Everest

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Everest Re Group Reports Record Earnings for Fourth Quarter and Full Year 2013; Return on Equity of 20% and 12% Growth in Book Value Per Share for Full Year

HAMILTON, Bermuda--(BUSINESS WIRE)--Feb. 5, 2014-- Everest Re Group, Ltd. (NYSE:RE) today reported fourth quarter 2013 net income available to common shareholders of $364.6 million, or $7.54 per diluted common share, compared to net income of $58.8 million, or $1.13 per diluted common share, for the fourth quarter of 2012. After-tax operating income1 available to common shareholders, excluding realized capital gains and losses, was $303.4 million, or $6.28 per diluted common share, for the fourth quarter of 2013, compared to $41.7 million, or $0.80 per diluted common share, for the same period in 2012.

For the year ended December 31, 2013, net income available to common shareholders was $1.3 billion, or $25.44 per diluted common share, compared to net income of $829.0 million, or $15.79 per diluted common share, for 2012. After-tax operating income1 available to common shareholders, excluding realized capital gains and losses, was $1.1 billion, or $21.47 per diluted common share, for the full year 2013, compared to $715.2 million or $13.62 per common share, for 2012.

Commenting on the Company’s results, President and Chief Executive Officer, Dominic J. Addesso said, “Everest has reached another milestone with record earnings of $1.3 billion and a 20% return on equity. This is certainly a reflection of the effort over the last several years to position the company for profitable growth. We continue to strategically maneuver through a challenging marketplace and are confident that the portfolio we put together post January renewals can produce another strong year in 2014.”

Operating highlights for the fourth quarter and full year of 2013 included the following:

  • Gross written premiums for the quarter were $1.3 billion, an increase of 14% compared to the fourth quarter of 2012. For the full year, gross written premiums grew 21% to $5.2 billion with reinsurance premiums up 21% and direct insurance premiums up 18%.
  • The combined ratio was 81.5% for the quarter and 84.5% for the year, compared to 108.4% and 93.8%, respectively, for the same periods in 2012. The quarter included $24.5m of catastrophe losses, net of reinstatement premiums, for the Pacific storm, Typhoon Fitow, which largely impacted China. For the full year, net pre-tax catastrophe losses totaled $177.7 million. Excluding catastrophe losses, reinstatement premiums and favorable prior year loss development, the calendar year attritional combined ratio improved 4 points to 81.0% for 2013.
  • Net investment income amounted to $126.1 million for the quarter and $548.5 million for the full year 2013. This included limited partnership income of $5.3 million and $46.9 million in each period, respectively.
  • Net after-tax realized capital gains totaled $61.3 million for the quarter and $196.8 million for the full year. Unrealized losses, net of tax, on the fixed income portfolio amounted to $55.0 million in the quarter and $402.8 million for the year, driven by changes in interest rates.
  • Cash flow from operations was $273.3 million for the quarter and $1.1 billion for the full year 2013. This compared to $193.4 million and $694.6 million for the same periods, respectively, in 2012.
  • For the year, the after-tax operating income1 return on average adjusted shareholders’ equity2 was 16.5% and net income return on equity was 19.5%.
  • During the quarter, the Company repurchased 472,437 of its common shares at an average price of $152.29 and a total cost of $72.0 million. For the year, the Company repurchased 4.7 million of its common shares for a total cost of $621.9 million. During January, the Company repurchased an additional 185,619 shares for a total cost of $28.0 million, which will be reflected in first quarter 2014 reporting. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 4.4 million shares available.
  • Shareholders’ equity ended the year at $7.0 billion, up 3.5% from the $6.7 billion at December 31, 2012. Book value per share increased 12% from $130.96 at year-end 2012 to $146.57 at December 31, 2013.

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. 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 fourth quarter results will be held at 10:30 a.m. Eastern Time on February 6, 2014. 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     Twelve Months Ended
December 31, December 31,
(Dollars in thousands, except per share amounts) 2013     2012 2013     2012
(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)* $ 364,638 $ 7.54 $ 58,777 $ 1.13 $ 1,259,382 $ 25.44 $ 828,954 $ 15.79
After-tax net realized capital gains (losses)   61,285       1.27   17,126       0.33   196,829       3.98   113,792       2.17
 
After-tax operating income (loss)* $ 303,353     $ 6.28 $ 41,651     $ 0.80 $ 1,062,553     $ 21.47 $ 715,162     $ 13.62
 
* attributable to common shareholders
(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

 
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
 
 
        Three Months Ended     Twelve Months Ended
December 31, December 31,
(Dollars in thousands, except per share amounts) 2013     2012 2013       2012
(unaudited) (unaudited)
REVENUES:
Premiums earned $ 1,287,496 $ 1,119,396 $ 4,753,543 $ 4,164,628
Net investment income 126,127 146,411 548,509 600,202
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities (861 ) (120 ) (1,052 ) (10,022 )
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss) - - - -
Other net realized capital gains (losses)   95,490     19,638     301,279     174,422  
Total net realized capital gains (losses) 94,629 19,518 300,227 164,400
Net derivative gain (loss) 11,039 (318 ) 44,044 (9,738 )
Other income (expense)   (2,169 )   (12,357 )   (5,487 )   3,318  
Total revenues   1,517,122     1,272,650     5,640,836     4,922,810  
 
