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Everest Re Group Reports Record Operating Earnings for the First Quarter 2015

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April 27, 2015 4:05 PM EDT

HAMILTON, Bermuda--(BUSINESS WIRE)-- Everest Re Group, Ltd. (NYSE: RE) today reported net income of $323.0 million, or $7.19 per diluted common share, for the first quarter of 2015, compared to net income of $293.9 million, or $6.21 per diluted common share, for the first quarter of 2014. Excluding realized capital gains and losses, after-tax operating income1 was $329.9 million, or $7.34 per diluted common share, for the first quarter 2015, compared to after-tax operating income1 of $281.0 million, or $5.93 per diluted common share, for the same period last year.

Commenting on the Company’s results, President and Chief Executive Officer, Dominic J. Addesso said, “This was another record quarter for Everest with operating earnings per share up 24% to $7.34, resulting in an 18% annualized operating return on equity and 4% growth in book value per share. Despite foreign currency headwinds, premium continued to rise, up 14% on a constant dollar basis, largely driven by growth in our insurance segment. We are pleased with the trajectory of our premium and operating earnings, which continues to drive growth in shareholder value. Our broadly diversified underwriting platform, and the capacity and flexibility we provide our clients, positions us well in this challenging market.”

Operating highlights for the first quarter of 2015 included the following:

  • Gross written premiums increased 12% to $1.4 billion compared to the first quarter of 2014 with worldwide reinsurance premiums, including the Mt. Logan Re segment, up 4% and insurance premiums up 48%. Given greater utilization of retrocessional capacity, including Mt. Logan, to support the reinsurance segments, the pace of growth for net written premiums is lower. On a net basis, premiums increased 5% for the group, while the Total Reinsurance segment premium was down 7%. Net written premium for the Insurance segment increased 43% due to higher premium for crop business and continued strong momentum in targeted classes of business.
  • The combined ratio was 81.9% for the quarter compared to 80.0% in the first quarter of 2014. Excluding catastrophe losses, reinstatement premiums, and prior year development, which was minimal in both quarters, the attritional combined ratio was 82.0%, up modestly from first quarter 2014, but consistent with the full year 2014 results.
  • Net investment income for the quarter was $122.6 million, including limited partnership income of $7.0 million.
  • Net after-tax realized capital losses were $6.9 million, while net after-tax unrealized capital gains totaled $105.4 million, for the quarter.
  • Cash flow from operations was $455.1 million compared to $367.1 million for the same period in 2014
  • For the quarter, the annualized after-tax operating income¹ return on average adjusted shareholders’ equity² was 18.1%.
  • During the quarter, the Company repurchased 434,878 of its common shares at an average price of $172.53 and a total cost of $75.0 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 5.9 million shares available.
  • Shareholders’ equity ended the quarter at $7.7 billion, up 3% compared to year end 2014. Book value per share increased 4% from $166.75 at December 31, 2014 to $172.63 at March 31, 2015.

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 first quarter results will be held at 10:30 a.m. Eastern Time on April 28, 2015. 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
March 31,
(Dollars in thousands, except per share amounts) 2015         2014
(unaudited)
Per Diluted Per Diluted
Common Common
Amount     Share Amount     Share
 
Net income (loss) $ 322,978 $ 7.19 $ 293,933 $ 6.21
After-tax net realized capital gains (losses) (6,896 )     (0.15 ) 12,964     0.27
 
After-tax operating income (loss) $ 329,874       $ 7.34   $ 280,969     $ 5.93
 
(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

--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) 2015 2014
(unaudited)
REVENUES:
Premiums earned $   1,307,077 $   1,144,490
Net investment income 122,583 123,157
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities (26,018 ) -
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss) - -
Other net realized capital gains (losses)     15,513       21,126  
Total net realized capital gains (losses) (10,505 ) 21,126
Net derivative gain (loss) (242 ) (1,661 )
Other income (expense)     46,073       (3,296 )
Total revenues     1,464,986       1,283,816  
 
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses 722,465 619,409
Commission, brokerage, taxes and fees 287,167 246,002
Other underwriting expenses 60,664 50,638
Corporate expenses 5,463 4,945
Interest, fees and bond issue cost amortization expense     8,990       7,568  
Total claims and expenses     1,084,749       928,562  
 
INCOME (LOSS) BEFORE TAXES 380,237 355,254
Income tax expense (benefit)     41,167       53,232  
 
NET INCOME (LOSS) $ 339,070 $ 302,022
Net (income) loss attributable to noncontrolling interests     (16,092 )     (8,089 )
NET INCOME (LOSS) ATTRIBUTABLE TO EVEREST RE GROUP $ 322,978 $ 293,933
 
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period 83,205 53,471
Reclassification adjustment for realized losses (gains) included in net income (loss)     22,183       1,874  
Total URA(D) on securities arising during the period 105,388 55,345
 
Foreign currency translation adjustments (102,340 ) (2,637 )
 
Benefit plan actuarial net gain (loss) for the period - -
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)     1,604       771  
Total benefit plan net gain (loss) for the period     1,604       771  
Total other comprehensive income (loss), net of tax     4,652       53,479  
Other comprehensive (income) loss attributable to noncontrolling interests     -       -  
Total other comprehensive income (loss), net of tax attributable to Everest Re Group     4,652       53,479  
 
COMPREHENSIVE INCOME (LOSS) $   327,630   $   347,412  
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO EVEREST RE GROUP:
Basic $ 7.26 $ 6.26
Diluted 7.19 6.21
Dividends declared 0.95 0.75
 
 
               
