Attached files
| file | filename |
|---|---|
| 8-K - GROUP 8-K 3Q 2017 - EVEREST RE GROUP LTD | group8k3q2017.htm |
|
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 Third Quarter 2017 Results
HAMILTON, Bermuda – October 30, 2017 -- Everest Re Group, Ltd. (NYSE: RE) today reported a net loss of $639.4 million, or $15.73 per common share for the third quarter 2017 compared to net income of $295.4 million, or $7.06 per diluted common share, for the third quarter of 2016. The after-tax operating loss1, excluding realized capital gains and losses, was $667.6 million, or $16.43 per common share, for the third quarter of 2017, compared to after-tax operating income1 of $273.2 million, or $6.53 per diluted common share, for the same period last year.
As previously announced, third quarter results included catastrophe losses, net of reinstatement premiums, of $1.2 billion for hurricanes Harvey, Irma, Maria and the Mexico City earthquake. The net after-tax impact on earnings from these events was $897.7 million or $22.09 per common share for the quarter.
For the nine months ended September 30, 2017, the net loss was $102.1 million, or $2.51 per common share, compared to net income of $622.8 million, or $14.70 per diluted common share, for the first nine months of 2016. The after-tax operating loss1, excluding realized capital gains and losses, was $180.6 million, or $4.45 per common share, compared to after-tax operating income¹ of $630.1 million or $14.87 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, "This series of natural catastrophes highlights the nature of our business model. We have consistently generated strong margins which gives us the financial ability to respond to these events, without impairment. We are proud to be part of an industry that provides financial security to its customers in times of need. Looking forward, market conditions are expected to be more favorable allowing the industry to continue on a sound footing. We should benefit to a greater degree given the strong underwriting fundamentals of our portfolio."
1
Operating highlights for the third quarter of 2017 included the following:
|
·
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Gross written premiums for the quarter were $2.0 billion, an increase of 15% compared to the third quarter of 2016. Worldwide, reinsurance premiums were up 25%, but adjusting for the high level of reinstatement premiums and the modest impact of foreign currency movements in the quarter, premiums in this division were up 13%. The growth in the reinsurance book is attributable to the new crop reinsurance program, growing premium from financial lines business, and increased shares on existing business. Insurance premiums were down 10%, quarter over quarter, but excluding the HCI crop business sold in 2016, premium was up 30%, with continued growth on new initiatives.
|
|
·
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The combined ratio for the quarter was 163.6% compared to 85.6% in the third quarter of 2016. Excluding catastrophe losses, reinstatement premiums, and nominal prior period loss development, the current quarter attritional combined ratio was 85.5% compared to 84.4% in the same period last year.
|
|
·
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Net investment income was up 12% for the quarter to $137.0 million.
|
|
·
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Other expense largely represents an after-tax foreign exchange loss of $43.5 million, or $1.07 per common share, driven by the revaluation of foreign currency loss reserves and the strengthening of certain currencies against the U.S. dollar. The offsetting foreign exchange impact on the assets that are held in these same currencies is shown in Other Comprehensive Income.
|
|
·
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Net after-tax realized capital gains amounted to $28.2 million and net after-tax unrealized losses were $11.2 million for the quarter.
|
|
·
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Cash flow from operations was $409.9 million compared to $277.2 million for the same period in 2016.
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|
·
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Shareholders' equity ended the quarter at $8.0 billion, down slightly from year end 2016. Book value per share was down from $197.45 at December 31, 2016 to $194.05 at September 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 Reinsurance
2
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 third quarter results will be held at 10:30 a.m. Eastern Time on October 31, 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:
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Three Months Ended
|
Nine Months Ended
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||||||||||||||||||||||||||||||
|
|
September 30,
|
September 30,
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||||||||||||||||||||||||||||||
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(Dollars in thousands, except per share amounts)
|
2017
|
2016
|
2017
|
2016
|
||||||||||||||||||||||||||||
|
|
(unaudited)
|
(unaudited)
|
||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
|
Per
|
Per Diluted
|
Per
|
Per Diluted
|
||||||||||||||||||||||||||||
|
|
Common
|
Common
|
Common
|
Common
|
||||||||||||||||||||||||||||
|
|
Amount
|
Share
|
Amount
|
Share
|
Amount
|
Share
|
Amount
|
Share
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Net income (loss)
|
$
|
(639,374
|
)
|
$
|
(15.73
|
)
|
$
|
295,394
|
$
|
7.06
|
$
|
(102,057
|
)
|
$
|
(2.51
|
)
|
$
|
622,772
|
$
|
14.70
|
||||||||||||
|
After-tax net realized capital gains (losses)
|
28,246
|
0.70
|
22,215
|
0.53
|
78,580
|
1.94
|
(7,302
|
)
|
(0.17
|
)
|
||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
After-tax operating income (loss)
|
$
|
(667,620
|
)
|
$
|
(16.43
|
)
|
$
|
273,179
|
$
|
6.53
|
$
|
(180,637
|
)
|
$
|
(4.45
|
)
|
$
|
630,074
|
$
|
14.87
|
||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
(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.