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses 725,915 931,275 2,800,251 2,745,265
Commission, brokerage, taxes and fees 253,858 228,327 977,558 952,701
Other underwriting expenses 69,419 53,727 237,126 207,659
Corporate expenses 8,174 7,293 24,817 23,976
Interest, fees and bond issue cost amortization expense   7,638     13,930     46,118     53,683  
Total claims and expenses   1,065,004     1,234,552     4,085,870     3,983,284  
 
INCOME (LOSS) BEFORE TAXES 452,118 38,098 1,554,966 939,526
Income tax expense (benefit)   85,370     (20,679 )   289,706     110,572  
 
NET INCOME (LOSS) $ 366,748 $ 58,777 $ 1,265,260 $ 828,954
Net (income) loss attributable to noncontrolling interests   (2,110 )   -     (5,878 )   -  
NET INCOME (LOSS) ATTRIBUTABLE TO EVEREST RE GROUP $ 364,638 $ 58,777 $ 1,259,382 $ 828,954
 
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period (55,530 ) (28,204 ) (395,797 ) 174,025
Reclassification adjustment for realized losses (gains) included in net income (loss)   534     (13,974 )   (6,977 )   (19,676 )
Total URA(D) on securities arising during the period (54,996 ) (42,178 ) (402,774 ) 154,349
 
Foreign currency translation adjustments 13,066 (4,427 ) (162 ) 22,698
 
Benefit plan actuarial net gain (loss) for the period 17,837 (11,771 ) 17,837 (11,771 )
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)   1,617     1,629     5,778     4,795  
Total benefit plan net gain (loss) for the period   19,454     (10,142 )   23,615     (6,976 )
Total other comprehensive income (loss), net of tax   (22,476 )   (56,747 )   (379,321 )   170,071  
Other comprehensive (income) loss attributable to noncontrolling interests   -     -     -     -  
Total other comprehensive income (loss), net of tax attributable to Everest Re Group   (22,476 )   (56,747 )   (379,321 )   170,071  
 
COMPREHENSIVE INCOME (LOSS) $ 342,162   $ 2,030   $ 880,061   $ 999,025  
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO EVEREST RE GROUP:
Basic $ 7.62 $ 1.14 $ 25.67 $ 15.85
Diluted 7.54 1.13 25.44 15.79
Dividends declared 0.75 0.48 2.19 1.92
 
 
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
 
 
        December 31,
(Dollars and share amounts in thousands, except par value per share) 2013     2012
(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value $ 12,636,907 $ 13,141,657
(amortized cost: 2013, $12,391,164; 2012, $12,444,880)
Fixed maturities - available for sale, at fair value 19,388 41,470
Equity securities - available for sale, at market value (cost: 2013, $148,342; 2012, $131,630) 144,081 143,493
Equity securities - available for sale, at fair value 1,462,079 1,255,557
Short-term investments 1,214,199 860,379
Other invested assets (cost: 2013, $508,447; 2012, $596,590) 508,447 596,590
Cash   611,382     537,050  
Total investments and cash 16,596,483 16,576,196
Accrued investment income 119,058 130,209
Premiums receivable 1,453,114 1,237,859
Reinsurance receivables 540,883 659,081
Funds held by reinsureds 228,000 228,375
Deferred acquisition costs 363,721 303,268
Prepaid reinsurance premiums 81,779 71,107
Deferred tax asset 146,281 262,024
Income taxes recoverable 32,053 68,442
Other assets   246,664     241,346  
TOTAL ASSETS $ 19,808,036   $ 19,777,907  
 
LIABILITIES:
Reserve for losses and loss adjustment expenses $ 9,673,240 $ 10,069,055
Future policy benefit reserve 59,512 66,107
Unearned premium reserve 1,579,945 1,322,525
Funds held under reinsurance treaties 2,692 2,755
Commission reserves 66,160 65,533
Other net payable to reinsurers 116,387 162,778
Losses in course of payment 332,631 191,076
5.4% Senior notes due 10/15/2014 249,958 249,907
6.6% Long term notes due 5/1/2067 238,361 238,357
Junior subordinated debt securities payable - 329,897
Accrued interest on debt and borrowings 4,781 4,781
Equity index put option liability 35,423 79,467
Unsettled securities payable 53,867 48,830
Other liabilities   333,425     213,372  
Total liabilities   12,746,382     13,044,440  
 
NONCONTROLLING INTERESTS:
Redeemable noncontrolling interests - Mt. Logan Re   93,378     -  
 
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; (2013) 67,965
and (2012) 67,105 outstanding before treasury shares 680 671
Additional paid-in capital 2,029,774 1,946,439
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $57,661 at 2013 and $119,629 at 2012 157,728 537,049
Treasury shares, at cost; 20,422 shares (2013) and 15,687 shares (2012) (1,985,873 ) (1,363,958 )
Retained earnings   6,765,967     5,613,266  
Total shareholders' equity attributable to Everest Re Group, Ltd.   6,968,276     6,733,467  
TOTAL LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY $ 19,808,036   $ 19,777,907  
 
