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Form 8-K EVEREST RE GROUP LTD For: Jul 25

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July 25, 2016 4:25 PM EDT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

July 25, 2016

Everest Re Group, Ltd.
(Exact name of registrant as specified in its charter)

Bermuda
1-15731
98-0365432
     
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)
     
Seon Place, 4TH Floor
141 Front Street
PO Box HM 845
Hamilton, HM 19, Bermuda
Not Applicable
     
(Address of principal executive offices)
(Zip Code)

Registrant's telephone number, including area code 441-295-0006


Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



ITEM 2.02
DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On July 25 2016, the registrant issued a news release announcing its second quarter 2016 results. A copy of that news release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The news release furnished herewith contains information regarding the registrant's operating income (loss).  Operating income (loss) differs from net income (loss) attributable to Everest Re Group, the most directly comparable generally accepted accounting principle financial measure, only by the exclusion of realized capital gains (losses) on investments.  Management believes that presentation of operating income (loss) provides useful information to investors because it more accurately measures and predicts the registrant's results of operations by removing the variability arising from the management of the registrant's investment portfolio.  In addition, management, analysts and investors use operating income (loss) to evaluate the financial performance of the registrant and the insurance industry in general.

In accordance with general instruction B.2 of Form 8-K, the information in this report, including exhibits, is furnished pursuant to Item 2.02 and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.

ITEM 9.01
FINANCIAL STATEMENTS AND EXHIBITS

(c)
  
Exhibits
  
       
   
Exhibit No.
Description
       
   
99.1
News Release of the registrant,
     
dated July 25, 2016
 

 

 
SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


   
EVEREST RE GROUP, LTD.
         
         
         
 
By:
/S/ CRAIG HOWIE
  
   
Craig Howie
  
   
Executive Vice President and
     
Chief Financial Officer


Dated:  July 25, 2016
 

 
 
EXHIBIT INDEX


Exhibit
      
Number
  
Description of Document
Page No.
       
99.1
  
News Release of the registrant,
  
   
dated July 25, 2016
5


 
 
 
                    
NEWS RELEASE
  

EVEREST RE GROUP, LTD.
Seon Place, 141 Front Street, 4th Floor, Hamilton HM 19, Bermuda


Contact:  Elizabeth B. Farrell
Vice President, Investor Relations
Everest Global Services, Inc.
908.604.3169

For Immediate Release

Everest Re Group Reports Second Quarter 2016 Results;
8% Growth in Premium; 95% Combined Ratio

HAMILTON, Bermuda – July 25, 2016 -- Everest Re Group, Ltd. (NYSE: RE) today reported second quarter 2016 net income of $155.7 million, or $3.67 per diluted common share, compared to net income of $209.1 million, or $4.68 per diluted common share, for the second quarter of 2015. After-tax operating income1, excluding realized capital gains and losses, was $134.2 million, or $3.17 per diluted common share, for the second quarter of 2016, compared to after-tax operating income1 of $224.5 million, or $5.03 per diluted common share, for the same period last year.

For the six months ended June 30, 2016, net income was $327.4 million, or $7.68 per diluted common share, compared to $532.0 million, or $11.88 per diluted common share, for the first six months of 2015. After-tax operating income1, excluding realized capital gains and losses, was $356.9 million, or $8.37 per diluted common share, compared to $554.4 million or $12.38 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, "Everest's six month annualized operating return on equity of 9.4% is an excellent result given the number of catastrophe loss events, the impact of foreign currency movements around the world, and the continued low interest rate environment. It remains a challenging environment but the strategic actions we have taken to position Everest for continued success are borne out by these results."

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

·
Gross written premiums for the quarter were $1.4 billion, an increase of 8% compared to the second quarter of 2015. Eliminating the unfavorable effects of foreign currency fluctuations, premiums were actually up 10% for the quarter. Worldwide, reinsurance premiums were up 1%, on a constant dollar basis, and insurance premiums were up 32%, quarter over quarter.
 
