Press Release

Everest Re Group Reports Third Quarter 2016 Results; Annualized Return on Equity of 15% for the Quarter and 11% Year-to-Date

HAMILTON, Bermuda--(BUSINESS WIRE)--Oct. 24, 2016-- Everest Re Group, Ltd. (NYSE:RE) today reported third quarter 2016 net income of $295.4 million, or $7.06 per diluted common share, compared to net income of $88.6 million, or $2.00 per diluted common share, for the third quarter of 2015. After-tax operating income1, excluding realized capital gains and losses, was $273.2 million, or $6.53 per diluted common share, for the third quarter of 2016, compared to after-tax operating income1 of $200.2 million, or $4.53 per diluted common share, for the same period last year.

For the nine months ended September 30, 2016, net income was $622.8 million, or $14.70 per diluted common share, compared to $620.6 million, or $13.92 per diluted common share, for the first nine months of 2015. After-tax operating income1, excluding realized capital gains and losses, was $630.1 million, or $14.87 per diluted common share, compared to $754.6 million or $16.92 per diluted common share, for the same period in 2015.

Commenting on the Company’s results, President and Chief Executive Officer, Dominic J. Addesso said, “We are very pleased with this quarter’s results. These earnings reflect strong underwriting margins, with a combined ratio of 85.6%, and a well-balanced investment portfolio that is providing solid investment income returns. Continued momentum in our insurance operations coupled with the stability of our reinsurance book is fostering these strong results and providing shareholders double digit returns, with an 11% annualized operating return on equity for the first nine months of the year.”

Operating highlights for the third quarter of 2016 included the following:

  • Gross written premiums for the quarter were $1.8 billion, an increase of 3% compared to the third quarter of 2015. Eliminating the unfavorable effects of foreign currency fluctuations, premiums were actually up 4% for the quarter. Worldwide, reinsurance premiums were up 2%, on a constant dollar basis, and insurance premiums were up 9%, quarter over quarter.
  • The combined ratio for the quarter was 85.6% compared to 90.6% in the third quarter of 2015. Excluding catastrophe losses, reinstatement premiums, and prior period loss development, the current quarter attritional combined ratio was 84.4% compared to 88.3% in the same period last year.
  • Catastrophe losses, net of reinsurance, amounted to $17.5 million in the quarter, largely arising from Hurricane Hermine. In addition, reserves for events that occurred earlier in the year were strengthened but were largely offset by reserve releases on several prior year events. The net impact in the quarter of these catastrophe losses, after reinstatement premiums and taxes, was $16.2 million.
  • Net investment income for the quarter was $122.7 million, including income of $17.1 million on limited partnership investments.
  • Cash flow from operations was $276.3 million compared to $270.2 million for the same period in 2015.
  • Through the first nine months, the annualized after-tax operating income¹ return on average adjusted shareholders’ equity² was 11.0%.
  • During the quarter, the Company repurchased 1,013,857 of its common shares at an average price of $190.21 and a total cost of $192.9 million. Subsequent to quarter end, the Company repurchased an additional 36,756 shares at an average price of $192.07 and a total cost of $7.1 million bringing total repurchases since second quarter to $200 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 quarter at $8.0 billion, up 6% compared to year end 2015. Book value per share increased 10% from $178.21 at December 31, 2015 to $196.67 at September 30, 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 third quarter results will be held at 10:30 a.m. Eastern Time on October 25, 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 Nine Months Ended
September 30, September 30,
(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) $ 295,394 $ 7.06 $ 88,553 $ 2.00 $ 622,772 $ 14.70 $ 620,588 $ 13.92
After-tax net realized capital gains (losses)   22,215       0.53   (111,680 )       (2.53 )   (7,302 )       (0.17 )   (134,024 )       (3.01 )
 
After-tax operating income (loss) $ 273,179     $ 6.53 $ 200,233       $ 4.53   $ 630,074       $ 14.87   $ 754,612       $ 16.92  
 