 
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
        Three Months Ended       Twelve Months Ended
December 31, December 31,
(Dollars in thousands) 2013       2012 2013       2012
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 366,748 $ 58,777 $ 1,265,260 $ 828,954
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable 183,945 (33,771 ) (217,678 ) (153,694 )
Decrease (increase) in funds held by reinsureds, net (323 ) (3,791 ) 162 42,298
Decrease (increase) in reinsurance receivables 196,128 (19,302 ) 118,963 (55,274 )
Decrease (increase) in current income taxes 19,503 (48,217 ) 36,233 (26,831 )
Decrease (increase) in deferred tax asset 64,337 16,013 177,615 64,909
Decrease (increase) in prepaid reinsurance premiums 8,736 34,759 (12,777 ) 16,358
Increase (decrease) in reserve for losses and loss adjustment expenses (98,134 ) 235,945 (374,027 ) (169,595 )
Increase (decrease) in future policy benefit reserve (5,743 ) 374 (6,595 ) (1,080 )
Increase (decrease) in unearned premiums (42,769 ) (46,193 ) 261,959 (98,418 )
Increase (decrease) in other net payable to reinsurers (108,745 ) (64,576 ) (45,043 ) 100,566
Increase (decrease) in losses in course of payment (262,644 ) 85,895 142,192 173,232
Change in equity adjustments in limited partnerships (5,212 ) (17,013 ) (45,905 ) (63,779 )
Distribution of limited partnership income 8,249 8,910 56,982 30,718
Change in other assets and liabilities, net 10,900 (20,125 ) (57,212 ) 76,788
Non-cash compensation expense 16,756 9,158 31,844 31,984
Amortization of bond premium (accrual of bond discount) 16,181 16,049 66,461 61,844
Amortization of underwriting discount on senior notes 13 14 54 52
Net realized capital (gains) losses   (94,629 )   (19,518 )   (300,227 )   (164,400 )
Net cash provided by (used in) operating activities   273,297     193,388     1,098,261     694,632  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value 502,752 535,686 2,415,730 1,830,582
Proceeds from fixed maturities matured/called - available for sale, at fair value - - 7,213 1,300
Proceeds from fixed maturities sold - available for sale, at market value 247,030 273,838 1,092,387 913,139
Proceeds from fixed maturities sold - available for sale, at fair value 3,175 11,991 21,573 84,917
Proceeds from equity securities sold - available for sale, at market value 393 150,015 46,142 280,807
Proceeds from equity securities sold - available for sale, at fair value 245,886 171,823 705,831 558,740
Distributions from other invested assets 20,392 22,512 100,081 53,736
Cost of fixed maturities acquired - available for sale, at market value (749,741 ) (1,184,638 ) (3,543,776 ) (3,328,409 )
Cost of fixed maturities acquired - available for sale, at fair value (1,398 ) (791 ) (6,196 ) (7,955 )
Cost of equity securities acquired - available for sale, at market value (5,172 ) (6,445 ) (59,756 ) (26,571 )
Cost of equity securities acquired - available for sale, at fair value (196,786 ) (121,461 ) (621,038 ) (426,507 )
Cost of other invested assets acquired (6,872 ) (8,688 ) (21,935 ) (58,369 )
Net change in short-term investments (350,043 ) 112,153 (357,451 ) (175,043 )
Net change in unsettled securities transactions   11,710     (30,872 )   (2,808 )   35,085  
Net cash provided by (used in) investing activities   (278,674 )   (74,877 )   (224,003 )   (264,548 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period, net (172 ) 1,605 51,500 21,473
Purchase of treasury shares (71,959 ) (39,963 ) (621,915 ) (289,988 )
Net cost of junior subordinated debt securities maturing - - (329,897 ) -
Third party investment in redeemable noncontrolling interest - - 87,500 -
Subscription advances for third party redeemable noncontrolling interest 143,000 - 143,000 -
Dividends paid to shareholders   (35,961 )   (24,735 )   (106,681 )   (100,402 )
Net cash provided by (used in) financing activities   34,908     (63,093 )   (776,493 )   (368,917 )
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH   (7,683 )   3,074     (23,433 )   27,232  
 
Net increase (decrease) in cash 21,848 58,492 74,332 88,399
Cash, beginning of period   589,534     478,558     537,050     448,651  
Cash, end of period $ 611,382   $ 537,050   $ 611,382   $ 537,050  
 
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered) $ 4,384 $ 5,291 $ 69,302 $ 59,754
Interest paid 14,866 21,072 38,390 53,008
 
Non-cash transaction:
Conversion of equity securities - available for sale, at market value, to fixed
maturity securities - available for sale, at market value, including accrued
interest at time of conversion - - - 92,981
 

Source: Everest Re Group, Ltd.

Everest Global Services, Inc.
Elizabeth B. Farrell, 908-604-3169
Vice President, Investor Relations