EVEREST RE GROUP LTD - FORM 8-K - EX-99.1 - EVEREST RE GROUP EARNINGS RELEASE - April 25, 2016

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NEWS RELEASE
  
                  


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


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

For Immediate Release

Everest Re Group Reports First Quarter 2016 Results;
12% Annualized Operating Return on Equity

HAMILTON, Bermuda – April 25, 2016 -- Everest Re Group, Ltd. (NYSE: RE) today reported first quarter 2016 after-tax operating income1 available to common shareholders of $222.7 million, or $5.19 per diluted common share, compared to after-tax operating income¹ of $329.9 million, or $7.34 per diluted common share, for the first quarter of 2015. Net income available to common shareholders was $171.7 million, or $4.00 per diluted common share, for the first quarter of 2016, compared to net income of $323.0 million, or $7.19 per diluted common share, for the same period last year.

Commenting on the Company's results, President and Chief Executive Officer, Dominic J. Addesso said, "Against the backdrop of what continues to be significant challenges affecting both investment and underwriting activities, Everest produced strong results with an annualized operating return on equity of 12% for the quarter. While foreign currency headwinds and declining rates are hampering growth in our reinsurance book, we are seeing strong and profitable growth in our insurance book as new initiatives take hold."

Effective this quarter, the Company adopted Accounting Standards Update 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis". As a result, the segregated accounts of Mt. Logan Re, Ltd. have been deconsolidated from the Company results. The adoption of this amended accounting guidance has been implemented utilizing a full retrospective application for all periods. Note that this change had no impact to the prior reported net income or retained earnings of the Company.

1
Operating highlights for the first quarter of 2016 included the following:

·
Gross written premiums decreased 5% to $1.4 billion compared to the first quarter of 2015, but eliminating the unfavorable effects of foreign currency fluctuations, premiums were actually down 3%. Worldwide, reinsurance premiums were down 8%, on a constant dollar basis, while insurance premiums were up 11%, quarter over quarter.
·
The combined ratio was 86.0% for the quarter compared to 83.1% in the first quarter of 2015. Excluding catastrophe losses arising from the Taiwan earthquake that occurred in the quarter, and prior year development, the attritional combined ratio was 85.3% compared to 83.1% in the same period last year.
·
Net investment income for the quarter was $102.5 million, including a loss of $6.2 million on limited partnership investments.
·
Net after-tax realized capital losses were $51.0 million, while net after-tax unrealized capital gains totaled $175.3 million, for the quarter.
·
Cash flow from operations was $367.1 million compared to $350.6 million for the same period in 2015
·
For the quarter, the annualized after-tax operating income¹ return on average adjusted shareholders' equity² was 11.7%.
·
During the quarter, the Company repurchased 464,360 of its common shares at an average price of $185.00 and a total cost of $85.9 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company's Board of Directors, under which there remains 3.6 million shares available.
·
Shareholders' equity ended the quarter at $7.8 billion, up 3% compared to year end 2015. Book value per share increased 4% from $178.21 at December 31, 2015 to $184.91 at March 31, 2016.

This news release contains forward-looking statements within the meaning of the U.S. federal securities laws.  We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. Federal securities laws. These statements involve risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements made on behalf of the Company.  These risks and uncertainties include the impact of general economic conditions and conditions affecting the insurance and reinsurance industry, the adequacy of our reserves, our ability to assess underwriting risk, trends in rates for property and casualty insurance and reinsurance, competition, investment market fluctuations, trends in insured and paid losses, catastrophes, regulatory and legal uncertainties and other factors described in our latest Annual Report on Form 10-K.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Everest Re Group, Ltd. is a Bermuda holding company that operates through the following subsidiaries: Everest Reinsurance Company provides reinsurance to property and casualty insurers in both the U.S. and international markets. Everest Reinsurance (Bermuda), Ltd., including through its branch in the United Kingdom, provides reinsurance and insurance to worldwide property and casualty markets and reinsurance to life insurers. Everest Reinsurance Company (Ireland), Limited provides reinsurance to non-life insurers in Europe. Everest National Insurance Company and Everest Security Insurance Company provide property and casualty insurance to
 
 
 2
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. The Company also operates within the Lloyd's insurance market through Syndicate 2786. In addition, through Mt. Logan Re, Ltd., the Company manages segregated accounts, capitalized by the Company and third party investors, that provide reinsurance for property catastrophe risks. 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 first quarter results will be held at 10:30 a.m. Eastern Time on April 26, 2016. 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
  
 
  
March 31,
  
(Dollars in thousands, except per share amounts)
  
2016
    
2015
  
 
  
   
(unaudited)
    
 
 
  
   
Per Diluted
    
   
Per Diluted
  
 
  
   
Common
    
   
Common
  
 
  
Amount
    
Share
    
Amount
    
Share
  
 
  
   
   
   
 
Net income (loss)
  
