[LOGO]
NEWS RELEASE
EVEREST RE GROUP, LTD.
c/o ABG Financial & Management Services, Inc.
Parker House, Wildey Business Park, Wildey Road, St. Michael, Barbados
Contact: James H. Foster Senior Vice President, Investor Relations Everest Global Services, Inc. 908.604.3169 | For Immediate Release |
Everest Re Group Announces First Quarter Earnings
ST. MICHAEL, Barbados – April 21, 2003 — Everest Re Group, Ltd. (NYSE: RE) reported first quarter 2003 after-tax operating income of $104.1 million, or $2.02 per diluted share, a 58% increase compared to $66.1 million, or $1.35 per diluted share in the first quarter of 2002. Operating income differs from net income only by the exclusion of realized gains and losses on investments. Net income was $94.4 million, or $1.83 per diluted share, a 55% increase compared to $61.1 million, or $1.24 per diluted share, in the first quarter of 2002.
Gross premiums written for the first quarter were $1.002 billion in 2003, a 68% increase compared to $596 million in 2002. The Company’s GAAP combined ratio was 93.5% for this quarter compared to 99.3% in 2002. Net investment income for the first quarter was $93.4 million compared to $85.5 million in the first quarter of 2002. Cash flow from operations for the quarter was $327.7 million, an increase of 211% compared to $105.5 million in the first quarter of 2002.
Commenting on the Company’s results, Chairman and Chief Executive Officer Joseph V. Taranto said, “I am extremely pleased that, for the first time in each case, it took 9 digits to describe our quarterly earnings, 10 digits to describe our quarterly gross written premium and 11 digits to describe our total assets. We continue to receive excellent business opportunities; accordingly, we are increasing 2003 earnings guidance to $7.75 — $8.25 per share and providing 2004 guidance of $9.50 — $10.50 per share, absent any unusual losses”.
At March 31, 2003, the Company’s shareholders’ equity was $2.49 billion (a book value per share of $48.90), compared to shareholders’ equity of $2.37 billion ($46.55 per share) at December 31, 2002.
The Company also announced that Mr. Taranto’s employment agreement has been extended to March 31, 2006.
This press 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. In particular, our forecasts of future earnings are forward looking statements. 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 US and international markets. Everest Reinsurance (Bermuda), Ltd. provides reinsurance to property and casualty and life insurers in both the Bermuda and international markets. Everest National Insurance Company and Everest Security Insurance Company provide property and casualty insurance to policyholders in the United States. Everest Indemnity Insurance Company offers excess and surplus lines insurance in the United States. Additional information on Everest Re Group companies can be found at the Group’s web site atwww.everestre.com.
A conference call discussing the first quarter results will be held at 8:30 a.m. Eastern Standard Time on April 22, 2003. The call will be available on the Internet through the Group’s web site or atwww.streetevents.com.
Anyone receiving this release by wire or through the Internet may visit the Group’s web site to view supplemental financial information on the Group’s results. The supplemental information is located atwww.everestre.com in the “Financials/Financial Reports” section. The supplemental financial information may also be obtained by contacting the Company directly.