(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 Nine Months Ended
September 30, September 30,
(Dollars in thousands, except per share amounts)   2016     2015     2016     2015  
(unaudited) (unaudited)
REVENUES:
Premiums earned $ 1,371,474 $ 1,362,864 $ 3,879,201 $ 3,920,607
Net investment income 122,657 115,403 357,918 362,959
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities (867 ) (20,445 ) (31,130 ) (62,701 )
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss) - - - -
Other net realized capital gains (losses)   1,247     (139,526 )   (10,091 )   (131,953 )
Total net realized capital gains (losses) 380 (159,971 ) (41,221 ) (194,654 )
Net derivative gain (loss) 6,510 (11,428 ) 5,486 (5,225 )
Other income (expense)   9,435     25,251     (20,998 )   74,468  
Total revenues   1,510,456     1,332,119     4,180,386     4,158,155  
 
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses 786,168 871,612 2,344,733 2,364,951
Commission, brokerage, taxes and fees 309,545 295,193 880,053 868,807
Other underwriting expenses 78,563 67,980 222,750 188,623
Corporate expenses 6,400 5,924 21,403 17,312
Interest, fees and bond issue cost amortization expense   8,893     8,990     27,194     27,006  
Total claims and expenses   1,189,569     1,249,699     3,496,133     3,466,699  
 
INCOME (LOSS) BEFORE TAXES 320,887 82,420 684,253 691,456
Income tax expense (benefit)   25,493     (6,133 )   61,481     70,868  
 
NET INCOME (LOSS) $ 295,394 $ 88,553 $ 622,772 $ 620,588
 
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period (9,032 ) (91,059 ) 258,286 (144,335 )
Reclassification adjustment for realized losses (gains) included in net income (loss)   (3,222 )   24,596     27,711     59,526  
Total URA(D) on securities arising during the period (12,254 ) (66,463 ) 285,997 (84,809 )
 
Foreign currency translation adjustments 2,816 (32,505 ) 17,639 (80,508 )
 
Benefit plan actuarial net gain (loss) for the period - - - -
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)   1,268     1,556     3,949     4,769  
Total benefit plan net gain (loss) for the period   1,268     1,556     3,949     4,769  
Total other comprehensive income (loss), net of tax   (8,170 )   (97,412 )   307,585     (160,548 )
 
COMPREHENSIVE INCOME (LOSS) $ 287,224   $ (8,859 ) $ 930,357   $ 460,040  
 
EARNINGS PER COMMON SHARE
Basic $ 7.11 $ 2.02 $ 14.80 $ 14.04
Diluted 7.06 2.00 14.70 13.92
Dividends declared 1.15 0.95 3.45 2.85
 
       
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
 
September 30, 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 $ 14,266,113 $ 13,357,294
(amortized cost: 2016, $13,853,790; 2015, $13,276,206)
Fixed maturities - available for sale, at fair value 3,982 2,102
Equity securities - available for sale, at market value (cost: 2016, $126,729; 2015, $122,271) 123,296 108,940
Equity securities - available for sale, at fair value 1,090,734 1,337,733
Short-term investments 314,494 799,684
Other invested assets (cost: 2016, $1,305,174; 2015, $786,994) 1,305,174 786,994
Cash   435,795     283,658  
Total investments and cash 17,539,588 16,676,405
Accrued investment income 101,011 100,942
Premiums receivable 1,667,002 1,483,090
Reinsurance receivables 965,427 894,037
Funds held by reinsureds 241,983 278,673
Deferred acquisition costs 349,317 372,351
Prepaid reinsurance premiums 232,919 164,971
Income taxes 169,867 258,541
Other assets   395,968     316,408  
TOTAL ASSETS $ 21,663,082   $ 20,545,418  
 