1


·
The combined ratio for the quarter was 95.1% compared to 88.0% in the second quarter of 2015. Excluding catastrophe losses, reinstatement premiums, and prior period loss development, the current quarter attritional combined ratio was 86.1% compared to 85.9% in the same period last year.
·
Catastrophe losses, net of reinsurance, amounted to $123.8 million in the quarter, with current quarter catastrophe losses for the Fort McMurray, Canada wildfires, Ecuador earthquake, and Texas hailstorms totaling $149.1 million, offset by reserve releases on several 2011 events. The net impact of these losses, after reinstatement premiums and taxes was $105.4 million.
·
Net investment income for the quarter was $132.7 million, including income of $23.0 million on limited partnership investments.
·
Net after-tax realized and unrealized capital gains amounted to $21.5 million and $122.9 million, respectively, for the quarter.
·
Cash flow from operations was $307.3 million compared to $181.1 million for the same period in 2015.
·
Through the first six months, the annualized after-tax operating income¹ return on average adjusted shareholders' equity² was 9.4%.
·
During the quarter, the Company repurchased 544,728 of its common shares at an average price of $184.37 and a total cost of $100.4 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company's Board of Directors, under which there remains 3.1 million shares available.
·
Shareholders' equity ended the quarter at $8.0 billion, up 5% compared to year end 2015. Book value per share increased 7% from $178.21 at December 31, 2015 to $190.66 at June 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.

2


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 second quarter results will be held at 10:30 a.m. Eastern Time on July 26, 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
    
Six Months Ended
  
 
  
June 30,
    
June 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)
  
$
155,692
    
$
3.67
    
$
209,057
    
$
4.68
    
$
327,378
    
$
7.68
    
$
532,035
    
$
11.88
  
After-tax net realized capital gains (losses)
    
21,462
      
0.51
      
(15,448
)
    
(0.35
)
    
(29,517
)
    
(0.69
)
    
(22,344
)
    
(0.50
)
 
                                                                
After-tax operating income (loss)
  
$
134,230
    
$
3.17
    
$
224,505
    
$
5.03
    
$
356,895
    
$
8.37
    
$
554,379
    
$
12.38
  
 
                                                                
(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--
 
3
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)
  
2016
    
2015
    
2016
    
2015
  
   
(unaudited)
    
(unaudited)
  
REVENUES:
                        
Premiums earned
  
$
1,288,860
    
$
1,285,255
    
$
2,507,727
    
$
2,557,743
  
Net investment income
    
132,737
      
124,990
      
235,261
      
247,556
  
Net realized capital gains (losses):
                                
Other-than-temporary impairments on fixed maturity securities
    
(1,470
)
    
(16,238
)
    
(30,263
)
    
(42,256
)
Other-than-temporary impairments on fixed maturity securities
                                
transferred to other comprehensive income (loss)
    
-
      
-
      
-
      
-
  
Other net realized capital gains (losses)
    
34,128
      
(7,940
)
    
(11,338
)
    
7,573
  
Total net realized capital gains (losses)
    
32,658
      
(24,178
)
    
(41,601
)
    
(34,683
)
Net derivative gain (loss)
    
1,996
      
6,445
      
(1,024
)
    
6,203
  
Other income (expense)
    
(28,367
)
    
(2,064
)
    
(30,433
)
    
49,217
  
Total revenues
    
1,427,884
      
1,390,448
      
2,669,930
      
2,826,036
  
                                 
CLAIMS AND EXPENSES:
                                
Incurred losses and loss adjustment expenses
    
857,816
      
778,184
      
1,558,565
      
1,493,339
  
Commission, brokerage, taxes and fees
    
295,502
      
290,520
      
570,508
      
573,614
  
Other underwriting expenses
    
72,077
      
61,902
      
144,187
      
120,643
  
Corporate expenses
    
7,117
      
5,925
      
15,003
      
11,388
  
Interest, fees and bond issue cost amortization expense
    
9,073
      
9,026
      
18,301
      
18,016
  
Total claims and expenses
    
1,241,585
      
1,145,557
      
2,306,564
      
2,217,000
  
                                 
INCOME (LOSS) BEFORE TAXES
    
186,299
      
244,891
      
363,366
      
609,036
  
Income tax expense (benefit)
    
30,607
      
35,834
      
35,988
      
77,001
  
                                 
NET INCOME (LOSS)
  