— Financial Details Follow—
2
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value per share)
March 31, 2003 | December 31, 2002 | |||||||
(unaudited) | ||||||||
ASSETS: | ||||||||
Fixed maturities – available for sale, at market value (amortized cost: 2003, $6,727,217; 2002, $6,460,839) | $ | 7,083,954 |
| $ | 6,779,858 |
| ||
Equity securities, at market value (cost: 2003, $56,779; 2002, $56,841) |
| 45,382 |
|
| 47,473 |
| ||
Short-term investments |
| 242,237 |
|
| 169,116 |
| ||
Other invested assets |
| 57,779 |
|
| 53,856 |
| ||
Cash |
| 153,721 |
|
| 208,830 |
| ||
Total investments and cash |
| 7,583,073 |
|
| 7,259,133 |
| ||
Accrued investment income |
| 101,569 |
|
| 85,959 |
| ||
Premiums receivable |
| 816,053 |
|
| 673,377 |
| ||
Reinsurance receivables |
| 1,097,016 |
|
| 1,116,362 |
| ||
Funds held by reinsureds |
| 134,595 |
|
| 121,308 |
| ||
Deferred acquisition costs |
| 245,588 |
|
| 207,416 |
| ||
Prepaid reinsurance premiums |
| 75,420 |
|
| 63,437 |
| ||
Deferred tax asset |
| 143,409 |
|
| 139,176 |
| ||
Other assets |
| 173,605 |
|
| 198,435 |
| ||
TOTAL ASSETS | $ | 10,370,328 |
| $ | 9,864,603 |
| ||
LIABILITIES: | ||||||||
Reserve for losses and adjustment expenses | $ | 5,100,240 |
| $ | 4,905,582 |
| ||
Future policy benefit reserve |
| 224,716 |
|
| 227,925 |
| ||
Unearned premium reserve |
| 1,092,548 |
|
| 872,340 |
| ||
Funds held under reinsurance treaties |
| 346,103 |
|
| 347,360 |
| ||
Losses in the course of payment |
| 64,282 |
|
| 45,511 |
| ||
Contingent commissions |
| (2,477 | ) |
| 1,932 |
| ||
Other net payable to reinsurers |
| 70,934 |
|
| 61,244 |
| ||
Current federal income taxes |
| 9,607 |
|
| (16,696 | ) | ||
8.5% Senior notes due 3/15/2005 |
| 249,803 |
|
| 249,780 |
| ||
8.75% Senior notes due 3/15/2010 |
| 199,179 |
|
| 199,158 |
| ||
Revolving credit agreement borrowings |
| 70,000 |
|
| 70,000 |
| ||
Accrued interest on debt and borrowings |
| 3,744 |
|
| 13,481 |
| ||
Other liabilities |
| 242,321 |
|
| 308,340 |
| ||
Total liabilities |
| 7,671,000 |
|
| 7,285,957 |
| ||
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely subordinated debentures (“trust preferred securities”) |
| 210,000 |
|
| 210,000 |
| ||
SHAREHOLDERS’ EQUITY: | ||||||||
Preferred shares, par value: $0.01; 50 million shares authorized; no shares issued and outstanding |
| — |
|
| — |
| ||
Common shares, par value: $0.01; 200 million shares authorized; 50.9 million shares issued in 2003 and 50.9 million shares issued in 2002 |
| 514 |
|
| 513 |
| ||
Additional paid-in capital |
| 619,407 |
|
| 618,521 |
| ||
Unearned compensation |
| (319 | ) |
| (340 | ) | ||
Accumulated other comprehensive income, net of deferred income taxes of $85.5 million in 2003 and $74.4 million in 2002 |
| 251,530 |
|
| 221,542 |
| ||
Retained earnings |
| 1,641,146 |
|
| 1,551,360 |
| ||
Treasury shares, at cost; 0.5 million shares in 2003 and 0.5 million shares in 2002 |
| (22,950 | ) |
| (22,950 | ) | ||
Total shareholders’ equity |
| 2,489,328 |
|
| 2,368,646 |
| ||
TOTAL LIABILITIES, TRUST PREFERRED SECURTIES AND SHAREHOLDERS’ EQUITY | $ | 10,370,328 |
| $ | 9,864,603 |
| ||
Page 1 of 4
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in thousands, except per share amounts)