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
 
 
March 31, December 31,
(Dollars and share amounts in thousands, except par value per share) 2015 2014
(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value $   13,415,871 $   13,101,067
(amortized cost: 2015, $13,010,017; 2014, $12,831,159)
Fixed maturities - available for sale, at fair value 363 1,509
Equity securities - available for sale, at market value (cost: 2015, $151,044; 2014, $148,326) 141,478 140,210
Equity securities - available for sale, at fair value 1,504,694 1,447,820
Short-term investments 1,706,684 1,705,932
Other invested assets (cost: 2015, $626,799; 2014, $601,925) 626,799 601,925
Cash     398,575       437,474  
Total investments and cash 17,794,464 17,435,937
Accrued investment income 106,788 111,075
Premiums receivable 1,485,095 1,397,983
Reinsurance receivables 700,009 670,854
Funds held by reinsureds 236,846 228,192
Deferred acquisition costs 373,160 398,408
Prepaid reinsurance premiums 135,042 154,177
Income taxes 159,445 184,762
Other assets     276,438       236,436  
TOTAL ASSETS $   21,267,287   $   20,817,824  
 
LIABILITIES:
Reserve for losses and loss adjustment expenses $ 9,633,982 $ 9,720,813
Future policy benefit reserve 59,693 59,820
Unearned premium reserve 1,675,413 1,728,745
Funds held under reinsurance treaties 78,423 3,932
Commission reserves 93,337 87,990
Other net payable to reinsurers 200,262 139,841
Losses in course of payment 228,079 157,527
4.868% Senior notes due 6/1/2044 400,000 400,000
6.6% Long term notes due 5/1/2067 238,365 238,364
Accrued interest on debt and borrowings 12,341 3,537
Equity index put option liability 47,264 47,022
Unsettled securities payable 76,074 41,092
Other liabilities     253,829       316,469  
Total liabilities     12,997,062       12,945,152  
 
NONCONTROLLING INTERESTS:
Redeemable noncontrolling interests - Mt. Logan Re     603,595       421,552  
 
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; (2015) 68,496
and (2014) 68,336 outstanding before treasury shares 685 683
Additional paid-in capital 2,073,977 2,068,807
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $32,751 at 2015 and $20,715 at 2014 52,969 48,317
Treasury shares, at cost; 24,085 shares (2015) and 23,650 shares (2014) (2,560,937 ) (2,485,897 )
Retained earnings     8,099,936       7,819,210  
Total shareholders' equity attributable to Everest Re Group     7,666,630       7,451,120  
TOTAL LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY $   21,267,287   $   20,817,824  
 
 
 
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Three Months Ended
March 31,
(Dollars in thousands) 2015 2014
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $   339,070 $   302,022
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable (98,195 ) 25,533
Decrease (increase) in funds held by reinsureds, net 62,973 3,399
Decrease (increase) in reinsurance receivables (84,665 ) (114,898 )
Decrease (increase) in income taxes 14,214 34,417
Decrease (increase) in prepaid reinsurance premiums 12,144 2,359
Increase (decrease) in reserve for losses and loss adjustment expenses 55,334 (56,348 )
Increase (decrease) in future policy benefit reserve (127 ) (1,423 )
Increase (decrease) in unearned premiums (40,934 ) 80,016
Increase (decrease) in other net payable to reinsurers 68,365 1,176
Increase (decrease) in losses in course of payment 71,568 107,003
Change in equity adjustments in limited partnerships (6,762 ) 2,313
Distribution of limited partnership income 8,600 8,600
Change in other assets and liabilities, net 24,542 (23,959 )
Non-cash compensation expense 5,170 4,427
Amortization of bond premium (accrual of bond discount) 13,333 13,572
Amortization of underwriting discount on senior notes 1 14
Net realized capital (gains) losses     10,505       (21,126 )
Net cash provided by (used in) operating activities     455,136       367,097  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value 594,807 490,745
Proceeds from fixed maturities matured/called - available for sale, at fair value - 875
Proceeds from fixed maturities sold - available for sale, at market value 355,812 328,709
Proceeds from fixed maturities sold - available for sale, at fair value 1,236 20,763
Proceeds from equity securities sold - available for sale, at market value 83 534
Proceeds from equity securities sold - available for sale, at fair value 137,966 178,598
Distributions from other invested assets 10,797 17,077
Cost of fixed maturities acquired - available for sale, at market value (1,370,458 ) (1,163,440 )
Cost of fixed maturities acquired - available for sale, at fair value - (1,309 )
Cost of equity securities acquired - available for sale, at market value (4,464 ) (8,546 )
Cost of equity securities acquired - available for sale, at fair value (171,411 ) (92,329 )
Cost of other invested assets acquired (41,961 ) (4,961 )
Net change in short-term investments (7,567 ) (152,715 )
Net change in unsettled securities transactions     (505 )     1,564  
Net cash provided by (used in) investing activities     (495,665 )     (384,435 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period, net 2 2,121
Purchase of treasury shares (75,040 ) (249,983 )
Third party investment in redeemable noncontrolling interest 156,848 70,700
Dividends paid to shareholders (42,252 ) (34,742 )
Dividends paid on third party investment in redeemable noncontrolling interest     (30,896 )     -  
Net cash provided by (used in) financing activities     8,662       (211,904 )
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH     (7,032 )     3,264  
 
Net increase (decrease) in cash (38,899 ) (225,978 )
Cash, beginning of period     437,474       611,382  
Cash, end of period $   398,575   $   385,404  
 
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered) $ 24,266 $ 16,260
Interest paid 132 174
 
 

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

Source: Everest Re Group, Ltd.


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