--Financial Details Follow--
3
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EVEREST RE GROUP, LTD.
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||||||||||||||||
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CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
|
AND COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
(Dollars in thousands, except per share amounts)
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
(unaudited)
|
(unaudited)
|
|||||||||||||||
|
REVENUES:
|
||||||||||||||||
|
Premiums earned
|
$
|
1,598,875
|
$
|
1,371,474
|
$
|
4,280,653
|
$
|
3,879,201
|
||||||||
|
Net investment income
|
136,973
|
122,657
|
393,770
|
357,918
|
||||||||||||
|
Net realized capital gains (losses):
|
||||||||||||||||
|
Other-than-temporary impairments on fixed maturity securities
|
(1,485
|
)
|
(867
|
)
|
(5,188
|
)
|
(31,130
|
)
|
||||||||
|
Other-than-temporary impairments on fixed maturity securities
|
||||||||||||||||
|
transferred to other comprehensive income (loss)
|
-
|
-
|
-
|
-
|
||||||||||||
|
Other net realized capital gains (losses)
|
43,020
|
1,247
|
124,719
|
(10,091
|
)
|
|||||||||||
|
Total net realized capital gains (losses)
|
41,535
|
380
|
119,531
|
(41,221
|
)
|
|||||||||||
|
Net derivative gain (loss)
|
2,656
|
6,510
|
6,052
|
5,486
|
||||||||||||
|
Other income (expense)
|
(54,568
|
)
|
9,435
|
(59,146
|
)
|
(20,998
|
)
|
|||||||||
|
Total revenues
|
1,725,471
|
1,510,456
|
4,740,860
|
4,180,386
|
||||||||||||
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CLAIMS AND EXPENSES:
|
||||||||||||||||
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Incurred losses and loss adjustment expenses
|
2,210,082
|
786,168
|
3,842,145
|
2,344,733
|
||||||||||||
|
Commission, brokerage, taxes and fees
|
333,113
|
309,545
|
915,338
|
880,053
|
||||||||||||
|
Other underwriting expenses
|
73,145
|
78,563
|
227,901
|
222,750
|
||||||||||||
|
Corporate expenses
|
5,932
|
6,400
|
21,308
|
21,403
|
||||||||||||
|
Interest, fees and bond issue cost amortization expense
|
7,266
|
8,893
|
24,289
|
27,194
|
||||||||||||
|
Total claims and expenses
|
2,629,538
|
1,189,569
|
5,030,981
|
3,496,133
|
||||||||||||
|
INCOME (LOSS) BEFORE TAXES
|
(904,067
|
)
|
320,887
|
(290,121
|
)
|
684,253
|
||||||||||
|
Income tax expense (benefit)
|
(264,693
|
)
|
25,493
|
(188,064
|
)
|
61,481
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
(639,374
|
)
|
$
|
295,394
|
$
|
(102,057
|
)
|
$
|
622,772
|
||||||
|
Other comprehensive income (loss), net of tax:
|
||||||||||||||||
|
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
|
(5,671
|
)
|
(9,032
|
)
|
18,745
|
258,286
|
||||||||||
|
Reclassification adjustment for realized losses (gains) included in net income (loss)
|
(5,537
|
)
|
(3,222
|
)
|
(16,729
|
)
|
27,711
|
|||||||||
|
Total URA(D) on securities arising during the period
|
(11,208
|
)
|
(12,254
|
)
|
2,016
|
285,997
|
||||||||||
|
Foreign currency translation adjustments
|
77,564
|
2,816
|
125,124
|
17,639
|
||||||||||||
|
Benefit plan actuarial net gain (loss) for the period
|
-
|
-
|
-
|
-
|
||||||||||||
|
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
|
1,369
|
1,268
|
5,377
|
3,949
|
||||||||||||
|
Total benefit plan net gain (loss) for the period
|
1,369
|
1,268
|
5,377
|
3,949
|
||||||||||||
|
Total other comprehensive income (loss), net of tax
|
67,725
|
(8,170
|
)
|
132,517
|
307,585
|
|||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
(571,649
|
)
|
$
|
287,224
|
$
|
30,460
|
$
|
930,357
|
|||||||
|
EARNINGS PER COMMON SHARE:
|
||||||||||||||||
|
Basic
|
$
|
(15.73
|
)
|
$
|
7.11
|
$
|
(2.51
|
)
|
$
|
14.80
|
||||||
|
Diluted
|
(15.73
|
)
|
7.06
|
(2.51
|
)
|
14.70
|
||||||||||
|
Dividends declared
|
1.25
|
1.15
|
3.75
|
3.45
|
||||||||||||
|
EVEREST RE GROUP, LTD.