Three Months Ended March 31, | ||||||||
2003 | 2002 | |||||||
(unaudited) | ||||||||
REVENUES: | ||||||||
Premiums earned | $ | 744,870 |
| $ | 491,208 |
| ||
Net investment income |
| 93,377 |
|
| 85,540 |
| ||
Net realized capital (loss) |
| (13,235 | ) |
| (3,855 | ) | ||
Net derivative (expense) |
| (2,700 | ) |
| (250 | ) | ||
Other (expense) income |
| (1,147 | ) |
| 1,337 |
| ||
Total revenues |
| 821,165 |
|
| 573,980 |
| ||
CLAIMS AND EXPENSES: | ||||||||
Incurred loss and loss adjustment expenses |
| 513,471 |
|
| 352,506 |
| ||
Commission, brokerage, taxes and fees |
| 162,805 |
|
| 121,009 |
| ||
Other underwriting expenses |
| 19,864 |
|
| 14,125 |
| ||
Distributions related to trust preferred securities |
| 4,121 |
|
| — |
| ||
Interest expense on senior notes |
| 9,731 |
|
| 9,728 |
| ||
Interest expense on credit facility |
| 360 |
|
| 909 |
| ||
Total claims and expenses |
| 710,352 |
|
| 498,277 |
| ||
INCOME BEFORE TAXES |
| 110,813 |
|
| 75,703 |
| ||
Income tax expense |
| 16,446 |
|
| 14,642 |
| ||
NET INCOME | $ | 94,367 |
| $ | 61,061 |
| ||
Other comprehensive income (loss), net of tax |
| 29,988 |
|
| (68,126 | ) | ||
COMPREHENSIVE INCOME (LOSS) | $ | 124,355 |
| $ | (7,065 | ) | ||
PER SHARE DATA: | ||||||||
Average shares outstanding (000’s) |
| 50,897 |
|
| 48,108 |
| ||
Net income per common share – basic | $ | 1.85 |
| $ | 1.27 |
| ||
Average diluted shares outstanding (000’s) |
| 51,521 |
|
| 49,087 |
| ||
Net income per common share – diluted | $ | 1.83 |
| $ | 1.24 |
| ||
Page 2 of 4
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY
(Dollars in thousands, except per share amounts)
Three Months Ended March 31, | ||||||||
2003 | 2002 | |||||||
(unaudited) | ||||||||
COMMON SHARES (shares outstanding): | ||||||||
Balance, beginning of period |
| 50,881,693 |
|
| 46,269,015 |
| ||
Issued during the period, net |
| 26,950 |
|
| 5,017,450 |
| ||
Balance, end of period |
| 50,908,643 |
|
| 51,286,465 |
| ||
COMMON SHARES (par value): | ||||||||
Balance, beginning of period | $ | 513 |
| $ | 463 |
| ||
Issued during the period |
| 1 |
|
| 50 |
| ||
Balance, end of period |
| 514 |
|
| 513 |
| ||
ADDITIONAL PAID IN CAPITAL: | ||||||||
Balance, beginning of period |
| 618,521 |
|
| 269,945 |
| ||
Common shares issued during the period |
| 886 |
|
| 346,563 |
| ||
Balance, end of period |
| 619,407 |
|
| 616,508 |
| ||
UNEARNED COMPENSATION: | ||||||||
Balance, beginning of period |
| (340 | ) |
| (115 | ) | ||
Net increase during the period |
| 21 |
|
| — |
| ||
Balance, end of period |
| (319 | ) |
| (115 | ) | ||
ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF DEFERRED INCOME TAXES: | ||||||||
Balance, beginning of period |
| 221,542 |
|
| 113,880 |
| ||
Net increase (decrease) during the period |
| 29,988 |
|
| (68,126 | ) | ||
Balance, end of period |
| 251,530 |
|
| 45,754 |
| ||
RETAINED EARNINGS: | ||||||||
Balance, beginning of period |
| 1,551,360 |
|
| 1,336,404 |
| ||
Net income |
| 94,367 |
|
| 61,061 |
| ||
Dividends declared ($0.09 per share in 2003 and $0.08 per share in 2002) |
| (4,581 | ) |
| (4,102 | ) | ||
Balance, end of period |
| 1,641,146 |
|
| 1,393,363 |
| ||
TREASURY SHARES AT COST: | ||||||||
Balance, beginning of period |
| (22,950 | ) |
