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Everest Re Group Reports First Quarter 2020 Results

Everest Re Group, Ltd. ("Everest" or the "Company") today reported that for the three months ended March 31, 2020, net income was $16.6 million, or $0.41 per diluted common share, compared to net income of $354.6 million, or $8.67 per diluted common share, for the three months ended March 31, 2019. After-tax operating income¹ for the quarter was $164.4 million, or $4.03 per diluted common share, compared to after-tax operating income¹ of $282.4 million, or $6.91 per diluted common share, for the same period in 2019.

"Our thoughts and sympathies go out to all those directly affected by the coronavirus. We would like to offer our sincere gratitude and thanks to those on the front lines who are putting themselves at risk to keep everyone safe. Additionally, we’d like to share our tremendous appreciation to all of those who are working hard to keep the supply chains going," said Juan C. Andrade, President and Chief Executive Officer. "Everest continues to do its part by successfully operating remotely to serve all of our customers and stakeholders without interruption. Our diversified global platform with its broad mix of products, distribution and geography is an important source of stable capacity to our broker partners and customers. Our capital position remains a source of strength, with high quality invested assets, significant liquidity and low financial leverage. Our well-diversified investment portfolio is resilient, and we have taken additional steps to reposition it by moving up in credit quality and further reducing equity exposure.

Above all it is the ingenuity, perseverance and dedication of our employees during these unique times that allows us to operate our business without interruption. Despite the impacts of the pandemic, Everest remains profitable and resilient with a strong capital base."

"Turning to the Company’s results, Everest wrote nearly $2.6 billion in gross written premiums for the quarter, an increase of 21% as compared to a year ago. Our Reinsurance segment grew 16% while the Insurance segment was up 33%. These results continue to demonstrate the value of the Everest franchise to our broker partners and customers.

Our combined ratio for the quarter was 98.6%, which includes $150 million in net pre-tax IBNR losses related to the Covid-19 pandemic (91.2% combined ratio excluding these losses). The IBNR loss is attributed $110 million to Reinsurance and $40 million to Insurance. Excluding catastrophe and pandemic IBNR, the underlying combined ratio was 89.9%, 87.7% for Reinsurance and 95.6% for Insurance, highlighting the underlying strength and sustainable profitability of the franchise."

Operating highlights for the first quarter of 2020 included the following:

  • The combined ratio was 98.6% for the first quarter of 2020 compared with 88.7% for the first quarter of 2019. Excluding the impacts of catastrophe losses, reinstatement premiums, and the 7.4% impact of Covid-19 pandemic the comparable combined ratios are 89.9% for the first quarter of 2020 and 87.4% for the first quarter of 2019. The increase in these comparable combined ratios is primarily attributable to the continued business mix shift toward more pro-rata business in Reinsurance.
  • Catastrophe losses, net of reinsurance and reinstatement premiums, amounted to $30.0 million in the quarter, related to losses from Australian wildfires, Australian East Coast storms and the Nashville, U.S. tornadoes.
  • Cash flow from operations was $506.0 million for the quarter compared to $459.8 million for 2019.
  • Net income of $16.6 million included a $31.0 million tax benefit from the CARES Act, which extended the carry back period for tax losses.
  • Net investment income of $147.8 million for the quarter including limited partnership income of $21.6 million. Note that net investment income from limited partnerships is generally subject to a reporting lag averaging one quarter.
  • Net after-tax realized losses amounted to $172.4 million for the quarter, while net after-tax unrealized losses were $248.0 million for the quarter. Since the end of the quarter, the unrealized loss position has substantially recovered.
  • Shareholders’ equity at quarter end was $8.6 billion vs. $9.1 billion at year end 2019.
  • The Company paid $63.3 million in common share dividends.
  • Everest repurchased 970,892 shares at an average cost of $206.00 per share, for a total repurchase of $200.0 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 0.4 million shares available.
  • Book value per share declined 4.1% during the quarter, to $214.59 at March 31, 2020 compared to $223.85 at December 31, 2019.

