EVEREST RE GROUP LTD - FORM 8-K - EX-99.1 - EVEREST RE GROUP EARNINGS RELEASE - July 27, 2015

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8-K - EVEREST RE GROUP LTDgroup8k2q2015.htm

 
 
 
 
NEWS RELEASE

  

EVEREST RE GROUP, LTD.
Wessex House, 45 Reid Street, 2nd Floor, Hamilton HM DX, Bermuda


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

For Immediate Release

Everest Re Group Reports Second Quarter 2015 Results;
15% Annualized Operating ROE

HAMILTON, Bermuda – July 27, 2015 -- Everest Re Group, Ltd. (NYSE: RE) today reported second quarter 2015 net income of $209.1 million, or $4.68 per diluted common share, compared to net income of $290.2 million, or $6.26 per diluted common share, for the second quarter of 2014. After-tax operating income1, excluding realized capital gains and losses, was $224.5 million, or $5.03 per diluted common share, for the second quarter of 2015, compared to after-tax operating income1 of $250.8 million, or $5.41 per diluted common share, for the same period last year.

For the six months ended June 30, 2015, net income was $532.0 million, or $11.88 per diluted common share, compared to $584.1 million, or $12.46 per diluted common share, for the first six months of 2014. After-tax operating income1, excluding realized capital gains and losses, was $554.4 million, or $12.38 per diluted common share, compared to $531.7 million or $11.35 per diluted common share, for the same period in 2014.

Commenting on the Company's results, President and Chief Executive Officer, Dominic J. Addesso said, "Through the first six months, Everest generated over $550 million of operating earnings, providing an annualized operating return on equity of 15%. These are solid results, particularly when considering the headwinds of a market that remains quite challenging. Our dynamic and responsive approach to the market, however, has provided unique opportunities and enabled us to continue to deliver superior returns to our shareholders."

1

Operating highlights for the second quarter of 2015 included the following:

·
Gross written premiums decreased 11% to $1.3 billion compared to the second quarter of 2014, but eliminating the unfavorable effects of foreign currency fluctuations, premiums were actually down 8.5%. Worldwide, reinsurance premiums, including the Mt. Logan Re segment, were down 13%, on a constant dollar basis, while insurance premiums, excluding crop business, were up 20%, quarter over quarter.
·
The combined ratio for the quarter was 86.3% compared to 84.7% in the second quarter of 2014. Excluding catastrophe losses, reinstatement premiums, and prior period loss development, the current quarter attritional combined ratio was 84.0% compared to 81.4% in the same period last year. The increase in the attritional ratio was primarily driven by a number of smaller loss events, not rising to the level of what would be classified as a catastrophe loss.
·
Catastrophe losses amounted to $30.0 million in the quarter, and included losses from the Northern Chile and New South Wales storm events that occurred during the quarter. The net impact of these losses, after reinstatement premiums, taxes, and non-controlling interest, was $22.6 million.
·
Net investment income for the quarter was $125.0 million, including limited partnership income of $6.7 million.
·
Net after-tax realized and unrealized capital losses totaled $15.4 million and $123.7 million, respectively, for the quarter.
·
Cash flow from operations was $227.9 million compared to $223.3 million for the same period in 2014.
·
Through the first six months of 2015, the annualized after-tax operating income1 return on average adjusted shareholders' equity2 was 15.0%.
·
During the quarter, the Company repurchased 277,500 of its common shares at an average price of $179.95 and a total cost of $50.0 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company's Board of Directors, under which there remains 5.6 million shares available.
·
Shareholders' equity ended the quarter at $7.7 billion, up 4% compared to year end 2014. Book value per share increased 5% from $166.75 at December 31, 2014 to $174.84 at June 30, 2015.

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
 
2
 
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 second quarter results will be held at 10:30 a.m. Eastern Time on July 28, 2015. The call will be available on the Internet through the Company's web site or at www.streetevents.com.