LIABILITIES:
Reserve for losses and loss adjustment expenses $ 10,375,470 $ 9,951,798
Future policy benefit reserve 56,998 58,910
Unearned premium reserve 1,702,390 1,613,390
Funds held under reinsurance treaties 23,567 13,544
Commission reserves 93,733 60,098
Other net payable to reinsurers 262,662 173,087
Losses in course of payment 121,082 112,170
4.868% Senior notes due 6/1/2044 396,684 396,594
6.6% Long term notes due 5/1/2067 236,438 236,364
Accrued interest on debt and borrowings 12,341 3,537
Equity index put option liability 35,219 40,705
Unsettled securities payable 76,813 15,314
Other liabilities   228,593     261,322  
Total liabilities   13,621,990     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) 68,822
and (2015) 68,606 outstanding before treasury shares 688 686
Additional paid-in capital 2,129,311 2,103,638
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $56,361 at 2016 and ($15,863) at 2015 75,830 (231,755 )
Treasury shares, at cost; 27,935 shares (2016) and 25,912 shares (2015) (3,265,184 ) (2,885,956 )
Retained earnings   9,100,447     8,621,972  
Total shareholders' equity   8,041,092     7,608,585  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 21,663,082   $ 20,545,418  
 
       
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended
September 30,
(Dollars in thousands)   2016     2015  
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 622,772 $ 620,588
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable (185,559 ) (278,433 )
Decrease (increase) in funds held by reinsureds, net 46,134 (41,745 )
Decrease (increase) in reinsurance receivables (87,807 ) (232,472 )
Decrease (increase) in income taxes 15,935 (61,627 )
Decrease (increase) in prepaid reinsurance premiums (66,147 ) (67,406 )
Increase (decrease) in reserve for losses and loss adjustment expenses 470,560 347,729
Increase (decrease) in future policy benefit reserve (1,912 ) (240 )
Increase (decrease) in unearned premiums 89,013 1,455
Increase (decrease) in other net payable to reinsurers 85,493 70,103
Increase (decrease) in losses in course of payment 7,673 142,418
Change in equity adjustments in limited partnerships (33,289 ) (12,725 )
Distribution of limited partnership income 52,913 42,625
Change in other assets and liabilities, net (164,782 ) 21,994
Non-cash compensation expense 20,359 16,150
Amortization of bond premium (accrual of bond discount) 38,151 38,770
Amortization of underwriting discount on senior notes 3 3
Net realized capital (gains) losses   41,221     194,654  
Net cash provided by (used in) operating activities   950,731     801,841  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value 1,439,002 1,687,589
Proceeds from fixed maturities sold - available for sale, at market value 888,761 1,146,000
Proceeds from fixed maturities sold - available for sale, at fair value 1,588 1,824
Proceeds from equity securities sold - available for sale, at market value 155 22,120
Proceeds from equity securities sold - available for sale, at fair value 542,560 439,692
Distributions from other invested assets 3,600,587 41,782
Proceeds from sale of subsidiary (net of cash disposed) 47,721 3,934
Cost of fixed maturities acquired - available for sale, at market value (2,974,792 ) (3,583,990 )
Cost of fixed maturities acquired - available for sale, at fair value (3,940 ) (234 )
Cost of equity securities acquired - available for sale, at market value (4,194 ) (6,581 )
Cost of equity securities acquired - available for sale, at fair value (269,544 ) (460,965 )
Cost of other invested assets acquired (4,131,419 ) (140,923 )
Net change in short-term investments 488,047 498,902
Net change in unsettled securities transactions   44,494     (18,242 )
Net cash provided by (used in) investing activities   (330,974 )   (369,092 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period, net 5,315 9,896
Purchase of treasury shares (379,228 ) (324,981 )
Dividends paid to shareholders   (144,297 )   (125,905 )
Net cash provided by (used in) financing activities   (518,210 )   (440,990 )
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH   50,590     (28,007 )
 
Net increase (decrease) in cash 152,137 (36,248 )
Cash, beginning of period   283,658     437,474  
Cash, end of period $ 435,795   $ 401,226  
 
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered) $ 40,072 $ 123,234
Interest paid 18,227 18,039
 

Source: Everest Re Group, Ltd.

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