|
||||||||
|
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
September 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
|
$
|
14,778,175
|
$
|
14,107,408
|
||||
|
(amortized cost: 2017, $14,626,754; 2016, $13,932,613)
|
||||||||
|
Equity securities - available for sale, at market value (cost: 2017, $128,116; 2016, $129,553)
|
127,425
|
119,067
|
||||||
|
Equity securities - available for sale, at fair value
|
1,141,146
|
1,010,085
|
||||||
|
Short-term investments
|
362,376
|
431,478
|
||||||
|
Other invested assets (cost: 2017, $1,484,599; 2016, $1,333,069)
|
1,487,519
|
1,333,129
|
||||||
|
Cash
|
585,395
|
481,922
|
||||||
|
Total investments and cash
|
18,482,036
|
17,483,089
|
||||||
|
Accrued investment income
|
101,092
|
96,473
|
||||||
|
Premiums receivable
|
2,071,714
|
1,485,990
|
||||||
|
Reinsurance receivables
|
1,366,890
|
1,018,325
|
||||||
|
Funds held by reinsureds
|
269,783
|
260,644
|
||||||
|
Deferred acquisition costs
|
396,858
|
344,052
|
||||||
|
Prepaid reinsurance premiums
|
314,949
|
191,768
|
||||||
|
Income taxes
|
415,182
|
177,704
|
||||||
|
Other assets
|
517,765
|
263,459
|
||||||
|
TOTAL ASSETS
|
$
|
23,936,269
|
$
|
21,321,504
|
||||
|
LIABILITIES:
|
||||||||
|
Reserve for losses and loss adjustment expenses
|
$
|
12,455,357
|
$
|
10,312,313
|
||||
|
Future policy benefit reserve
|
54,279
|
55,074
|
||||||
|
Unearned premium reserve
|
1,992,907
|
1,577,546
|
||||||
|
Funds held under reinsurance treaties
|
21,768
|
21,278
|
||||||
|
Commission reserves
|
40,075
|
70,335
|
||||||
|
Other net payable to reinsurers
|
269,230
|
190,986
|
||||||
|
Losses in course of payment
|
205,215
|
67,107
|
||||||
|
4.868% Senior notes due 6/1/2044
|
396,804
|
396,714
|
||||||
|
6.6% Long term notes due 5/1/2067
|
236,536
|
236,462
|
||||||
|
Accrued interest on debt and borrowings
|
7,564
|
3,537
|
||||||
|
Equity index put option liability
|
16,006
|
22,059
|
||||||
|
Unsettled securities payable
|
54,711
|
27,927
|
||||||
|
Other liabilities
|
216,486
|
264,770
|
||||||
|
Total liabilities
|
15,966,938
|
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) 69,040
|
||||||||
|
and (2016) 68,871 outstanding before treasury shares
|
691
|
689
|
||||||
|
Additional paid-in capital
|
2,158,143
|
2,140,783
|
||||||
|
Accumulated other comprehensive income (loss), net of deferred income tax expense
|
||||||||
|
(benefit) of $21,672 at 2017 and $8,240 at 2016
|
(84,247
|
)
|
(216,764
|
)
|
||||
|
Treasury shares, at cost; 27,972 shares 2017 and 2016
|
(3,272,244
|
)
|
(3,272,244
|
)
|
||||
|
Retained earnings
|
9,166,988
|
9,422,932
|
||||||
|
Total shareholders' equity
|
7,969,331
|
8,075,396
|
||||||
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
23,936,269
|
$
|
21,321,504
|
||||
|
EVEREST RE GROUP, LTD.