Recipients are encouraged to visit the Company's web site to view supplemental financial information on the Company's results. The supplemental information is located at www.everestregroup.com in the "Financial Reports" section of the "Investor Center". The supplemental financial information may also be obtained by contacting the Company directly.
___________________________
1The Company generally uses after-tax operating income (loss), a non-GAAP financial measure, to evaluate its performance.  After-tax operating income (loss) consists of net income (loss) excluding after-tax net realized capital gains (losses) as the following reconciliation displays:


 
  
Three Months Ended
    
Six Months Ended
  
 
  
June 30,
    
June 30,
  
(Dollars in thousands, except per share amounts)
  
2015
    
2014
    
2015
    
2014
  
 
  
(unaudited)		  
(unaudited) 
 
  
   
   
   
   
   
   
   
 
 
  
   
Per Diluted
    
   
Per Diluted
    
   
Per Diluted
    
   
Per Diluted
  
 
  
   
Common
    
   
Common
    
   
Common
    
   
Common
  
 
  
Amount
    
Share
    
Amount
    
Share
    
Amount
    
Share
    
Amount
    
Share
  
 
  
   
   
   
   
   
   
   
 
Net income (loss)
  
$
209,057
    
$
4.68
    
$
290,184
    
$
6.26
    
$
532,035
    
$
11.88
    
$
584,117
    
$
12.46
  
After-tax net realized capital gains (losses)
    
(15,448
)
    
(0.35
)
    
39,413
      
0.85
      
(22,344
)
    
(0.50
)
    
52,377
      
1.12
  
 
                                                                
After-tax operating income (loss)
  
$
224,505
    
$
5.03
    
$
250,771
    
$
5.41
    
$
554,379
    
$
12.38
    
$
531,740
    
$
11.35
  
 
                                                                
(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.

2Adjusted shareholders' equity excludes net after-tax unrealized (appreciation) depreciation of investments

--Financial Details Follow--
 
3
 
 
EVEREST RE GROUP, LTD.
                
CONSOLIDATED STATEMENTS OF OPERATIONS
                
AND COMPREHENSIVE INCOME (LOSS)
                
                 
                 
   
Three Months Ended 
  
Six Months Ended 
   
June 30, 
  
June 30, 
(Dollars in thousands, except per share amounts)
  
2015 
  
2014 
  
2015 
  
2014 
   
(unaudited) 
  
(unaudited) 
REVENUES:
                
Premiums earned
  
$
1,332,398
    
$
1,272,317
    
$
2,639,475
    
$
2,416,807
  
Net investment income
    
125,046
      
131,224
      
247,629
      
254,381
  
Net realized capital gains (losses):
                                
Other-than-temporary impairments on fixed maturity securities
    
(16,238
)
    
(389
)
    
(42,256
)
    
(389
)
Other-than-temporary impairments on fixed maturity securities
                                
transferred to other comprehensive income (loss)
    
-
      
-
      
-
      
-
  
Other net realized capital gains (losses)
    
(7,940
)
    
59,405
      
7,573
      
80,531
  
Total net realized capital gains (losses)
    
(24,178
)
    
59,016
      
(34,683
)
    
80,142
  
Net derivative gain (loss)
    
6,445
      
3,774
      
6,203
      
2,113
  
Other income (expense)
    
(3,925
)
    
(13,871
)
    
42,148
      
(17,167
)
Total revenues
    
1,435,786
      
1,452,460
      
2,900,772
      
2,736,276
  
                                 
CLAIMS AND EXPENSES:
                                
Incurred losses and loss adjustment expenses
    
790,661
      
735,697
      
1,513,126
      
1,355,106
  
Commission, brokerage, taxes and fees
    
294,917
      
283,687
      
582,084
      
529,689
  
Other underwriting expenses
    
63,951
      
58,414
      
124,615
      
109,052
  
Corporate expenses
    
5,925
      
3,899
      
11,388
      
8,844
  
Interest, fees and bond issue cost amortization expense
    
9,026
      
8,978
      
18,016
      
16,546
  
Total claims and expenses
    
1,164,480
      
1,090,675
      
2,249,229
      
2,019,237
  
                                 
INCOME (LOSS) BEFORE TAXES
    
271,306
      
361,785
      
651,543
      
717,039
  
Income tax expense (benefit)
    
35,834
      
63,860
      
77,001
      
117,092
  
                                 
NET INCOME (LOSS)
  
$
235,472
    
$
297,925
    
$
574,542
    
$
599,947
  
Net (income) loss attributable to noncontrolling interests
    
(26,415
)
    
(7,741
)
    
(42,507
)
    
(15,830
)
NET INCOME (LOSS) ATTRIBUTABLE TO EVEREST RE GROUP
  
$
209,057
    
$
290,184
    
$
532,035
    
$
584,117
  
                                 
Other comprehensive income (loss), net of tax:
                                
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
    
(136,481
)
    
85,921
      
(53,276
)
    
139,392
  
Reclassification adjustment for realized losses (gains) included in net income (loss)
    
12,747
      
2,169
      
34,930
      
4,043
  
Total URA(D) on securities arising during the period
    
(123,734
)
    