| (55 | ) | ||
Treasury shares acquired during the period |
| — |
|
| — |
| ||
Balance, end of period |
| (22,950 | ) |
| (55 | ) | ||
TOTAL SHAREHOLDERS’ EQUITY, END OF PERIOD | $ | 2,489,328 |
| $ | 2,055,968 |
| ||
Page 3 of 4
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended March 31, | ||||||||
2003 | 2002 | |||||||
(unaudited) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 94,367 |
| $ | 61,061 |
| ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
(Increase) in premiums receivable |
| (143,600 | ) |
| (66,264 | ) | ||
(Increase) decrease in funds held, net |
| (13,945 | ) |
| 19,980 |
| ||
Decrease (increase) in reinsurance receivables |
| 22,674 |
|
| (29,554 | ) | ||
(Increase) decrease in deferred tax asset |
| (15,274 | ) |
| 25,158 |
| ||
Increase in reserve for losses and loss adjustment expenses |
| 181,783 |
|
| 67,527 |
| ||
(Decrease) increase in future policy benefit reserve |
| (3,209 | ) |
| 4,712 |
| ||
Increase in unearned premiums |
| 219,163 |
|
| 74,778 |
| ||
(Increase) in other assets and liabilities |
| (27,441 | ) |
| (53,882 | ) | ||
Non cash compensation expense |
| 21 |
|
| — |
| ||
Accrual of bond discount/amortization of bond premium |
| (163 | ) |
| (1,911 | ) | ||
Amortization of underwriting discount on senior notes |
| 44 |
|
| 41 |
| ||
Realized capital losses |
| 13,235 |
|
| 3,855 |
| ||
Net cash provided by operating activities |
| 327,655 |
|
| 105,501 |
| ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from fixed maturities matured/called – available for sale |
| 196,985 |
|
| 147,594 |
| ||
Proceeds from fixed maturities sold – available for sale |
| 465,679 |
|
| 416,572 |
| ||
Proceeds from equity securities sold |
| 120 |
|
| 5,370 |
| ||
Proceeds from other invested assets sold |
| 10 |
|
| 3,261 |
| ||
Cost of fixed maturities acquired – available for sale |
| (928,353 | ) |
| (859,060 | ) | ||
Cost of equity securities acquired |
| — |
|
| (9,227 | ) | ||
Cost of other invested assets acquired |
| (3,048 | ) |
| (328 | ) | ||
Net (purchases) of short-term securities |
| (72,283 | ) |
| (137,219 | ) | ||
Net (decrease) increase in unsettled securities transactions |
| (35,881 | ) |
| 18,879 |
| ||
Net cash (used in) investing activities |
| (376,771 | ) |
| (414,158 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Common shares issued during the period |
| 887 |
|
| 346,613 |
| ||
Dividends paid to shareholders |
| (4,581 | ) |
| (4,102 | ) | ||
Borrowing on revolving credit agreement |
| — |
|
| 20,000 |
| ||
Repayments on revolving credit agreement |
| — |
|
| (20,000 | ) | ||
Net cash (used in) provided by financing activities |
| (3,694 | ) |
| 342,511 |
| ||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
| (2,299 | ) |
| (3,979 | ) | ||
Net (decrease) increase in cash |
| (55,109 | ) |
| 29,875 |
| ||
Cash, beginning of period |
| 208,830 |
|
| 71,878 |
| ||
Cash, end of period | $ | 153,721 |
| $ | 101,753 |
| ||
SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
Cash transactions: | ||||||||
Income taxes paid (refunded), net | $ | 5,453 |
| $ | (17,397 | ) | ||
Interest paid | $ | 23,905 |
| $ | 20,299 |
| ||
Non-cash financing transaction: | ||||||||
Issuance of common shares | $ | 21 |
| $ | — |
| ||
Page 4 of 4