$
155,692
    
$
209,057
    
$
327,378
    
$
532,035
  
                                 
Other comprehensive income (loss), net of tax:
                                
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
    
124,356
      
(136,481
)
    
267,318
      
(53,276
)
Reclassification adjustment for realized losses (gains) included in net income (loss)
    
(1,448
)
    
12,747
      
30,933
      
34,930
  
Total URA(D) on securities arising during the period
    
122,908
      
(123,734
)
    
298,251
      
(18,346
)
                                 
Foreign currency translation adjustments
    
5,050
      
54,337
      
14,823
      
(48,003
)
                                 
Benefit plan actuarial net gain (loss) for the period
    
-
      
-
      
-
      
-
  
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
    
1,341
      
1,609
      
2,681
      
3,213
  
Total benefit plan net gain (loss) for the period
    
1,341
      
1,609
      
2,681
      
3,213
  
Total other comprehensive income (loss), net of tax
    
129,299
      
(67,788
)
    
315,755
      
(63,136
)
                                 
COMPREHENSIVE INCOME (LOSS)
  
$
284,991
    
$
141,269
    
$
643,133
    
$
468,899
  
                                 
EARNINGS PER COMMON SHARE
                                
Basic
  
$
3.70
    
$
4.72
    
$
7.73
    
$
11.99
  
Diluted
    
3.67
      
4.68
      
7.68
      
11.88
  
Dividends declared
    
1.15
      
0.95
      
2.30
      
1.90
  

 


EVEREST RE GROUP, LTD.
            
CONSOLIDATED BALANCE SHEETS
            
             
             
   
June 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
  
$
14,058,965
    
$
13,357,294
  
(amortized cost: 2016, $13,631,263; 2015, $13,276,206)
                
Fixed maturities - available for sale, at fair value
    
-
      
2,102
  
Equity securities - available for sale, at market value (cost: 2016, $124,699; 2015, $122,271)
    
118,740
      
108,940
  
Equity securities - available for sale, at fair value
    
1,104,430
      
1,337,733
  
Short-term investments
    
531,511
      
799,684
  
Other invested assets (cost: 2016, $1,216,171; 2015, $786,994)
    
1,216,171
      
786,994
  
Cash
    
429,287
      
283,658
  
Total investments and cash
    
17,459,104
      
16,676,405
  
Accrued investment income
    
96,772
      
100,942
  
Premiums receivable
    
1,461,563
      
1,483,090
  
Reinsurance receivables
    
950,323
      
894,037
  
Funds held by reinsureds
    
242,033
      
278,673
  
Deferred acquisition costs
    
319,781
      
372,351
  
Prepaid reinsurance premiums
    
219,050
      
164,971
  
Income taxes
    
195,094
      
258,541
  
Other assets
    
338,455
      
316,408
  
TOTAL ASSETS
  
$
21,282,175
    
$
20,545,418
  
                 
LIABILITIES:
                
Reserve for losses and loss adjustment expenses
  
$
10,263,267
    
$
9,951,798
  
Future policy benefit reserve
    
57,827
      
58,910
  
Unearned premium reserve
    
1,495,838
      
1,613,390
  
Funds held under reinsurance treaties
    
23,373
      
13,544
  
Commission reserves
    
85,670
      
60,098
  
Other net payable to reinsurers
    
224,380
      
173,087
  
Losses in course of payment
    
124,703
      
112,170
  
4.868% Senior notes due 6/1/2044
    
396,654
      
396,594
  
6.6% Long term notes due 5/1/2067
    
236,413
      
236,364
  
Accrued interest on debt and borrowings
    
3,537
      
3,537
  
Equity index put option liability
    
41,729
      
40,705
  
Unsettled securities payable
    
86,003
      
15,314
  
Other liabilities
    
257,313
      
261,322
  
Total liabilities
    
13,296,707
      
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) 68,805
                
and (2015) 68,606 outstanding before treasury shares
    
688
      
686
  
Additional paid-in capital
    
2,120,581
      
2,103,638
  
Accumulated other comprehensive income (loss), net of deferred income tax expense
                
(benefit) of $57,700 at 2016 and ($15,863) at 2015
    
84,000
      
(231,755
)
Treasury shares, at cost; 26,921 shares (2016) and 25,912 shares (2015)
    
(3,072,313
)
    
(2,885,956
)
Retained earnings
    
8,852,512
      
8,621,972
  
Total shareholders' equity
    
7,985,468
      
7,608,585
  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  
$
21,282,175
    
$
20,545,418
  



EVEREST RE GROUP, LTD.
            