88,090
      
(18,346
)
    
143,435
  
                                 
Foreign currency translation adjustments
    
54,337
      
(763
)
    
(48,003
)
    
(3,400
)
                                 
Benefit plan actuarial net gain (loss) for the period
    
-
      
-
      
-
      
-
  
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
    
1,609
      
770
      
3,213
      
1,541
  
Total benefit plan net gain (loss) for the period
    
1,609
      
770
      
3,213
      
1,541
  
Total other comprehensive income (loss), net of tax
    
(67,788
)
    
88,097
      
(63,136
)
    
141,576
  
Other comprehensive (income) loss attributable to noncontrolling interests
    
-
      
-
      
-
      
-
  
Total other comprehensive income (loss), net of tax attributable to Everest Re Group
    
(67,788
)
    
88,097
      
(63,136
)
    
141,576
  
                                 
COMPREHENSIVE INCOME (LOSS)
  
$
141,269
    
$
378,281
    
$
468,899
    
$
725,693
  
                                 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO EVEREST RE GROUP:
                                
Basic
  
$
4.72
    
$
6.32
    
$
11.99
    
$
12.58
  
Diluted
    
4.68
      
6.26
      
11.88
      
12.46
  
Dividends declared
    
0.95
      
0.75
      
1.90
      
1.50
  



EVEREST RE GROUP, LTD.
        
CONSOLIDATED BALANCE SHEETS
        
         
         
   
June 30, 
  
December 31, 
(Dollars and share amounts in thousands, except par value per share)
  
2015 
  
2014 
   
(unaudited) 
  
 
ASSETS:
        
Fixed maturities - available for sale, at market value
  
$
13,474,801
    
$
13,101,067
  
    (amortized cost: 2015, $13,213,596; 2014, $12,831,159)
                
Fixed maturities - available for sale, at fair value
    
228
      
1,509
  
Equity securities - available for sale, at market value (cost: 2015, $147,512; 2014, $148,326)
    
137,516
      
140,210
  
Equity securities - available for sale, at fair value
    
1,483,803
      
1,447,820
  
Short-term investments
    
1,901,807
      
1,705,932
  
Other invested assets (cost: 2015, $665,153; 2014, $601,925)
    
665,153
      
601,925
  
Cash
    
338,901
      
437,474
  
       Total investments and cash
    
18,002,209
      
17,435,937
  
Accrued investment income
    
108,829
      
111,075
  
Premiums receivable
    
1,445,180
      
1,397,983
  
Reinsurance receivables
    
682,878
      
670,854
  
Funds held by reinsureds
    
233,447
      
228,192
  
Deferred acquisition costs
    
350,551
      
398,408
  
Prepaid reinsurance premiums
    
179,448
      
154,177
  
Income taxes
    
206,400
      
184,762
  
Other assets
    
273,954
      
236,436
  
TOTAL ASSETS
  
$
21,482,896
    
$
20,817,824
  
                 
LIABILITIES:
                
Reserve for losses and loss adjustment expenses
  
$
9,783,570
    
$
9,720,813
  
Future policy benefit reserve
    
59,456
      
59,820
  
Unearned premium reserve
    
1,562,078
      
1,728,745
  
Funds held under reinsurance treaties
    
78,553
      
3,932
  
Commission reserves
    
88,008
      
87,990
  
Other net payable to reinsurers
    
160,248
      
139,841
  
Losses in course of payment
    
251,980
      
157,527
  
4.868% Senior notes due 6/1/2044
    
400,000
      
400,000
  
6.6% Long term notes due 5/1/2067
    
238,366
      
238,364
  
Accrued interest on debt and borrowings
    
3,537
      
3,537
  
Equity index put option liability
    
40,819
      
47,022
  
Unsettled securities payable
    
72,834
      
41,092
  
Other liabilities
    
257,056
      
316,469
  
       Total liabilities
    
12,996,505
      
12,945,152
  
                 
NONCONTROLLING INTERESTS:
                
Redeemable noncontrolling interests - Mt. Logan Re
    
759,729
      
421,552
  
                 
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; (2015) 68,555
                
    and (2014) 68,336 outstanding before treasury shares
    
685
      
683
  
Additional paid-in capital
    
2,084,636
      
2,068,807
  
Accumulated other comprehensive income (loss), net of deferred income tax expense
                
    (benefit) of $20,968 at 2015 and $20,715 at 2014
    
(14,819
)
    
48,317
  
Treasury shares, at cost; 24,363 shares (2015) and 23,650 shares (2014)
    
(2,610,878
)
    
(2,485,897
)
Retained earnings
    
8,267,038
      
7,819,210
  
       Total shareholders' equity attributable to Everest Re Group
    
7,726,662
      
7,451,120
  
TOTAL LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY
  
$
21,482,896
    
$
20,817,824
  


EVEREST RE GROUP, LTD.
        
