NEWS RELEASE
EVEREST RE GROUP, LTD.
Wessex House, 45 Reid Street, 2nd Floor, Hamilton HM DX, Bermuda
Contact:
Elizabeth B. Farrell
Vice President, Investor Relations
Everest Global Services, Inc.
908.604.3169
For Immediate Release
Everest Re Group Announces Fourth Quarter Earnings
HAMILTON, Bermuda – January 31, 2005 — Everest Re Group, Ltd. (NYSE: RE) reported fourth quarter 2004 after-tax operating income1, which excludes realized capital gains and losses, of $94.7 million, or $1.66 per diluted share, a 20.2% decrease compared to $118.6 million, or $2.09 per diluted share, in the fourth quarter of 2003. Fourth quarter 2004 net income decreased 23.4% to $93.3 million, or $1.64 per diluted share, compared to $121.8 million, or $2.15 per diluted share, in the fourth quarter of 2003. Operating income differs from net income only by the exclusion of realized gains and losses on investments.
For the year ended December 31, 2004, after-tax operating income1 was $425.3 million, or $7.48 per diluted share, a decrease of 6.7% compared to $456.0 million, or $8.29 per diluted share, in 2003. Net income for 2004 was $494.9 million, or $8.71 per diluted share, an increase of 16.2% compared to $426.0 million, or $7.74 per diluted share, in 2003.
Gross premiums written for the fourth quarter of 2004 were $1.18 billion, a 6.9% decrease compared to $1.26 billion in 2003. Net premiums written were $1.12 billion, a decrease of 5.7% from $1.19 billion for the fourth quarter of 2003. The Company’s GAAP combined ratio in the fourth quarter was 102.8% compared to 96.4% in 2003. Net investment income for the fourth quarter was $134.4 million compared to $106.5 million in the fourth quarter of 2003. Cash flow from operations for the fourth quarter of 2004 was $197.0 million, a decrease of 59.0% from $480.7 million in the fourth quarter of 2003.
For the year ended December 31, 2004, gross premiums written were $4.70 billion, a 2.8% increase from $4.57 billion in 2003. Net written premiums grew 5.0% to $4.53 billion from $4.32 billion in 2003. The GAAP combined ratio for 2004 was 98.8% compared to 95.2% in 2003. Net investment income for the year was $495.9 million, an increase of 23.2% from $402.6 million in 2003. Cash flow from operations for 2004 was $1.49 billion, compared to $1.65 billion in 2003.
At December 31, 2004, the Company’s shareholders’ equity was $3.71 billion, or $66.09 per outstanding share. The change in book value represents a 17.3% increase from shareholders’ equity of $3.16 billion, or $56.84 per outstanding share, at December 31, 2003.
Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, “In 2004, despite unusually high catastrophe losses, we achieved a 13.5% ROE and grew total capital by 29.4%. We begin 2005 with a strong balance sheet, a high quality underwriting portfolio and a determination to continue to deliver excellent shareholder returns”.
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 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. Additional information on Everest Re Group companies can be found at the Group’s web site at www.everestre.com.
A conference call discussing the fourth quarter results will be held at 8:30 a.m. Eastern Time on February 1, 2005. The call will be available on the Internet through the Company’s web site or atwww.streetevents.com.
Anyone receiving this release by wire or through the Internet may visit the Company’s web site to view supplemental financial information on the Company’s results. The supplemental information is located atwww.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, a non-GAAP financial measure, to evaluate its performance. After-tax operating income consists of net income excluding after-tax realized gains (losses) as the following reconciliation displays:
| | Three Months Ended
December 31, | | Twelve Months Ended
December 31, |
| |
| |
|
(Dollars in thousands,
except per share amounts) | | 2004 | 2003 | | 2004 | 2003 |
| |
| |
|
| | (unaudited) | | |
| | | amount | | | per
diluted
share | | | amount | | | per
diluted
share | | | | amount | | | per
diluted
share | | | amount | | | per
diluted
share | |
| |
| |
|
| Net income | | | | $ | 93,327 | | $ | 1.64 | | $ | 121,780 | | $ | 2.15 | | | | $ | 494,858 | | $ | 8.71 | | $ | 426,028 | | $ | 7.74 | |
