EVEREST RE GROUP LTD - FORM 8-K - EX-99.1 - EARNINGS RELEASE 2Q2017 - July 24, 2017

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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 Second Quarter 2017 Results;
17% Growth in Premium; 13% Annualized Return on Equity

HAMILTON, Bermuda – July 24, 2017 -- Everest Re Group, Ltd. (NYSE: RE) today reported second quarter 2017 net income of $245.7 million, or $5.95 per diluted common share, compared to net income of $155.7 million, or $3.67 per diluted common share, for the second quarter of 2016. After-tax operating income1, excluding realized capital gains and losses, was $227.5 million, or $5.51 per diluted common share, for the second quarter of 2017, compared to after-tax operating income1 of $134.2 million, or $3.17 per diluted common share, for the same period last year.

For the six months ended June 30, 2017, net income was $537.3 million, or $13.02 per diluted common share, compared to $327.4 million, or $7.68 per diluted common share, for the first six months of 2016. After-tax operating income1, excluding realized capital gains and losses, was $487.0 million, or $11.80 per diluted common share, compared to $356.9 million or $8.37 per diluted common share, for the same period in 2016.

Commenting on the Company's results, President and Chief Executive Officer, Dominic J. Addesso said, "Everest continues to generate double digit ROE's, while steadily growing its capital base. Strong underwriting results, with an attritional combined ratio of 86.7% for the quarter, coupled with stable investment income are providing for solid growth in book value per share. We seek out opportunities for profitable growth in both our reinsurance and insurance books and have been successful as borne out by these excellent results."

1
Operating highlights for the second quarter of 2017 included the following:

·
Gross written premiums for the quarter were $1.6 billion, an increase of 17% compared to the second quarter of 2016. Worldwide, reinsurance premiums were up 14%, with growth coming from the new crop reinsurance program, increased shares on property pro-rata treaties, and growth in financial lines business. Insurance premiums were up 25%, quarter over quarter, with continued growth on new initiatives. Excluding the HCI crop business that was sold in 2016, the insurance segment premium was up 41%, quarter over quarter.
·
The combined ratio for the quarter was 90.5% compared to 95.1% in the second quarter of 2016. Excluding catastrophe losses, reinstatement premiums, and nominal prior period loss development, the current quarter attritional combined ratio was 86.7% compared to 86.1% in the same period last year.
·
Catastrophe losses, net of reinsurance, amounted to $53.5 million in the quarter, with current quarter catastrophe losses from the South African (Knysna) fires, Colorado hailstorms, and Peru flooding. The net impact of these losses, after reinstatement premiums and taxes was $46.6 million.
·
Net investment income was up 1% for the quarter to $134.5 million.
·
Net after-tax realized capital gains amounted to $18.2 million and net after-tax unrealized losses were $4.1 million for the quarter.
·
Cash flow from operations was $252.6 million compared to $308.1 million for the same period in 2016.
·
Through the first six months, the annualized after-tax operating income¹ return on average adjusted shareholders' equity² was 11.9%.
·
Shareholders' equity ended the quarter at $8.6 billion, up 6% compared to year end 2016. Book value per share increased 6% from $197.45 at December 31, 2016 to $209.05 at June 30, 2017.

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
 
2
 
Reinsurance Company (Ireland), dac, provides reinsurance to non-life insurers in Europe. Everest Insurance® refers to the primary insurance operations of Everest Re Group, Ltd., and its affiliated companies which offer property, casualty and specialty lines insurance on both an admitted and non-admitted basis in the U.S. and internationally. 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 second quarter results will be held at 10:30 a.m. Eastern Time on July 25, 2017. 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)
  
2017
    
2016
    
2017
    
2016
  
 
        
(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)
  
$
245,674
    
$
5.95
    
$
155,692
    
$
3.67
    
$
537,317
    
$
13.02
    
$
327,378
    
$
7.68
  
After-tax net realized capital gains (losses)
    
18,224
      
0.44
      
21,462
      
0.51
      
50,334
      
1.22
      
(29,517
)
    
(0.69
)
 
                                                                
After-tax operating income (loss)
  
$
227,450
    
$
5.51
    
$
134,230
    
$
3.17
    
$
486,983
    
$
11.80
    
$
356,895
    
$
8.37
  
 
                                                                
(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)
  
2017
    
2016
    
2017
    
2016
  
   
(unaudited)
    
(unaudited)
  
REVENUES:
                        
Premiums earned
  
$
1,369,681
    
$
1,288,860
    
$
2,681,778
    
$
2,507,727
  
Net investment income
    
134,508
      
132,737
      
256,797
      
235,261
  
Net realized capital gains (losses):
                                
Other-than-temporary impairments on fixed maturity securities
    
(2,475
)
    
(1,470
)
    
(3,703
)
    
(30,263
)
Other-than-temporary impairments on fixed maturity securities
                                
transferred to other comprehensive income (loss)
    
