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Everest Re Group Reports Second Quarter 2020 Results

Everest Re Group, Ltd. (“Everest” or the “Company”) today reported that for the three months ended June 30, 2020, net income was $190.9 million, or $4.77 per diluted common share, compared to net income of $332.9 million, or $8.15 per diluted common share, for the three months ended June 30, 2019. After-tax operating income¹ for the quarter was $82.9 million, or $2.07 per diluted common share, compared to after-tax operating income¹ of $320.9 million, or $7.85 per diluted common share, for the same period in 2019.

Everest Re Group President & CEO Juan C. Andrade commented: “Despite the current challenging and uncertain public health, economic, and social environment, Everest reported another solid quarter and first half of 2020 results. Our ability to successfully leverage our capital position, our global platform, and our success in executing against our objectives - even under adverse conditions - drive our results. Our people continue to demonstrate the passion and resilience to differentiate Everest and deliver value to our customers. We have strong forward momentum across our Reinsurance and Insurance Segments.

Turning to the Company’s results, Everest wrote nearly $2.4 billion in gross written premiums for the quarter, an increase of 9.4% as compared to a year ago, 10.7% excluding the impact of foreign exchange. Our Reinsurance Segment (“Reinsurance”) grew 9.1% while the Insurance Segment (“Insurance”) was up 9.8% (11.0% and 10.0% respectively excluding the impact of foreign exchange). In Reinsurance, we continue to see excellent opportunities in several areas such as facultative risk, property and in certain territories including the US, Canada, Latin America and Asia, with an overall environment that gives us the opportunity to better shape our book towards deals with much better terms and pricing. In Insurance, the main growth drivers were continued strength in the Excess & Surplus business, strong and widespread rate momentum (excluding workers compensation up 18% and up over 12% including workers compensation) and high renewal retention across all of our businesses.

Insurance written rate also continues to exceed loss trend across our core P&C lines of business.

Our combined ratio for the quarter was 97.5%, 95.4% for Reinsurance and 103.4% for Insurance, resulting in $50.9 million of underwriting income and highlighting the underlying strength and sustainable profitability of the franchise. These results include $160 million in net pre-tax losses related to the Covid-19 Pandemic (“Pandemic”), attributed $130 million to Reinsurance and $30 million to Insurance. The Company also recorded $15 million of catastrophe losses from civil unrest in the United States. The attritional combined ratio excluding Pandemic impacts was 88.5%, 86.7% for Reinsurance and 93.7% for Insurance.

Our balance sheet and capital position remain a fundamental source of strength for Everest. This quarter reported record shareholder’s equity of $9.3 billion; combined with our low financial leverage and top tier ratings we have more than ample capital to take advantage of current and future opportunities in the global reinsurance and insurance market.”

Other operating highlights for the second quarter of 2020 included the following:

  • Net written premium of $2.0 billion reflecting growth of 13.1%
  • Cash flow from operations was $598.6 million for the quarter compared to $393.7 million for 2019.
  • Net investment income of $38.1 million for the quarter including limited partnership losses of ($88.3) million. Note that net investment income from limited partnerships is generally subject to a quarterly reporting lag, which indicates that limited partnership losses in the first quarter of 2020 are reflected in our net investment income for the second quarter of 2020.
  • Net after-tax realized gains amounted to $150.5 million for the quarter, while net after-tax unrealized gains were $544.5 million for the quarter.
  • Shareholders’ equity at quarter end was $9.3 billion vs. $9.1 billion at year end 2019.
  • The Company has paid $61.9 million in common share dividends during the quarter and $125.2 million thus far in 2020.

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 and investment income fluctuations, trends in insured and paid losses, catastrophes, pandemic, 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 second quarter results will be held at 10:30 a.m. Eastern Time on August 6, 2020. The call will be available on the Internet through the Company’s web site at everestre.com/investors.