| After-tax realized | | |
| (losses) gains | | | (1,323 | ) | | (0.02 | ) | | 3,154 | | | 0.06 | | | | | 69,516 | | | 1.22 | | | (30,017 | ) | | (0.56 | ) |
| |
| |
|
| After-tax operating | | |
| income | | $ | 94,650 | | $ | 1.66 | | $ | 118,626 | | $ | 2.09 | | | | $ | 425,342 | | $ | 7.48 | | $ | 456,045 | | $ | 8.29 | |
| |
| |
|
Although realized capital gains (losses) are an integral part of the Company’s insurance operations, the determination of realized capital gains (losses) is independent of the insurance underwriting process. The Company believes that the level of realized 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 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 in their analyses for the reasons discussed above. The Company provides after-tax operating income 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 |
| Three Months Ended
December 31,
| | Twelve Months Ended
December 31,
|
|
| |
| |
| (Dollars in thousands, except per share amounts) | 2004
| 2003
| 2004
| 2003
|
|
| |
| |
| (unaudited) |
| REVENUES: | | | | | | | | | | | | | | |
| Premiums earned | | | $ | 1,225,897 | | $ | 1,094,640 | | $ | 4,425,082 | | $ | 3,737,851 | |
| Net investment income | | | | 134,382 | | | 106,507 | | | 495,908 | | | 402,610 | |
| Net realized capital (losses) gains | | | | (2,284 | ) | | 3,517 | | | 89,614 | | | (38,026 | ) |
| Net derivative income (expense) | | | | 3,305 | | | 3,462 | | | (2,660 | ) | | 5,851 | |
| Other income (expense) | | | | 912 | | | 4,991 | | | 741 | | | (1,033 | ) |
|
| |
| |
| Total revenues | | | | 1,362,212 | | | 1,213,117 | | | 5,008,685 | | | 4,107,253 | |
|
| |
| |
| CLAIMS AND EXPENSES: | | |
| Incurred losses and loss adjustment expenses | | | | 941,508 | | | 763,429 | | | 3,291,139 | | | 2,600,196 | |
| Commission, brokerage, taxes and fees | | | | 289,443 | | | 264,171 | | | 975,176 | | | 863,933 | |
| Other underwriting expenses | | | | 29,424 | | | 27,906 | | | 107,120 | | | 94,623 | |
| Interest expense on senior notes | | | | 12,745 | | | 9,734 | | | 41,954 | | | 38,931 | |
| Interest expense on junior subordinated debt | | | | 9,362 | | | 4,248 | | | 32,392 | | | 16,995 | |
| Interest expense on credit facility | | | | 196 | | | 327 | | | 1,193 | | | 1,362 | |
|
| |
| |
| Total claims and expenses | | | | 1,282,678 | | | 1,069,815 | | | 4,448,974 | | | 3,616,040 | |
|
| |
| |
| INCOME BEFORE TAXES | | | | 79,534 | | | 143,302 | | | 559,711 | | | 491,213 | |
| Income tax (benefit) expense | | | | (13,793 | ) | | 21,522 | | | 64,853 | | | 65,185 | |
|
| |
| |
| NET INCOME | | | $ | 93,327 | | $ | 121,780 | | $ | 494,858 | | $ | 426,028 | |
|
| |
| |
| Other comprehensive income, net of tax | | | | 86,126 | | | 12,991 | | | 48,660 | | | 58,535 | |
|
| |
| |
| COMPREHENSIVE INCOME | | | $ | 179,453 | | $ | 134,771 | | $ | 543,518 | | $ | 484,563 | |
|
| |
| |
| PER SHARE DATA: | | |
| Average shares outstanding (000's) | | | | 56,041 | | | 55,566 | | | 55,929 | | | 54,023 | |
| Net income per common share - basic | | | $ | 1.67 | | $ | 2.19 | | $ | 8.85 | | $ | 7.89 | |
|
| |
| |
| Average diluted shares outstanding (000's) | | | | 56,928 | | | 56,763 | | | 56,826 | | | 55,010 | |
| Net income per common share - diluted | | | $ | 1.64 | | $ | 2.15 | | $ | 8.71 | | $ | 7.74 | |
|
| |
| |
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS |
| | | |
|---|
| (Dollars in thousands, except par value per share) | December 31,
2004 | | December 31,
2003 |
|
|
| | |
|---|
| ASSETS: | | | | | | | | |
| Fixed maturities - available for sale, at market value | | |
| (amortized cost: 2004, $9,609,617; 2003, $8,357,723) | | | $ | 9,947,172 | | $ | 8,726,886 | |
| Equity securities, at market value (cost: 2004, $571,717; 2003, $146,407) | | | | 650,871 | | | 154,381 | |
| Short-term investments | | | | 585,875 | | | 151,853 | |
| Other invested assets (cost: 2004, $160,188; 2003, $102,742) | | | | 161,324 | | | 103,359 | |
| Cash | | | | 184,930 | | | 184,859 | |
|
|
| Total investments and cash | | | | 11,530,172 | | | 9,321,338 | |
| Accrued investment income | | | | 130,216 | | | 113,989 | |
| Premiums receivable | | | | 1,314,160 | | | 1,047,856 | |
| Reinsurance receivables | | | | 1,210,795 | | | 1,284,139 | |
| Funds held by reinsureds | | | | 195,944 | | | 157,364 | |
