 2002 compared to $21.6 million in the six months ended
June 30, 2001 principally reflecting improved underwriting and investment
results and decreased interest expense, offset by increased taxable realized
capital losses.
NET INCOME. Net income was $114.5 million in the six months ended June 30, 2002
compared to $107.4 million in the six months ended June 30, 2001. This increase
generally reflects the improved underwriting and investment results and
decreased interest expense, partially offset by increased realized capital
losses.
FINANCIAL CONDITION
INVESTED ASSETS. Aggregate invested assets, including cash and short-term
investments, were $6,418.6 million at June 30, 2002 and $5,783.5 million at
December 31, 2001. The increase in invested assets between December 31, 2001 and
June 30, 2002 resulted primarily from $346.3 million of proceeds from the
Company's secondary offering of 5,000,000 common shares on February 27, 2002 and
$275.1 million in cash flows from operations generated during the six months
ended June 30, 2002, partially offset by $37.3 million in net unrealized
depreciation of the Company's investments.
LOSS AND LAE RESERVES. Gross loss and LAE reserves totaled $4,438.6 million at
June 30, 2002 and $4,278.3 million at December 31, 2001. The increase during the
six months ended June 30, 2002 was primarily attributable to increased earned
premiums and normal variability in claim settlements.
The Company's net loss and LAE reserves relating to asbestos and environmental
exposures were $544.2 million and $568.6 million at June 30, 2002 and December
31, 2001, respectively. Industry analysts have developed a measurement, known as
the survival ratio, to compare the asbestos and environmental reserves among
companies with such liabilities. The survival ratio is typically calculated by
dividing a company's current reserves by the three-year average of paid losses,
and therefore measures the number of years that it would take to exhaust the
current reserves based on historical payment patterns. Using this measurement,
the Company's net three-year asbestos and environmental survival ratio was 8.7
years and 9.8 years at June 30, 2002 and December 31, 2001, respectively.
Adjusting these to include the effect of $126.4 million of available reinsurance
on the next $160.0 million of potential future reserve strengthening at June 30,
2002 and $137.8 million of available reinsurance on the next $160.0 million of
potential future reserve strengthening at December 31, 2001, the measures rise
to the equivalent of 10.8 years and 12.1 years respectively. Because the
survival ratio was developed as a measure of reserve strength and not of
absolute reserve adequacy, the Company considers, but does not rely on, the
survival ratio when evaluating its reserves.
SHAREHOLDERS' EQUITY. The Company's shareholders' equity increased to $2,146.0
million as of June 30, 2002, from $1,720.5 million as of December 31, 2001,
principally reflecting $346.3 million of proceeds from the Company's secondary
offering of 5,000,000 common shares on February 27, 2002 and net income of
$114.5 million for the six months ended June 30, 2002, partially offset by net
unrealized depreciation of $31.0 million on the Company's investments. Dividends
of $8.2 million were declared and paid by the Company in the six months ended
June 30, 2002. At June 30, 2002, 2.180 million shares remained available for
26
repurchase under the Company's existing repurchase authorization. Between July
1, 2002 and August 6, 2002, Holdings repurchased 450,000 shares of Group's
common stock at an average price of $50.86 per share. The Company has 1.73
million shares remaining under its existing repurchase authorization.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL. The Company's business operations are in part dependent on the
Company's financial strength, and the market's perception thereof, as measured
in part by shareholders' equity, which was $2,146.0 million and $1,720.5 million
at June 30, 2002 and December 31, 2001, respectively. The Company has
flexibility with respect to capitalization as the result of its perceived
financial strength, including its financial strength ratings as assigned by
independent rating agencies, and its access to the debt and equity markets. The
Company continuously monitors its capital and financial position, as well as
investment and security market conditions, in general and with respect to the
Company's securities, and responds accordingly. On November 7, 2001, the Company
filed a shelf registration statement on Form S-3 with the Securities and
Exchange Commission, which provided for the issuance of up to $575 million of
common equity. On February 27, 2002, pursuant to this registration statement,
the Company completed an offering of 5,000,000 of its common shares at a price
of $69.25 per share, which resulted in $346.3 million of proceeds before
expenses of approximately $0.5 million related to the offering. The Company has
used the net proceeds for working capital and general corporate purposes. The
remaining amount available under this shelf registration statement as of June
30, 2002 was $228.7 million.
