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Everest Re Group Reports Record Quarter Earnings Per Share of $9.08; Full Year Return on Equity of 13%

HAMILTON, Bermuda--(BUSINESS WIRE)--Feb. 6, 2017-- Everest Re Group, Ltd. (NYSE: RE) today reported fourth quarter 2016 net income available to common shareholders of $373.6 million, or $9.08 per diluted common share, compared to net income of $357.3 million, or $8.26 per diluted common share, for the fourth quarter of 2015. After-tax operating income1 available to common shareholders was $363.4 million, or $8.83 per diluted common share, for the fourth quarter of 2016, compared to after-tax operating income¹ of $353.5 million, or $8.17 per diluted common share, for the same period last year.

For the year ended December 31, 2016, net income available to common shareholders was $996.3 million, or $23.68 per diluted common share, compared to $977.9 million, or $22.10 per diluted common share, for 2015. After-tax operating income1 available to common shareholders was $993.5 million, or $23.61 per diluted common share, for the full year 2016, compared to $1.1 billion or $25.04 per diluted common share, for 2015.

Commenting on the Company’s results, President and Chief Executive Officer, Dominic J. Addesso said, “Everest had another record quarter and an outstanding year, generating 13% ROE and strong growth in book value per share, despite what continues to be a very challenging market. Our reinsurance book remains quite strong with a 77.6% combined ratio, which is remarkable when considering the string of global natural catastrophe events for the year. While our insurance operations’ results were mostly impacted by charges on discontinued books of business, the underlying fundamentals of this book continue to improve. We are confident in the future and expect Everest to continue to generate above average returns for its shareholders.”

Operating highlights for the fourth quarter and full year 2016 included the following:

  • Gross written premiums for the quarter were $1.5 billion, an increase of 3% compared to the fourth quarter of 2015. For the full year, gross written premiums grew 2% to $6.0 billion. Eliminating the unfavorable effects of foreign currency fluctuations, total premiums were actually up 4% for the year. Worldwide reinsurance premiums were essentially flat, on a constant dollar basis, while direct insurance premiums were up 17% for the year.
  • The combined ratio was 82.1% for the quarter and 87.0% for the year, compared to 78.9% and 85.1%, respectively, for the same periods in 2015. The quarter benefitted from net prior year reserve releases of $204.9 million and a net reduction to prior year catastrophe loss estimates of $18.4 million. This was offset by $168.6 million for catastrophe losses that occurred in the quarter, including Hurricane Matthew, the New Zealand earthquake, and the Tennessee wildfires. For the full year, catastrophe losses, net of reinstatement premiums, totaled $286.0 million. Excluding catastrophe losses, reinstatement premiums and favorable prior year loss development, the calendar year attritional combined ratio was 85.5% compared to 84.8% for 2015.
  • Net investment income amounted to $115.2 million for the quarter and $473.1 million for the full year 2016, with the latter essentially flat to 2015.
  • Net after-tax realized capital gains totaled $10.2 million in the quarter. For the full year, realized and unrealized capital gains, net of tax, amounted to $2.9 million and $72.7 million, respectively.
  • Cash flow from operations was $422.3 million for the quarter and $1.4 billion for the full year 2016. This compared to $294.8 million and $1.1 billion for the same periods, respectively, in 2015.
  • For the year, the after-tax operating income1 return on average adjusted shareholders’ equity2 was 12.8%.
  • During the quarter, the Company made only modest share repurchases. For the year, the Company repurchased 2.1 million of its common shares for a total cost of $386.3 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 2.0 million shares available.
  • Shareholders’ equity ended the year at $8.1 billion. Book value per share increased 11% from $178.21 at year-end 2015 to $197.45 at December 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 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 fourth quarter results will be held at 10:30 a.m. Eastern Time on February 7, 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.