|
||||||||
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
|
Nine Months Ended
|
||||||||
|
September 30,
|
||||||||
|
(Dollars in thousands)
|
2017
|
2016
|
||||||
|
(unaudited)
|
||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net income (loss)
|
$
|
(102,057
|
)
|
$
|
622,772
|
|||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Decrease (increase) in premiums receivable
|
(564,080
|
)
|
(185,559
|
)
|
||||
|
Decrease (increase) in funds held by reinsureds, net
|
(4,742
|
)
|
46,134
|
|||||
|
Decrease (increase) in reinsurance receivables
|
(245,275
|
)
|
(87,807
|
)
|
||||
|
Decrease (increase) in income taxes
|
(247,571
|
)
|
15,935
|
|||||
|
Decrease (increase) in prepaid reinsurance premiums
|
(109,913
|
)
|
(66,147
|
)
|
||||
|
Increase (decrease) in reserve for losses and loss adjustment expenses
|
1,927,538
|
470,560
|
||||||
|
Increase (decrease) in future policy benefit reserve
|
(795
|
)
|
(1,912
|
)
|
||||
|
Increase (decrease) in unearned premiums
|
389,731
|
89,013
|
||||||
|
Increase (decrease) in other net payable to reinsurers
|
59,356
|
85,493
|
||||||
|
Increase (decrease) in losses in course of payment
|
137,805
|
7,673
|
||||||
|
Change in equity adjustments in limited partnerships
|
(54,155
|
)
|
(33,289
|
)
|
||||
|
Distribution of limited partnership income
|
36,859
|
52,913
|
||||||
|
Change in other assets and liabilities, net
|
(116,623
|
)
|
(154,765
|
)
|
||||
|
Non-cash compensation expense
|
23,011
|
20,359
|
||||||
|
Amortization of bond premium (accrual of bond discount)
|
34,657
|
38,151
|
||||||
|
Amortization of underwriting discount on senior notes
|
3
|
3
|
||||||
|
Net realized capital (gains) losses
|
(119,531
|
)
|
41,221
|
|||||
|
Net cash provided by (used in) operating activities
|
1,044,218
|
960,748
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Proceeds from fixed maturities matured/called - available for sale, at market value
|
1,619,552
|
1,439,002
|
||||||
|
Proceeds from fixed maturities sold - available for sale, at market value
|
1,691,937
|
888,761
|
||||||
|
Proceeds from fixed maturities sold - available for sale, at fair value
|
-
|
1,588
|
||||||
|
Proceeds from equity securities sold - available for sale, at market value
|
18,802
|
155
|
||||||
|
Proceeds from equity securities sold - available for sale, at fair value
|
316,087
|
542,560
|
||||||
|
Distributions from other invested assets
|
3,555,941
|
3,600,587
|
||||||
|
Proceeds from sale of subsidiary (net of cash disposed)
|
-
|
47,721
|
||||||
|
Cost of fixed maturities acquired - available for sale, at market value
|
(3,774,584
|
)
|
(2,974,792
|
)
|
||||
|
Cost of fixed maturities acquired - available for sale, at fair value
|
-
|
(3,940
|
)
|
|||||
|
Cost of equity securities acquired - available for sale, at market value
|
(19,196
|
)
|
(4,194
|
)
|
||||
|
Cost of equity securities acquired - available for sale, at fair value
|
(351,220
|
)
|
(269,544
|
)
|
||||
|
Cost of other invested assets acquired
|
(3,676,606
|
)
|
(4,131,419
|
)
|
||||
|
Net change in short-term investments
|
74,000
|
488,047
|
||||||
|
Net change in unsettled securities transactions
|
(219,208
|
)
|
44,494
|
|||||
|
Net cash provided by (used in) investing activities
|
(764,495
|
)
|
(330,974
|
)
|
||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Common shares issued during the period, net
|
(5,650
|
)
|
5,315
|
|||||
|
Purchase of treasury shares
|
-
|
(379,228
|
)
|
|||||
|
Dividends paid to shareholders
|
(153,887
|
)
|
(144,297
|
)
|
||||
|
Cost of shares withheld for taxes on settlements of share-based compensation awards
|
(12,707
|
)
|
(10,017
|
)
|
||||
|
Net cash provided by (used in) financing activities
|
(172,244
|
)
|
(528,227
|
)
|
||||
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
(4,006
|
)
|
50,590
|
|||||
|
Net increase (decrease) in cash
|
103,473
|
152,137
|
||||||
|
Cash, beginning of period
|
481,922
|
283,658
|
||||||
|
Cash, end of period
|
$
|
585,395
|
$
|
435,795
|
||||
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
||||||||
|
Income taxes paid (recovered)
|
$
|
58,701
|
$
|
40,072
|
||||
|
Interest paid
|
19,783
|
18,227
|
||||||