On July 30, 2002, the Company filed a shelf registration statement on Form S-3
with the Securities and Exchange Commission, which provides for the issuance of
up to $475.0 million of securities. Generally, under this shelf registration
statement, Group may issue common shares, preferred shares, debt, warrants and
hybrid securities, Holdings may issue debt securities and warrants and Everest
Re Capital Trust may issue trust preferred securities. This shelf registration
statement, once effective, will replace the existing common equity shelf
registration statement of the Company.
LIQUIDITY. The Company's current investment strategy seeks to maximize after-tax
income through a high quality, diversified, taxable bond and tax-preferenced
fixed maturity portfolio, while maintaining an adequate level of liquidity. The
Company's mix of taxable and tax-preferenced investments is adjusted
continuously, consistent with the Company's current and projected operating
results, market conditions and tax position. Additionally, the Company invests
in equity securities, which it believes will enhance the risk-adjusted total
return of the investment portfolio.
The Company's liquidity requirements are met on both a short- and long-term
basis by funds provided by premiums collected, investment income, collected
reinsurance receivables balances and from the sale and maturity of investments
together with the availability of funds under the Company's revolving credit
facility. The Company's net cash flows from operating activities were $169.6
million and $275.1 million in the three and six months ended June 30, 2002,
respectively, compared to $80.3 million and $143.8 million in the three and six
months ended June 30, 2001, respectively. The following table shows cash flows
from operating activities, as well as the impacts of select transactions on
those cash flows, for the three and six months ended June 30, 2002 and 2001.
27
- ---------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------
Cash flow from operations $ 169.6 $ 80.3 $ 275.1 $ 143.8
Catastrophe loss payments 15.7 10.0 31.5 14.0
Derivative settlement payments 0.0 0.0 23.8 0.0
Net tax payments * 10.8 51.9 (6.6) 54.5
-----------------------------------------------------
Cash flow from operations, net of adjustments
$ 195.8 $ 142.2 $ 323.3 $ 212.3
-----------------------------------------------------
* Net tax payments for the three and six months ended June 30, 2001 reflect a
$35.0 million payment to the Internal Revenue Service in connection with
the Company's 1997 tax year liabilities. This one time payment effectively
settled a deferred tax liability relating to the tax basis losses incurred
for the 1997 tax year. This payment, which relates to a timing item, had no
impact to the Company's results of operations for the period.
Management believes that net cash flows from operating activities are generally
consistent with expectations given the Company's investment strategies, mix of
business and the normal variability of premium collections and the payout of
loss reserves.
Proceeds from sales, calls and maturities and investment asset acquisitions were
$1,413.8 million and $1,980.8 million, respectively, in the six months ended
June 30, 2002, compared to $768.4 million and $863.6 million, respectively, in
the six months ended June 30, 2001. Proceeds from sales, calls and maturities
and investment asset acquisitions were $822.2 million and $975.0 million,
respectively, in the three months ended June 30, 2002, compared to $438.6
million and $571.4 million, respectively, in the three months ended June 30,
2001.
On December 21, 1999, Holdings entered into a three-year senior revolving credit
facility with a syndicate of lenders (the "Credit Facility). First Union
National Bank is the administrative agent for the Credit Facility. The Credit
Facility is used for liquidity and general corporate purposes. The Credit
Facility provides for the borrowing of up to $150.0 million with interest at a
rate selected by Holdings equal to either (i) the Base Rate (as defined below)
or (ii) an adjusted London InterBank Offered Rate ("LIBOR") plus a margin. The
Base Rate is the higher of the rate of interest established by First Union
National Bank from time to time as its prime rate or the Federal Funds rate plus
0.5% per annum. On December 18, 2000, the Credit Facility was amended to extend
the borrowing limit to $235.0 million for a period of 120 days. This 120-day
period expired during the three months ended March 31, 2001 after which the
limit reverted to $150.0 million. The amount of margin and the fees payable for
the Credit Facility depend upon Holdings' senior unsecured debt rating. Group
has guaranteed Holdings' obligations under the Credit Facility.