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 June 30,

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share amounts)

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

(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)

 

$190,880

 

$4.77

 

$332,868

 

$8.15

 

$207,492

 

$5.13

 

$687,419

 

$16.82

After-tax net realized capital gains (losses)

 

150,519

 

3.76

 

25,994

 

0.64

 

(21,844

)

 

(0.54

)

 

99,899

 

2.44

After-tax net foreign exchange income (expense)

 

(42,528

)

 

(1.06

)

 

(13,988

)

 

(0.34

)

 

(17,924

)

 

(0.44

)

 

(15,710

)

 

(0.38

)

 

 

 

 

 

 

 

 

After-tax operating income (loss)

 

$82,889

 

$2.07

 

$320,862

 

$7.85

 

$247,260

 

$6.12

 

$603,230

 

$14.76

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

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 Six Months Ended 
 June 30,June 30,
(Dollars in thousands, except per share amounts) 

2020

 

2019

2020

 

2019

 (unaudited)(unaudited)
REVENUES: 
Premiums earned  

 $

   2,042,405

 $

   1,817,299

 $

   4,079,219

 $

   3,549,996

Net investment income 

            38,083

         179,028

         185,883

         320,004

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

             (4,063

)

                        -

          (25,837

)

                        -

Other-than-temporary impairments on fixed maturity securities 

                        -

             (5,157

)

                        -

             (8,090

)

Other net realized capital gains (losses) 

         188,711

            35,429

                (103

)

         130,594

Total net realized capital gains (losses) 

         184,648

            30,272

          (25,940

)

         122,504

Net derivative gain (loss) 

            11,869

                  353

             (3,504

)

              3,584

Other income (expense) 

          (32,490

)

          (18,225

)

             (9,127

)

          (21,525

)

Total revenues 

      2,244,515

      2,008,727

      4,226,531

      3,974,563

  
CLAIMS AND EXPENSES: 
Incurred losses and loss adjustment expenses  

      1,407,016

1,094,630

      2,837,856

2,143,180

Commission, brokerage, taxes and fees 

         466,316

420,950

         914,838

810,424

Other underwriting expenses   

         118,130

104,833

         246,990

203,818

Corporate expenses 

              8,733

7,535

            18,566

14,187

Interest, fees and bond issue cost amortization expense 

              7,253

8,434

            14,836

16,065

Total claims and expenses 

      2,007,448

      1,636,382

      4,033,086

      3,187,674

  
INCOME (LOSS) BEFORE TAXES 

         237,067

         372,345

         193,445

         786,889

Income tax expense (benefit) 

            46,187

39,477

          (14,047

)

99,470

  
NET INCOME (LOSS) 

 $

      190,880

 $

      332,868

 $

      207,492

 $

      687,419

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

         551,753

         197,759

         272,354

         430,824

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

             (7,257

)

             (1,869

)

            24,142

             (3,691

)

Total URA(D) on securities arising during the period 

         544,496

         195,890

         296,496

         427,133

  
Foreign currency translation adjustments 

            20,586

          (25,832

)

          (30,238

)

          (11,780

)

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

              1,806

              1,151

              2,726

              2,302

Total benefit plan net gain (loss) for the period 

              1,806

              1,151

              2,726

              2,302

Total other comprehensive income (loss), net of tax 

         566,888

         171,209

         268,984

         417,655

  
COMPREHENSIVE INCOME (LOSS) 

 $

      757,768

 $

      504,077

 $

      476,476

 $

   1,105,074

  
EARNINGS PER COMMON SHARE: 
Basic 

 $

             4.78

 $

             8.17

 $

             5.14

 $

           16.88

Diluted 

                 4.77

                 8.15

                 5.13

              16.82

EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
  
  
  June 30,  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 

 $

     17,055,259

 $

     16,824,944

(amortized cost: 2020, $16,392,238; 2019, $16,473,491, credit allowances: 2020, $25,837; 2019, $0) 
Fixed maturities - available for sale, at fair value 

                   4,431

                   5,826

Equity securities, at fair value 

              949,170

              931,457

Short-term investments (cost: 2020, $854,248; 2019, $414,639) 

              853,964

              414,706

Other invested assets (cost: 2020, $1,816,373; 2019, $1,763,531) 