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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) 2016   2015 2016   2015
(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) $ 373,572 $ 9.08 $ 357,281 $ 8.26 $ 996,344 $ 23.68 $ 977,869 $ 22.10
After-tax net realized capital gains (losses)   10,180   0.25   3,831   0.09   2,878   0.07   (130,192 )   (2.94 )
 
After-tax operating income (loss) $ 363,392 $ 8.83 $ 353,450 $ 8.17 $ 993,466 $ 23.61 $ 1,108,061   $ 25.04  
 
(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) 2016 2015 2016 2015
(unaudited) (unaudited)
REVENUES:
Premiums earned $ 1,441,265 $ 1,372,235 $ 5,320,466 $ 5,292,842
Net investment income 115,167 110,514 473,085 473,473
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities (465 ) (39,498 ) (31,595 ) (102,199 )
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss) - - - -
Other net realized capital gains (losses)   34,470     50,005     24,379     (81,948 )
Total net realized capital gains (losses) 34,005 10,507 (7,216 ) (184,147 )
Net derivative gain (loss) 13,161 11,542 18,647 6,317
Other income (expense)   10,362     13,812     (10,636 )   88,280  
Total revenues   1,613,960     1,518,610     5,794,346     5,676,765  
 
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses 794,896 699,764 3,139,629 3,064,715
Commission, brokerage, taxes and fees 308,639 314,839 1,188,692 1,183,646
Other underwriting expenses 79,972 68,446 302,722 257,069
Corporate expenses 5,828 5,942 27,231 23,254
Interest, fees and bond issue cost amortization expense   9,034     9,185     36,228     36,191  
Total claims and expenses   1,198,369     1,098,176     4,694,502     4,564,875  
 
INCOME (LOSS) BEFORE TAXES 415,591 420,434 1,099,844 1,111,890
Income tax expense (benefit)   42,019     63,153     103,500     134,021  
 
NET INCOME (LOSS) $ 373,572 $ 357,281 $ 996,344 $ 977,869
 
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period (200,656 ) (129,792 ) 57,629 (274,127 )
Reclassification adjustment for realized losses (gains) included in net income (loss)   (12,594 )   34,162     15,118     93,688  
Total URA(D) on securities arising during the period (213,250 ) (95,630 ) 72,747 (180,439 )
 
Foreign currency translation adjustments (72,980 ) (31,022 ) (55,341 ) (111,530 )
 
Benefit plan actuarial net gain (loss) for the period (7,488 ) 5,681 (7,488 ) 5,681
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)   1,124     1,447     5,073     6,216  
Total benefit plan net gain (loss) for the period   (6,364 )   7,128     (2,415 )   11,897  
Total other comprehensive income (loss), net of tax   (292,594 )   (119,524 )   14,991     (280,072 )
 
COMPREHENSIVE INCOME (LOSS) $ 80,978   $ 237,757   $ 1,011,335   $ 697,797  
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO EVEREST RE GROUP:
Basic $ 9.14 $ 8.32 $ 23.85 $ 22.29
Diluted 9.08 8.26 23.68 22.10
Dividends declared 1.25 1.15 4.70 4.00
 
         
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
 
 
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 $ 14,107,408 $ 13,357,294
(amortized cost: 2016, $13,932,613; 2015, $13,276,206)
Fixed maturities - available for sale, at fair value - 2,102
Equity securities - available for sale, at market value (cost: 2016, $129,553; 2015, $122,271) 119,067 108,940
Equity securities - available for sale, at fair value 1,010,085 1,337,733
Short-term investments 431,478 799,684
Other invested assets (cost: 2016, $1,333,069; 2015, $786,994) 1,333,129 786,994
Cash   481,922     283,658  
Total investments and cash 17,483,089 16,676,405
Accrued investment income 96,473 100,942
Premiums receivable 1,485,990 1,483,090
Reinsurance receivables 1,018,325 894,037
Funds held by reinsureds 260,644 278,673
Deferred acquisition costs 344,052 372,351
Prepaid reinsurance premiums 191,768 164,971
Income taxes 177,704 258,541
Other assets   263,459     316,408  
TOTAL ASSETS $ 21,321,504   $ 20,545,418  
 