-
      
-
      
-
      
-
  
Other net realized capital gains (losses)
    
27,743
      
34,128
      
81,699
      
(11,338
)
Total net realized capital gains (losses)
    
25,268
      
32,658
      
77,996
      
(41,601
)
Net derivative gain (loss)
    
766
      
1,996
      
3,396
      
(1,024
)
Other income (expense)
    
388
      
(28,367
)
    
(4,578
)
    
(30,433
)
Total revenues
    
1,530,611
      
1,427,884
      
3,015,389
      
2,669,930
  
                                 
CLAIMS AND EXPENSES:
                                
Incurred losses and loss adjustment expenses
    
861,275
      
857,816
      
1,632,063
      
1,558,565
  
Commission, brokerage, taxes and fees
    
299,956
      
295,502
      
582,225
      
570,508
  
Other underwriting expenses
    
78,869
      
72,077
      
154,756
      
144,187
  
Corporate expenses
    
6,919
      
7,117
      
15,376
      
15,003
  
Interest, fees and bond issue cost amortization expense
    
8,059
      
9,073
      
17,023
      
18,301
  
Total claims and expenses
    
1,255,078
      
1,241,585
      
2,401,443
      
2,306,564
  
                                 
INCOME (LOSS) BEFORE TAXES
    
275,533
      
186,299
      
613,946
      
363,366
  
Income tax expense (benefit)
    
29,859
      
30,607
      
76,629
      
35,988
  
                                 
NET INCOME (LOSS)
  
$
245,674
    
$
155,692
    
$
537,317
    
$
327,378
  
                                 
Other comprehensive income (loss), net of tax:
                                
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
    
4,868
      
124,356
      
24,416
      
267,318
  
Reclassification adjustment for realized losses (gains) included in net income (loss)
    
(8,993
)
    
(1,448
)
    
(11,192
)
    
30,933
  
Total URA(D) on securities arising during the period
    
(4,125
)
    
122,908
      
13,224
      
298,251
  
                                 
Foreign currency translation adjustments
    
35,667
      
5,050
      
47,560
      
14,823
  
                                 
Benefit plan actuarial net gain (loss) for the period
    
-
      
-
      
-
      
-
  
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
    
2,004
      
1,341
      
4,008
      
2,681
  
Total benefit plan net gain (loss) for the period
    
2,004
      
1,341
      
4,008
      
2,681
  
Total other comprehensive income (loss), net of tax
    
33,546
      
129,299
      
64,792
      
315,755
  
                                 
COMPREHENSIVE INCOME (LOSS)
  
$
279,220
    
$
284,991
    
$
602,109
    
$
643,133
  
                                 
EARNINGS PER COMMON SHARE:
                                
Basic
  
$
5.98
    
$
3.70
    
$
13.10
    
$
7.73
  
Diluted
    
5.95
      
3.67
      
13.02
      
7.68
  
Dividends declared
    
1.25
      
1.15
      
2.50
      
2.30
  



EVEREST RE GROUP, LTD.
            
CONSOLIDATED BALANCE SHEETS
            
             
             
   
June 30,
    
December 31,
  
(Dollars and share amounts in thousands, except par value per share)
  
2017
    
2016
  
   
(unaudited)
        
ASSETS:
            
Fixed maturities - available for sale, at market value
  
$
14,922,035
    
$
14,107,408
  
(amortized cost: 2017, $14,756,926; 2016, $13,932,613)
                
Equity securities - available for sale, at market value (cost: 2017, $110,724; 2016, $129,553)
    
107,430
      
119,067
  
Equity securities - available for sale, at fair value
    
1,071,390
      
1,010,085
  
Short-term investments
    
326,585
      
431,478
  
Other invested assets (cost: 2017, $1,303,231; 2016, $1,333,069)
    
1,304,556
      
1,333,129
  
Cash
    
469,205
      
481,922
  
Total investments and cash
    
18,201,201
      
17,483,089
  
Accrued investment income
    
96,928
      
96,473
  
Premiums receivable
    
1,830,520
      
1,485,990
  
Reinsurance receivables
    
1,036,998
      
1,018,325
  
Funds held by reinsureds
    
272,526
      
260,644
  
Deferred acquisition costs
    
357,325
      
344,052
  
Prepaid reinsurance premiums
    
281,345
      
191,768
  
Income taxes
    
167,913
      
177,704
  
Other assets
    
277,135
      
263,459
  
TOTAL ASSETS
  
$
22,521,891
    
$
21,321,504
  
                 
LIABILITIES:
                