Note that beginning with this quarter’s results, the Company’s operations as detailed in the Financial Supplement will be presented as two (2) segments, Reinsurance and Insurance, in line with how management views results. The former three (3) reinsurance sub-segments of US Reinsurance, Bermuda (reinsurance) and International (reinsurance) are now part of the overall Reinsurance segment.

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.

About Everest Re Group, Ltd.

Everest Re Group, Ltd. ("Everest") is a leading global provider of reinsurance and insurance, operating for close to 50 years through subsidiaries in the U.S., Europe, Singapore, Canada, Bermuda and other territories.

Everest offers property, casualty, and specialty products through its various operating affiliates located in key markets around the world.

Everest common stock (NYSE:RE) is a component of the S&P 500 index.

Additional information about Everest, our people, and our products can be found on our website at www.everestre.com. All issuing companies may not do business in all jurisdictions.

A conference call discussing the first quarter results will be held at 10:30 a.m. Eastern Time on May 7, 2020. The call will be available on the Internet through the Company’s web site at everestre.com/investors or at www.streetevents.com.

Additional information about Everest, our people, and our products can be found on our website at www.everestre.com. All issuing companies may not do business in all jurisdictions.

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.everestre.com in the "Financial Reports" section of the "Investor Center". The supplemental financial information may also be obtained by contacting the Company directly.

_______________________________________________

1 The 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) and after-tax net foreign exchange income (expense) as the following reconciliation displays:

  
 Three Months Ended March 31,
(Dollars in thousands, except per share amounts)  

2020

2019

 

(unaudited)

  
 Per DilutedPer Diluted
 CommonCommon
 AmountShareAmountShare
  
Net income (loss)  

$

16,612

 

$

0.41

 

$

354,551

 

$

8.67

 

After-tax net realized capital gains (losses)  

 

(172,364

)

 

(4.22

)

 

73,905

 

 

1.81

 

After-tax net foreign exchange income (expense)  

 

24,604

 

 

0.60

 

 

(1,722

)

 

(0.04

)

  
After-tax operating income (loss)  

$

164,372

 

$

4.03

 

$

282,368

 

$

6.91

 

  

Although net realized capital gains (losses) and net foreign exchange income (expense) are an integral part of the Company’s insurance operations, the determination of net realized capital gains (losses) and foreign exchange income (expense) is independent of the insurance underwriting process. The Company believes that the level of net realized capital gains (losses) and net foreign exchange income (expense) 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--

EVEREST RE GROUP, LTD.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
AND COMPREHENSIVE INCOME (LOSS)  
  
 Three Months Ended
 March 31,
(Dollars in thousands, except per share amounts)  

2020

2019

 (unaudited)
REVENUES:  
Premiums earned  

$

2,036,814

 

$

1,732,697

 

Net investment income  

 

147,800

 

 

140,976

 

Net realized capital gains (losses):  
Credit allowances on fixed maturity securities  

 

(21,774

)

 

-

 

Other-than-temporary impairments on fixed maturity securities  

 

-

 

 

(2,933

)

Other net realized capital gains (losses)  

 

(188,814

)

 

95,165

 

Total net realized capital gains (losses)  

 

(210,588

)

 

92,232

 

Net derivative gain (loss)  

 

(15,373

)

 

3,231

 

Other income (expense)  

 

23,363

 

 

(3,300

)

Total revenues  

 

1,982,016

 

 

1,965,836

 

  
CLAIMS AND EXPENSES:  
Incurred losses and loss adjustment expenses  

 

1,430,840

 

 

1,048,550

 

Commission, brokerage, taxes and fees  

 

448,522

 

 

389,474

 

Other underwriting expenses  

 

128,860

 

 

98,985

 

Corporate expenses  

 

9,833

 

 

6,652

 

Interest, fees and bond issue cost amortization expense  

 

7,583

 

 

7,631

 

Total claims and expenses  

 

2,025,638

 

 

1,551,292

 

  
INCOME (LOSS) BEFORE TAXES  

 

(43,622

)

 

414,544

 