$
171,686
    
$
4.00
    
$
322,978
    
$
7.19
  
After-tax net realized capital gains (losses)
    
(50,979
)
    
(1.19
)
    
(6,896
)
    
(0.15
)
 
                                
After-tax operating income (loss)
  
$
222,665
    
$
5.19
    
$
329,874
    
$
7.34
  
 
                                
(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
  
   
March 31,
  
(Dollars in thousands, except per share amounts)
  
2016
    
2015
  
   
(unaudited)
  
REVENUES:
        
Premiums earned
  
$
1,218,867
    
$
1,272,488
  
Net investment income
    
102,524
      
122,566
  
Net realized capital gains (losses):
                
Other-than-temporary impairments on fixed maturity securities
    
(28,793
)
    
(26,018
)
Other-than-temporary impairments on fixed maturity securities
                
transferred to other comprehensive income (loss)
    
-
      
-
  
Other net realized capital gains (losses)
    
(45,466
)
    
15,513
  
Total net realized capital gains (losses)
    
(74,259
)
    
(10,505
)
Net derivative gain (loss)
    
(3,020
)
    
(242
)
Other income (expense)
    
(2,066
)
    
51,281
  
Total revenues
    
1,242,046
      
1,435,588
  
                 
CLAIMS AND EXPENSES:
                
Incurred losses and loss adjustment expenses
    
700,749
      
715,155
  
Commission, brokerage, taxes and fees
    
275,006
      
283,094
  
Other underwriting expenses
    
72,110
      
58,741
  
Corporate expenses
    
7,886
      
5,463
  
Interest, fees and bond issue cost amortization expense
    
9,228
      
8,990
  
Total claims and expenses
    
1,064,979
      
1,071,443
  
                 
INCOME (LOSS) BEFORE TAXES
    
177,067
      
364,145
  
Income tax expense (benefit)
    
5,381
      
41,167
  
                 
NET INCOME (LOSS)
  
$
171,686
    
$
322,978
  
                 
Other comprehensive income (loss), net of tax:
                
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
    
142,962
      
83,205
  
Reclassification adjustment for realized losses (gains) included in net income (loss)
    
32,381
      
22,183
  
Total URA(D) on securities arising during the period
    
175,343
      
105,388
  
                 
Foreign currency translation adjustments
    
9,773
      
(102,340
)
                 
Benefit plan actuarial net gain (loss) for the period
    
-
      
-
  
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
    
1,340
      
1,604
  
Total benefit plan net gain (loss) for the period
    
1,340
      
1,604
  
Total other comprehensive income (loss), net of tax
    
186,456
      
4,652
  
                 
COMPREHENSIVE INCOME (LOSS)
  
$
358,142
    
$
327,630
  
                 
EARNINGS PER COMMON SHARE
                
Basic
  
$
4.03
    
$
7.26
  
Diluted
    
4.00
      
7.19
  
Dividends declared
    
1.15
      
0.95
  
 
 


EVEREST RE GROUP, LTD.
        
CONSOLIDATED BALANCE SHEETS
        
         
         
   
March 31,
    
December 31,
  
(Dollars and share amounts in thousands, except par value per share)
  
2016
    
2015
  
   
(unaudited)
  
ASSETS:
        
Fixed maturities - available for sale, at market value
  
$
13,761,652
    
$
13,357,294
  
(amortized cost: 2016, $13,480,045; 2015, $13,276,206)
                
Fixed maturities - available for sale, at fair value
    
1,870
      
2,102
  
Equity securities - available for sale, at market value (cost: 2016, $123,354; 2015, $122,271)
    
114,388
      
108,940
  
Equity securities - available for sale, at fair value
    
1,313,404
      
1,337,733
  
Short-term investments
    
441,528
      
799,684
  
Other invested assets (cost: 2016, $1,109,186; 2015, $786,994)
    
1,109,186
      
786,994
  
Cash
    
328,943
      
283,658
  
Total investments and cash
    
17,070,971
      
16,676,405
  
Accrued investment income
    
101,789
      
100,942
  
Premiums receivable
    
1,475,155
      
1,483,090
  
Reinsurance receivables
    
920,039
      
894,037
  
Funds held by reinsureds
    
225,320
      
278,673
  
Deferred acquisition costs
    
357,335
      
372,351
  
Prepaid reinsurance premiums
    
176,741
      
164,971
  
Income taxes
    
223,507
      
258,541
  
Other assets
    
304,997
      
321,818
  
TOTAL ASSETS
  
$
20,855,854
    
$
20,550,828
  
                 
LIABILITIES:
                