Reserve for losses and loss adjustment expenses
  
$
10,475,705
    
$
10,312,313
  
Future policy benefit reserve
    
54,238
      
55,074
  
Unearned premium reserve
    
1,744,527
      
1,577,546
  
Funds held under reinsurance treaties
    
23,276
      
21,278
  
Commission reserves
    
53,996
      
70,335
  
Other net payable to reinsurers
    
262,462
      
190,986
  
Losses in course of payment
    
356,330
      
67,107
  
4.868% Senior notes due 6/1/2044
    
396,774
      
396,714
  
6.6% Long term notes due 5/1/2067
    
236,511
      
236,462
  
Accrued interest on debt and borrowings
    
2,632
      
3,537
  
Equity index put option liability
    
18,662
      
22,059
  
Unsettled securities payable
    
86,931
      
27,927
  
Other liabilities
    
225,049
      
264,770
  
Total liabilities
    
13,937,093
      
13,246,108
  
                 
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; (2017) 69,037
                
and (2016) 68,871 outstanding before treasury shares
    
691
      
689
  
Additional paid-in capital
    
2,150,659
      
2,140,783
  
Accumulated other comprehensive income (loss), net of deferred income tax expense
                
(benefit) of $758 at 2017 and $8,240 at 2016
    
(151,972
)
    
(216,764
)
Treasury shares, at cost; 27,972 shares 2017 and 2016
    
(3,272,244
)
    
(3,272,244
)
Retained earnings
    
9,857,664
      
9,422,932
  
Total shareholders' equity
    
8,584,798
      
8,075,396
  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  
$
22,521,891
    
$
21,321,504
  


EVEREST RE GROUP, LTD.
            
CONSOLIDATED STATEMENTS OF CASH FLOWS
            
             
             
   
Six Months Ended
  
   
June 30,
  
(Dollars in thousands)
  
2017
    
2016
  
   
(unaudited)
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income (loss)
  
$
537,317
    
$
327,378
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Decrease (increase) in premiums receivable
    
(337,069
)
    
20,168
  
Decrease (increase) in funds held by reinsureds, net
    
(7,980
)
    
45,656
  
Decrease (increase) in reinsurance receivables
    
8,270
      
(68,284
)
Decrease (increase) in income taxes
    
18,362
      
(10,424
)
Decrease (increase) in prepaid reinsurance premiums
    
(87,091
)
    
(51,243
)
Increase (decrease) in reserve for losses and loss adjustment expenses
    
97,493
      
352,147
  
Increase (decrease) in future policy benefit reserve
    
(836
)
    
(1,083
)
Increase (decrease) in unearned premiums
    
161,009
      
(119,315
)
Increase (decrease) in other net payable to reinsurers
    
65,929
      
46,508
  
Increase (decrease) in losses in course of payment
    
288,557
      
11,188
  
Change in equity adjustments in limited partnerships
    
(31,032
)
    
(16,518
)
Distribution of limited partnership income
    
22,992
      
41,296
  
Change in other assets and liabilities, net
    
(61,765
)
    
26,102
  
Non-cash compensation expense
    
15,725
      
14,262
  
Amortization of bond premium (accrual of bond discount)
    
22,475
      
24,125
  
Amortization of underwriting discount on senior notes
    
2
      
2
  
Net realized capital (gains) losses
    
(77,996
)
    
41,601
  
Net cash provided by (used in) operating activities
    
634,362
      
683,566
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from fixed maturities matured/called - available for sale, at market value
    
1,145,162
      
923,832
  
Proceeds from fixed maturities sold - available for sale, at market value
    
991,209
      
594,764
  
Proceeds from fixed securities sold - available for sale, at fair value
    
-
      
1,587
  
Proceeds from equity securities sold - available for sale, at market value
    
18,802
      
226
  
Proceeds from equity securities sold - available for sale, at fair value
    
258,226
      
430,038
  
Distributions from other invested assets
    
2,476,399
      
2,261,682
  
Cost of fixed maturities acquired - available for sale, at market value
    
(2,880,188
)
    
(1,932,527
)
Cost of equity securities acquired - available for sale, at market value
    
(2,610
)
    
(2,393
)
Cost of equity securities acquired - available for sale, at fair value
    
(258,543
)
    
(194,043
)
Cost of other invested assets acquired
    
(2,431,281
)
    
(2,711,306
)
Net change in short-term investments
    
105,566
      
271,913
  
Net change in unsettled securities transactions
    
47,800
      
59,619
  
Net cash provided by (used in) investing activities
    
(529,458
)
    
(296,608
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Common shares issued during the period, net
    
(5,847
)
    
2,683
  
Purchase of treasury shares
    
-
      
(186,357
)
Dividends paid to shareholders
    
(102,585
)
    
(96,838
)
Cost of shares withheld for taxes on settlements of share-based compensation awards
    
(12,407
)
    
(9,090
)
Net cash provided by (used in) financing activities
    
(120,839
)
    
(289,602
)
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
3,218
      
48,273
  
                 
Net increase (decrease) in cash
    
(12,717
)
    
145,629
  
Cash, beginning of period
    
481,922
      
283,658
  
Cash, end of period
  
$
469,205
    
$
429,287
  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
                
Income taxes paid (recovered)
  
$
57,772
    
$
41,905
  
Interest paid
    
16,704
      
18,192
  
 

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