Income tax expense (benefit)  

 

(60,234

)

 

59,993

 

  
NET INCOME (LOSS)  

$

16,612

 

$

354,551

 

  
Other comprehensive income (loss), net of tax:  
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period  

 

(279,398

)

 

233,065

 

Reclassification adjustment for realized losses (gains) included in net income (loss)  

 

31,399

 

 

(1,822

)

Total URA(D) on securities arising during the period  

 

(247,999

)

 

231,243

 

  
Foreign currency translation adjustments  

 

(50,824

)

 

14,052

 

  
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)  

 

920

 

 

1,151

 

Total benefit plan net gain (loss) for the period  

 

920

 

 

1,151

 

Total other comprehensive income (loss), net of tax  

 

(297,903

)

 

246,446

 

  
COMPREHENSIVE INCOME (LOSS)  

$

(281,291

)

$

600,997

 

  
EARNINGS PER COMMON SHARE:  
Basic  

$

0.41

 

$

8.70

 

Diluted  

 

0.41

 

 

8.67

 

EVEREST RE GROUP, LTD.  
CONSOLIDATED BALANCE SHEETS  
  
  
 March 31,December 31,
(Dollars and share amounts in thousands, except par value per share)  

2020

2019

 (unaudited)
ASSETS:  
Fixed maturities - available for sale, at market value  

$

16,545,895

 

$

16,824,944

 

(amortized cost: 2020, $16,493,187; 2019, $16,473,491, credit allowances: 2020, $21,774; 2019, $0)  
Fixed maturities - available for sale, at fair value  

 

4,703

 

 

5,826

 

Equity securities, at fair value  

 

722,851

 

 

931,457

 

Short-term investments (cost: 2020, $441,707; 2019, $414,639)  

 

441,722

 

 

414,706

 

Other invested assets (cost: 2020, $1,803,785; 2019, $1,763,531)  

 

1,803,785

 

 

1,763,531

 

Cash  

 

817,626

 

 

808,036

 

Total investments and cash  

 

20,336,582

 

 

20,748,500

 

Accrued investment income  

 

117,791

 

 

116,804

 

Premiums receivable  

 

2,340,392

 

 

2,259,088

 

Reinsurance receivables  

 

1,808,601

 

 

1,763,471

 

Funds held by reinsureds  

 

515,076

 

 

489,901

 

Deferred acquisition costs  

 

603,735

 

 

581,863

 

Prepaid reinsurance premiums  

 

438,308

 

 

445,716

 

Income taxes  

 

406,413

 

 

305,711

 

Other assets  

 

655,740

 

 

612,997

 

TOTAL ASSETS  

$

27,222,638

 

$

27,324,051

 

  
LIABILITIES:  
Reserve for losses and loss adjustment expenses  

 

13,820,504

 

 

13,611,313

 

Future policy benefit reserve  

 

41,677

 

 

42,592

 

Unearned premium reserve  

 

3,176,292

 

 

3,056,735

 

Funds held under reinsurance treaties  

 

9,163

 

 

10,668

 

Other net payable to reinsurers  

 

369,385

 

 

291,660

 

Losses in course of payment  

 

50,510

 

 

51,950

 

Senior notes due 6/1/2044  

 

397,104

 

 

397,074

 

Long term notes due 5/1/2067  

 

235,083

 

 

236,758

 

Revolving credit borrowings  

 

50,000

 

 

-

 

Accrued interest on debt and borrowings  

 

7,589

 

 

2,878

 

Equity index put option liability  

 

20,958

 

 

5,584

 

Unsettled securities payable  

 

77,042

 

 

30,650

 

Other liabilities  

 

386,387

 

 

453,264

 

Total liabilities  

 

18,641,694

 

 

18,191,126

 

  
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; (2020) 69,624  
and (2019) 69,464 outstanding before treasury shares  

 

696

 

 

694

 

Additional paid-in capital  

 

2,216,479

 

 

2,219,660

 

Accumulated other comprehensive income (loss), net of deferred income tax expense  
(benefit) of ($5,682) at 2020 and $30,996 at 2019  