| Deferred acquisition costs | | | | 331,909 | | | 333,214 | |
| Prepaid reinsurance premiums | | | | 84,646 | | | 98,384 | |
| Deferred tax asset | | | | 159,874 | | | 145,271 | |
| Other assets | | | | 115,050 | | | 187,981 | |
|
|
| TOTAL ASSETS | | | $ | 15,072,766 | | $ | 12,689,536 | |
|
|
| LIABILITIES: | | |
| Reserve for losses and adjustment expenses | | | $ | 7,836,306 | | $ | 6,361,245 | |
| Future policy benefit reserve | | | | 152,179 | | | 205,275 | |
| Unearned premium reserve | | | | 1,595,630 | | | 1,499,640 | |
| Funds held under reinsurance treaties | | | | 282,472 | | | 385,768 | |
| Losses in the course of payment | | | | 19,069 | | | 11,133 | |
| Contingent commissions | | | | 2,509 | | | 2,135 | |
| Other net payable to reinsurers | | | | 47,462 | | | 46,037 | |
| Current federal income taxes | | | | 31,854 | | | 41,308 | |
| 8.5% Senior notes due 3/15/2005 | | | | 249,976 | | | 249,874 | |
| 8.75% Senior notes due 3/15/2010 | | | | 199,341 | | | 199,245 | |
| 5.4% Senior notes due 10/15/2014 | | | | 249,584 | | | - | |
| Junior subordinated debt securities payable | | | | 546,393 | | | 216,496 | |
| Revolving credit agreement borrowings | | | | - | | | 70,000 | |
| Accrued interest on debt and borrowings | | | | 16,426 | | | 13,695 | |
| Other liabilities | | | | 131,048 | | | 222,785 | |
|
|
| Total liabilities | | | | 11,360,248 | | | 9,524,636 | |
|
|
| 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; | | |
| (2004) 56.2 million and (2003) 55.7 million issued and outstanding | | | | 566 | | | 561 | |
| Additional paid-in capital | | | | 983,025 | | | 954,658 | |
| Unearned compensation | | | | (7,108 | ) | | (5,257 | ) |
| Accumulated other comprehensive income, net of deferred income taxes of | | |
| $135.6 million at 2004 and $117.5 million at 2003 | | | | 328,737 | | | 280,077 | |
| Retained earnings | | | | 2,430,248 | | | 1,957,811 | |
| Treasury shares, at cost; 0.5 million shares (2004 and 2003) | | | | (22,950 | ) | | (22,950 | ) |
|
|
| Total shareholders' equity | | | | 3,712,518 | | | 3,164,900 | |
|
|
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | | $ | 15,072,766 | | $ | 12,689,536 | |
|
|
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| Three Months Ended
December 31,
| | Twelve Months Ended
December 31,
|
|
| |
| |
| (Dollars in thousands) | 2004
| 2003
| 2004
| 2003
|
|
| |
| |
| (unaudited) |
| | | |
| | | | |
|---|
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | $ | 196,988 | | $ | 480,658 | | $ | 1,487,568 | | $ | 1,653,805 | |
| | | |
| CASH FLOWS FROM INVESTING ACTIVITIES : | | |
| Proceeds from investments sold | | | | 246,798 | | | 386,103 | | | 1,475,975 | | | 1,231,177 | |
| Proceeds from investments maturing or called | | | | 147,550 | | | 207,411 | | | 659,426 | | | 875,575 | |
| Cost of investments acquired | | | | (730,349 | ) | | (1,303,777 | ) | | (3,703,130 | ) | | (4,144,191 | ) |
| Net (purchases) sales of short-term investments | | | | (58,473 | ) | | 244,530 | | | (432,279 | ) | | 20,479 | |
|
| |
| |
| Net cash used in investing activities | | | | (394,474 | ) | | (465,733 | ) | | (2,000,008 | ) | | (2,016,960 | ) |
|
| |
| |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | |
| Common shares issued during the period | | | | 4,413 | | | 7,781 | | | 25,146 | | | 330,885 | |
| Dividends paid to shareholders | | | | (5,616 | ) | | (5,010 | ) | | (22,421 | ) | | (19,577 | ) |
| Proceeds from issuance of senior notes | | | | 246,651 | | | - | | | 246,651 | | | - | |
| Net proceeds from issuance of junior subordinated notes | | | | - | | | - | | | 319,997 | | | - | |
| Repayments on revolving credit agreement | | | | (70,000 | ) | | - | | | (70,000 | ) | | - | |
|
| |
| |
| Net cash provided by financing activities | | | | 175,448 | | | 2,771 | | | 499,373 | | | 311,308 | |
|
| |
| |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | | | | 28,002 | | | 25,526 | | | 13,138 | | | 27,876 | |
|
| |
| |
| Net increase (decrease) in cash | | | | 5,964 | | | 43,222 | | | 71 | | | (23,971 | ) |
| | | |
| Cash, beginning of period | | | | 178,966 | | | 141,637 | | | 184,859 | | | 208,830 | |
|
| |
| |
| Cash, end of period | | | $ | 184,930 | | $ | 184,859 | | $ | 184,930 | | $ | 184,859 | |
|
| |
| |