The Credit Facility requires Group to maintain a debt to capital ratio of not
greater than 0.35 to 1, Holdings to maintain a minimum interest coverage ratio
of 2.5 to 1 and Everest Re to maintain its statutory surplus at $850.0 million
plus 25% of aggregate net income and 25% of aggregate capital contributions.
During the three and six months ended June 30, 2002, Holdings made payments on
the Credit Facility of $0.0 million and $20.0 million, respectively, compared to
$0.0 million and $123.0 million during the three and six months ended June 30,
2001. During the three and six months ended June 30, 2002, Holdings had Credit
28
Facility borrowings of $0.0 million and $20.0 million, respectively, compared to
$2.0 million and $22.0 million during the three and six months ended June 30,
2001. As of June 30, 2002 and 2001, Holdings had outstanding Credit Facility
borrowings of $105.0 million and $134.0 million, respectively. Interest expense
incurred in connection with these borrowings was $0.9 million and $1.8 million
for the three months ended June 30, 2002 and 2001, respectively, and $1.7
million and $4.5 million for the six months ended June 30, 2002 and 2001,
respectively.
During the first quarter of 2000, Holdings completed a public offering of $200.0
million principal amount of 8.75% senior notes due March 15, 2010 and $250.0
million principal amount of 8.5% senior notes due March 15, 2005. Interest
expense incurred in connection with these senior notes was $9.7 million for the
three months ended June 30, 2002 and 2001, and $19.5 million for the six months
ended June 30, 2002 and 2001.
MARKET SENSITIVE INSTRUMENTS. The Company's risks associated with market
sensitive instruments have not changed materially since the period ended
December 31, 2001.
SAFE HARBOR DISCLOSURE. This report contains forward-looking statements within
the meaning of the U.S. federal securities laws. The Company intends these
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements in the federal securities laws. In some cases, these
statements can be identified by the use of forward-looking words such as "may",
"will", "should", "could", "anticipate", "estimate", "expect", "plan",
"believe", "predict", "potential" and "intend". Forward-looking statements
contained in this report include information regarding the Company's reserves
for losses and LAE, including estimates of the Company's catastrophe exposure.
Forward-looking statements only reflect the Company's expectations and are not
guarantees of performance. These statements involve risks, uncertainties and
assumptions. Actual events or results may differ materially from the Company's
expectations. Important factors that could cause the Company's actual results to
be materially different from its expectations include the uncertainties that
surround the estimating of reserves for losses and LAE, those discussed in Note
4 to the Financial Statements included in this report and the risks described
under the caption "Risk Factors" in the Company's most recent Report on Form
10-K. The Company undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
29
Part I - Item 3
EVEREST RE GROUP, LTD.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
MARKET RISK INSTRUMENTS. The Company's risks associated with market sensitive
instruments have not changed materially since the period ended December 31,
2001.
30
EVEREST RE GROUP, LTD.
OTHER INFORMATION
Part II - ITEM 1. LEGAL PROCEEDINGS
The Company is involved from time to time in ordinary routine litigation and
arbitration proceedings incidental to its business. The Company does not believe
that there are any other material pending legal proceedings to which it or any
of its subsidiaries or their properties are subject.
Part II - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit Index:
Exhibit No. Description Location
----------- ----------- --------
11.1 Statement regarding computation of per Filed herewith
share earnings
99.1 CEO and CFO certification of Form 10-Q Filed herewith
b) There have been no reports filed on Form 8-K for the current period.
Omitted from this Part II are items which are inapplicable or to which the
answer is negative for the period covered.
31
EVEREST RE GROUP, LTD.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Everest Re Group, Ltd.
(Registrant)
/S/ STEPHEN L. LIMAURO
--------------------------------------
Stephen L. Limauro
Executive Vice President and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
Dated: August 13, 2002