CONSOLIDATED STATEMENTS OF CASH FLOWS
        
         
         
   
Six Months Ended 
   
June 30, 
(Dollars in thousands)
  
2015
  
2014 
   
(unaudited) 
CASH FLOWS FROM OPERATING ACTIVITIES:
        
Net income (loss)
  
$
574,542
    
$
599,947
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Decrease (increase) in premiums receivable
    
(51,422
)
    
(97,827
)
Decrease (increase) in funds held by reinsureds, net
    
68,245
      
2,148
  
Decrease (increase) in reinsurance receivables
    
(32,526
)
    
(137,077
)
Decrease (increase) in income taxes
    
(20,898
)
    
15,257
  
Decrease (increase) in prepaid reinsurance premiums
    
(28,916
)
    
(68,346
)
Increase (decrease) in reserve for losses and loss adjustment expenses
    
113,567
      
8,055
  
Increase (decrease) in future policy benefit reserve
    
(364
)
    
(1,144
)
Increase (decrease) in unearned premiums
    
(160,849
)
    
96,803
  
Increase (decrease) in other net payable to reinsurers
    
23,867
      
100,546
  
Increase (decrease) in losses in course of payment
    
95,003
      
161,990
  
Change in equity adjustments in limited partnerships
    
(12,840
)
    
(3,200
)
Distribution of limited partnership income
    
18,332
      
13,430
  
Change in other assets and liabilities, net
    
26,768
      
(56,872
)
Non-cash compensation expense
    
10,364
      
9,768
  
Amortization of bond premium (accrual of bond discount)
    
25,514
      
27,068
  
Amortization of underwriting discount on senior notes
    
2
      
28
  
Net realized capital (gains) losses
    
34,683
      
(80,142
)
Net cash provided by (used in) operating activities
    
683,072
      
590,432
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from fixed maturities matured/called - available for sale, at market value
    
1,172,211
      
1,047,509
  
Proceeds from fixed maturities matured/called - available for sale, at fair value
    
-
      
875
  
Proceeds from fixed maturities sold - available for sale, at market value
    
731,673
      
606,476
  
Proceeds from fixed maturities sold - available for sale, at fair value
    
1,613
      
20,763
  
Proceeds from equity securities sold - available for sale, at market value
    
4,599
      
8,672
  
Proceeds from equity securities sold - available for sale, at fair value
    
300,620
      
304,892
  
Distributions from other invested assets
    
27,705
      
22,520
  
Cost of fixed maturities acquired - available for sale, at market value
    
(2,448,121
)
    
(2,458,723
)
Cost of fixed maturities acquired - available for sale, at fair value
    
(234
)
    
(1,309
)
Cost of equity securities acquired - available for sale, at market value
    
(5,541
)
    
(10,619
)
Cost of equity securities acquired - available for sale, at fair value
    
(317,650
)
    
(183,314
)
Cost of other invested assets acquired
    
(98,890
)
    
(34,388
)
Net change in short-term investments
    
(199,226
)
    
(423,677
)
Net change in unsettled securities transactions
    
4,475
      
20,633
  
Net cash provided by (used in) investing activities
    
(826,766
)
    
(1,079,690
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Common shares issued during the period, net
    
5,468
      
13,143
  
Purchase of treasury shares
    
(124,981
)
    
(324,951
)
Net proceeds from issuance of senior notes
    
-
      
400,000
  
Third party investment in redeemable noncontrolling interest
    
296,848
      
123,700
  
Subscription advances for third party redeemable noncontrolling interest
    
-
      
77,500
  
Dividends paid to shareholders
    
(84,207
)
    
(69,061
)
Dividends paid on third party investment in redeemable noncontrolling interest
    
(41,178
)
    
-
  
Net cash provided by (used in) financing activities
    
51,950
      
220,331
  
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
(6,829
)
    
(885
)
                 
Net increase (decrease) in cash
    
(98,573
)
    
(269,812
)
Cash, beginning of period
    
437,474
      
611,382
  
Cash, end of period
  
$
338,901
    
$
341,570
  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
                
Income taxes paid (recovered)
  
$
93,352
    
$
97,241
  
Interest paid
    
17,907
      
15,018
  

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