 

(269,751

)

 

28,152

 

Treasury shares, at cost; 29,636 shares (2020) and 28,665 shares (2019)  

 

(3,622,172

)

 

(3,422,152

)

Retained earnings  

 

10,255,692

 

 

10,306,571

 

Total shareholders' equity  

 

8,580,944

 

 

9,132,925

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  

$

27,222,638

 

$

27,324,051

 

EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Three Months Ended
March 31,
(Dollars in thousands)

2020

2019

(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)

$

16,612

 

$

354,551

 

Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable

 

(119,548

)

 

(168,377

)

Decrease (increase) in funds held by reinsureds, net

 

(28,973

)

 

9,353

 

Decrease (increase) in reinsurance receivables

 

(130,593

)

 

34,556

 

Decrease (increase) in income taxes

 

(65,114

)

 

91,856

 

Decrease (increase) in prepaid reinsurance premiums

 

(10,572

)

 

(11,677

)

Increase (decrease) in reserve for losses and loss adjustment expenses

 

406,257

 

 

58,073

 

Increase (decrease) in future policy benefit reserve

 

(915

)

 

103

 

Increase (decrease) in unearned premiums

 

158,744

 

 

135,157

 

Increase (decrease) in other net payable to reinsurers

 

95,555

 

 

63,326

 

Increase (decrease) in losses in course of payment

 

(1,422

)

 

(66,714

)

Change in equity adjustments in limited partnerships

 

(8,512

)

 

(8,079

)

Distribution of limited partnership income

 

11,108

 

 

14,799

 

Change in other assets and liabilities, net

 

(45,259

)

 

30,152

 

Non-cash compensation expense

 

9,393

 

 

9,056

 

Amortization of bond premium (accrual of bond discount)

 

8,640

 

 

5,899

 

Net realized capital (gains) losses

 

210,588

 

 

(92,232

)

Net cash provided by (used in) operating activities

 

505,989

 

 

459,802

 

 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value

 

656,070

 

 

460,537

 

Proceeds from fixed maturities sold - available for sale, at market value

 

501,953

 

 

1,798,226

 

Proceeds from equity securities sold, at fair value

 

112,841

 

 

69,500

 

Distributions from other invested assets

 

104,085

 

 

54,692

 

Cost of fixed maturities acquired - available for sale, at market value

 

(1,359,281

)

 

(2,249,663

)

Cost of equity securities acquired, at fair value

 

(76,513

)

 

(146,435

)

Cost of other invested assets acquired

 

(152,269

)

 

(115,028

)

Net change in short-term investments

 

(27,882

)

 

(354,388

)

Net change in unsettled securities transactions

 

(17,185

)

 

49,809

 

Net cash provided by (used in) investing activities

 

(258,181

)

 

(432,750

)

 
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period for share-based compensation, net of expense

 

(12,573

)

 

(8,288

)

Purchase of treasury shares

 

(200,020

)

 

(16,153

)

Dividends paid to shareholders

 

(63,277

)

 

(57,137

)

Proceeds from revolving credit borrowings

 

50,000

 

 

-

 

Cost of debt repurchase

 

(1,198

)

 

-

 

Cost of shares withheld on settlements of share-based compensation awards

 

(13,982

)

 

(11,443

)

Net cash provided by (used in) financing activities

 

(241,050

)

 

(93,021

)

 
EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

2,832

 

 

(6,152

)

 
Net increase (decrease) in cash

 

9,590

 

 

(72,121

)

Cash, beginning of period

 

808,036

 

 

656,095

 

Cash, end of period

$

817,626

 

$

583,974

 

 
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)

$

4,920

 

$

(90,846

)

Interest paid

 

2,817

 

 

3,154

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200506006025/en/

Contacts

Media: Dane Lopes
Group Head of Marketing & Communications
Everest Global Services, Inc.
203.388.3977

Investors: Jon Levenson
Head of Investor Relations
Everest Global Services, Inc.
908.604.3169