Reserve for losses and loss adjustment expenses
  
$
9,985,979
    
$
9,951,798
  
Future policy benefit reserve
    
58,438
      
58,910
  
Unearned premium reserve
    
1,588,506
      
1,613,390
  
Funds held under reinsurance treaties
    
20,745
      
13,544
  
Commission reserves
    
55,960
      
60,098
  
Other net payable to reinsurers
    
179,072
      
173,087
  
Losses in course of payment
    
137,267
      
112,170
  
4.868% Senior notes due 6/1/2044
    
400,000
      
400,000
  
6.6% Long term notes due 5/1/2067
    
238,369
      
238,368
  
Accrued interest on debt and borrowings
    
12,341
      
3,537
  
Equity index put option liability
    
43,725
      
40,705
  
Unsettled securities payable
    
54,984
      
15,314
  
Other liabilities
    
240,169
      
261,322
  
Total liabilities
    
13,015,555
      
12,942,243
  
                 
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; (2016) 68,776
                
and (2015) 68,606 outstanding before treasury shares
    
688
      
686
  
Additional paid-in capital
    
2,111,828
      
2,103,638
  
Accumulated other comprehensive income (loss), net of deferred income tax expense
                
(benefit) of $22,446 at 2016 and ($15,863) at 2015
    
(45,299
)
    
(231,755
)
Treasury shares, at cost; 26,377 shares (2016) and 25,912 shares (2015)
    
(2,971,870
)
    
(2,885,956
)
Retained earnings
    
8,744,952
      
8,621,972
  
Total shareholders' equity
    
7,840,299
      
7,608,585
  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  
$
20,855,854
    
$
20,550,828
  



EVEREST RE GROUP, LTD.
        
CONSOLIDATED STATEMENTS OF CASH FLOWS
        
         
         
   
Three Months Ended
  
   
March 31,
  
(Dollars in thousands)
  
2016
    
2015
  
   
(unaudited)
  
CASH FLOWS FROM OPERATING ACTIVITIES:
        
Net income (loss)
  
$
171,686
    
$
322,978
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Decrease (increase) in premiums receivable
    
7,604
      
(101,728
)
Decrease (increase) in funds held by reinsureds, net
    
60,592
      
(12,027
)
Decrease (increase) in reinsurance receivables
    
(32,865
)
    
(90,028
)
Decrease (increase) in income taxes
    
(3,883
)
    
14,214
  
Decrease (increase) in prepaid reinsurance premiums
    
(10,219
)
    
(12,868
)
Increase (decrease) in reserve for losses and loss adjustment expenses
    
50,497
      
55,334
  
Increase (decrease) in future policy benefit reserve
    
(473
)
    
(127
)
Increase (decrease) in unearned premiums
    
(26,116
)
    
(40,934
)
Increase (decrease) in other net payable to reinsurers
    
5,254
      
81,172
  
Increase (decrease) in losses in course of payment
    
24,473
      
71,568
  
Change in equity adjustments in limited partnerships
    
6,181
      
(6,762
)
Distribution of limited partnership income
    
15,915
      
8,600
  
Change in other assets and liabilities, net
    
3,844
      
32,168
  
Non-cash compensation expense
    
8,041
      
5,170
  
Amortization of bond premium (accrual of bond discount)
    
12,354
      
13,333
  
Amortization of underwriting discount on senior notes
    
1
      
1
  
Net realized capital (gains) losses
    
74,259
      
10,505
  
Net cash provided by (used in) operating activities
    
367,145
      
350,569
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from fixed maturities matured/called - available for sale, at market value
    
503,428
      
594,807
  
Proceeds from fixed maturities sold - available for sale, at market value
    
324,118
      
355,812
  
Proceeds from fixed maturities sold - available for sale, at fair value
    
-
      
1,236
  
Proceeds from equity securities sold - available for sale, at market value
    
203
      
83
  
Proceeds from equity securities sold - available for sale, at fair value
    
92,245
      
137,966
  
Distributions from other invested assets
    
1,111,710
      
10,797
  
Cost of fixed maturities acquired - available for sale, at market value
    
(1,078,990
)
    
(1,370,458
)
Cost of equity securities acquired - available for sale, at market value
    
(1,105
)
    
(4,464
)
Cost of equity securities acquired - available for sale, at fair value
    
(96,297
)
    
(171,411
)
Cost of other invested assets acquired
    
(1,454,123
)
    
(41,961
)
Net change in short-term investments
    
360,238
      
222,952
  
Net change in unsettled securities transactions
    
30,390
      
(505
)
Net cash provided by (used in) investing activities
    
(208,183
)
    
(265,146
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Common shares issued during the period, net
    
151
      
2
  
Purchase of treasury shares
    
(85,914
)
    
(75,040
)
Dividends paid to shareholders
    
(48,706
)
    
(42,252
)
Net cash provided by (used in) financing activities
    
(134,469
)
    
(117,290
)
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
20,792
      
(7,032
)
                 
Net increase (decrease) in cash
    
45,285
      
(38,899
)
Cash, beginning of period
    
283,658
      
437,474
  
Cash, end of period
  
$
328,943
    
$
398,575
  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
                
Income taxes paid (recovered)
  
$
5,000
    
$
24,266
  
Interest paid
    
370
      
132
  

 

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