CONSOLIDATED STATEMENTS OF CASH FLOWS
            
             
             
   
Six Months Ended
  
   
June 30,
  
(Dollars in thousands)
  
2016
    
2015
  
   
(unaudited)
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income (loss)
  
$
327,378
    
$
532,035
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Decrease (increase) in premiums receivable
    
20,168
      
(56,849
)
Decrease (increase) in funds held by reinsureds, net
    
45,656
      
(6,755
)
Decrease (increase) in reinsurance receivables
    
(68,284
)
    
(49,185
)
Decrease (increase) in income taxes
    
(10,424
)
    
(20,898
)
Decrease (increase) in prepaid reinsurance premiums
    
(51,243
)
    
(39,563
)
Increase (decrease) in reserve for losses and loss adjustment expenses
    
352,147
      
113,567
  
Increase (decrease) in future policy benefit reserve
    
(1,083
)
    
(364
)
Increase (decrease) in unearned premiums
    
(119,315
)
    
(160,849
)
Increase (decrease) in other net payable to reinsurers
    
46,508
      
16,712
  
Increase (decrease) in losses in course of payment
    
11,188
      
95,003
  
Change in equity adjustments in limited partnerships
    
(16,518
)
    
(12,840
)
Distribution of limited partnership income
    
41,296
      
18,332
  
Change in other assets and liabilities, net
    
17,012
      
32,728
  
Non-cash compensation expense
    
14,262
      
10,364
  
Amortization of bond premium (accrual of bond discount)
    
24,125
      
25,514
  
Amortization of underwriting discount on senior notes
    
2
      
2
  
Net realized capital (gains) losses
    
41,601
      
34,683
  
Net cash provided by (used in) operating activities
    
674,476
      
531,637
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from fixed maturities matured/called - available for sale, at market value
    
923,832
      
1,172,211
  
Proceeds from fixed maturities matured/called - available for sale, at fair value
    
-
      
-
  
Proceeds from fixed maturities sold - available for sale, at market value
    
594,764
      
731,673
  
Proceeds from fixed maturities sold - available for sale, at fair value
    
1,587
      
1,613
  
Proceeds from equity securities sold - available for sale, at market value
    
226
      
4,599
  
Proceeds from equity securities sold - available for sale, at fair value
    
430,038
      
300,620
  
Distributions from other invested assets
    
2,261,682
      
27,705
  
Cost of fixed maturities acquired - available for sale, at market value
    
(1,932,527
)
    
(2,448,121
)
Cost of fixed maturities acquired - available for sale, at fair value
    
-
      
(234
)
Cost of equity securities acquired - available for sale, at market value
    
(2,393
)
    
(5,541
)
Cost of equity securities acquired - available for sale, at fair value
    
(194,043
)
    
(317,650
)
Cost of other invested assets acquired
    
(2,711,306
)
    
(98,890
)
Net change in short-term investments
    
271,913
      
207,879
  
Net change in unsettled securities transactions
    
59,619
      
4,475
  
Net cash provided by (used in) investing activities
    
(296,608
)
    
(419,661
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Common shares issued during the period, net
    
2,683
      
5,468
  
Purchase of treasury shares
    
(186,357
)
    
(124,981
)
Dividends paid to shareholders
    
(96,838
)
    
(84,207
)
Net cash provided by (used in) financing activities
    
(280,512
)
    
(203,720
)
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
48,273
      
(6,829
)
                 
Net increase (decrease) in cash
    
145,629
      
(98,573
)
Cash, beginning of period
    
283,658
      
437,474
  
Cash, end of period
  
$
429,287
    
$
338,901
  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
                
Income taxes paid (recovered)
  
$
41,905
    
$
93,352
  
Interest paid
    
18,192
      
17,907
  


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