LIABILITIES:
Reserve for losses and loss adjustment expenses $ 10,312,313 $ 9,951,798
Future policy benefit reserve 55,074 58,910
Unearned premium reserve 1,577,546 1,613,390
Funds held under reinsurance treaties 21,278 13,544
Commission reserves 70,335 60,098
Other net payable to reinsurers 190,986 173,087
Losses in course of payment 67,107 112,170
4.868% Senior notes due 6/1/2044 396,714 396,594
6.6% Long term notes due 5/1/2067 236,462 236,364
Accrued interest on debt and borrowings 3,537 3,537
Equity index put option liability 22,059 40,705
Unsettled securities payable 27,927 15,314
Other liabilities   264,770     261,322  
Total liabilities   13,246,108     12,936,833  
 
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) 68,871
and (2015) 68,606 outstanding before treasury shares 689 686
Additional paid-in capital 2,140,783 2,103,638
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $8,240 at 2016 and ($15,863) at 2015 (216,764 ) (231,755 )
Treasury shares, at cost; 27,972 shares (2016) and 25,912 shares (2015) (3,272,244 ) (2,885,956 )
Retained earnings   9,422,932     8,621,972  
Total shareholders' equity   8,075,396     7,608,585  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 21,321,504   $ 20,545,418  
 
         
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Twelve Months Ended
December 31,
(Dollars in thousands) 2016 2015
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 996,344 $ 977,869
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable (15,655 ) (98,211 )
Decrease (increase) in funds held by reinsureds, net 22,219 (43,775 )
Decrease (increase) in reinsurance receivables (202,950 ) (265,103 )
Decrease (increase) in income taxes 54,526 (36,771 )
Decrease (increase) in prepaid reinsurance premiums (32,455 ) (21,819 )
Increase (decrease) in reserve for losses and loss adjustment expenses 545,967 394,167
Increase (decrease) in future policy benefit reserve (3,836 ) (910 )
Increase (decrease) in unearned premiums (22,072 ) (96,950 )
Increase (decrease) in other net payable to reinsurers 26,200 43,727
Increase (decrease) in losses in course of payment (45,933 ) (43,964 )
Change in equity adjustments in limited partnerships (37,939 ) (12,965 )
Distribution of limited partnership income 62,008 53,984
Change in other assets and liabilities, net (56,204 ) (8,934 )
Non-cash compensation expense 26,398 21,237
Amortization of bond premium (accrual of bond discount) 49,167 50,901
Amortization of underwriting discount on senior notes 4 4
Net realized capital (gains) losses   7,216     184,147  
Net cash provided by (used in) operating activities   1,373,005     1,096,634  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value 1,919,808 2,144,930
Proceeds from fixed maturities sold - available for sale, at market value 1,258,434 1,724,093
Proceeds from fixed maturities sold - available for sale, at fair value 5,837 1,824
Proceeds from equity securities sold - available for sale, at market value 6,423 28,936
Proceeds from equity securities sold - available for sale, at fair value 723,359 614,044
Distributions from other invested assets 4,823,484 57,201
Proceeds from sale of subsidiary (net of cash disposed) 47,721 3,934
Cost of fixed maturities acquired - available for sale, at market value (4,061,896 ) (4,718,303 )
Cost of fixed maturities acquired - available for sale, at fair value (3,940 ) (2,436 )
Cost of equity securities acquired - available for sale, at market value (12,538 ) (10,850 )
Cost of equity securities acquired - available for sale, at fair value (346,929 ) (556,889 )
Cost of other invested assets acquired (5,396,001 ) (286,599 )
Net change in short-term investments 368,977 341,733
Net change in unsettled securities transactions   9,388     (22,719 )
Net cash provided by (used in) investing activities   (657,873 )   (681,101 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period, net 10,751 13,597
Purchase of treasury shares (386,288 ) (400,059 )
Dividends paid to shareholders   (195,384 )   (175,107 )
Net cash provided by (used in) financing activities   (570,921 )   (561,569 )
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH   54,053     (7,780 )
 
Net increase (decrease) in cash 198,264 (153,816 )
Cash, beginning of period   283,658     437,474  
Cash, end of period $ 481,922   $ 283,658  
 
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered) $ 42,636 $ 164,856
Interest paid 36,010 35,973

Source: Everest Re Group, Ltd.

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