           1,816,373

           1,763,531

Cash 

              922,479

              808,036

Total investments and cash 

        21,601,676

        20,748,500

Accrued investment income 

              120,387

              116,804

Premiums receivable 

           2,484,271

           2,259,088

Reinsurance receivables  

           1,852,887

           1,763,471

Funds held by reinsureds 

              513,123

              489,901

Deferred acquisition costs 

              578,210

              581,863

Prepaid reinsurance premiums 

              464,206

              445,716

Income taxes 

              294,333

              305,711

Other assets 

              675,700

              612,997

TOTAL ASSETS 

 $

     28,584,793

 $

     27,324,051

  
LIABILITIES: 
Reserve for losses and loss adjustment expenses 

        14,276,641

        13,611,313

Future policy benefit reserve 

                 40,659

                 42,592

Unearned premium reserve 

           3,190,174

           3,056,735

Funds held under reinsurance treaties 

                 11,876

                 10,668

Other net payable to reinsurers 

              369,761

              291,660

Losses in course of payment 

              199,157

                 51,950

Senior notes due 6/1/2044 

              397,134

              397,074

Long term notes due 5/1/2067 

              223,625

              236,758

Accrued interest on debt and borrowings 

                   2,368

                   2,878

Equity index put option liability 

                   9,088

                   5,584

Unsettled securities payable 

                 89,749

                 30,650

Other liabilities 

              488,262

              453,264

Total liabilities 

        19,298,494

        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) 69,608 
and (2019) 69,464 outstanding before treasury shares 

                      696

                      694

Additional paid-in capital 

           2,225,993

           2,219,660

Accumulated other comprehensive income (loss), net of deferred income tax expense 
(benefit) of $66,616 at 2020 and $30,996 at 2019 

              297,137

                 28,152

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

         (3,622,172

)

         (3,422,152

)

Retained earnings 

        10,384,645

        10,306,571

Total shareholders' equity  

           9,286,299

           9,132,925

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 

 $

     28,584,793

 $

     27,324,051

EVEREST RE GROUP, LTD. 
CONSOLIDATED STATEMENTS OF CASH FLOWS   
  
  
 Six Months Ended 
 June 30,
(Dollars in thousands) 

2020

 

2019

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

 $

        207,492

 $

        687,419

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

          (252,609

)

          (174,583

)

Decrease (increase) in funds held by reinsureds, net 

            (23,498

)

            (55,421

)

Decrease (increase) in reinsurance receivables 

          (147,515

)

            (19,319

)

Decrease (increase) in income taxes 

            (25,000

)

           180,126

Decrease (increase) in prepaid reinsurance premiums 

            (29,699

)

          (137,092

)

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

           800,816

           155,096

Increase (decrease) in future policy benefit reserve 

               (1,933

)

               (1,648

)

Increase (decrease) in unearned premiums 

           159,744

           219,263

Increase (decrease) in other net payable to reinsurers 

              89,499

           132,474

Increase (decrease) in losses in course of payment 

           147,427

              35,738

Change in equity adjustments in limited partnerships 

              84,066

            (57,031

)

Distribution of limited partnership income 

              40,447

              41,321

Change in other assets and liabilities, net 

            (10,313

)

            (60,820

)

Non-cash compensation expense  

              19,175

              17,171

Amortization of bond premium (accrual of bond discount) 

              20,547

              13,321

Net realized capital (gains) losses  

              25,940

          (122,504

)

Net cash provided by (used in) operating activities 

        1,104,586

           853,511

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

        1,261,650

        1,009,921

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

           990,273

        2,318,207

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

                          -

                2,706

Proceeds from equity securities sold, at fair value 

           213,185

           149,233

Distributions from other invested assets 

           164,975

           143,752

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

       (2,301,701

)

       (3,466,331

)

Cost of equity securities acquired, at fair value 

          (224,086

)

          (229,070

)

Cost of other invested assets acquired 

          (343,332

)

          (207,323

)

Net change in short-term investments 

          (439,457

)

          (499,983

)

Net change in unsettled securities transactions 

              49,504

              88,531

Net cash provided by (used in) investing activities 

          (628,989

)

          (690,357

)

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

            (12,841

)

               (7,485

)

Purchase of treasury shares 

          (200,019

)

            (24,604

)

Dividends paid to shareholders 

          (125,205

)

          (114,136

)

Cost of debt repurchase 

            (10,647

)

                          -

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

            (14,141

)

            (11,748

)

Net cash provided by (used in) financing activities 

          (362,853

)

          (157,973

)

  
EFFECT OF EXCHANGE RATE CHANGES ON CASH 

                1,699

                      91

  
Net increase (decrease) in cash 

           114,443

                5,272

Cash, beginning of period 

           808,036

           656,095

Cash, end of period 

 $

        922,479

 $

        661,367

  
SUPPLEMENTAL CASH FLOW INFORMATION: 
Income taxes paid (recovered) 

 $

          10,895

 $

         (83,995

)

Interest paid  

              14,992

              15,984

Contacts:

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

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