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 Reports First Quarter 2010 Earnings
HAMILTON, Bermuda – April 28, 2010 -- Everest Re Group, Ltd. (NYSE: RE) reported a net loss of $22.7 million, or $0.38 per common share, for the first quarter 2010, compared to net income of $108.6 million, or $1.76 per diluted common share, for the first quarter of 2009. The after-tax operating loss1, which excludes realized capital gains and losses, was $73.8 million, or $1.25 per common share, for the first quarter 2010, compared to after-tax operating income1 of $106.1 million, or $1.72 per diluted common share, for the same period last year.
The principal driver of the Company’s loss, as commented on previously in its press release of March 10, was the losses incurred in connection with the Chile earthquake and the European windstorm Xynthia. While there has been no change to the announced loss estimates for these events, additional catastrophe losses in the quarter, specifically the Australian storms in Melbourne and Perth, further contributed to these losses. Overall, catastrophe losses, net of reinstatement premiums and taxes, were $275.6 million, or $4.66 per common share, during the quarter.
Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, “As an industry, we experienced record catastrophe losses in the first quarter compared to the same period in any other year. While this had a significant impact on the quarterly results, our return to shareholders, including dividends paid, was slightly positive, attesting to the overall strength of our organization.”
Operating highlights for the first quarter of 2010 included the following:
| · | Gross written premiums increased 2% to $1,021 million compared to the same period in 2009, but eliminating the effects of foreign exchange, gross written |
| | premiums were roughly flat to last year. Globally, reinsurance premiums were about even with last year but adjusting for foreign currency movements and reinstatement premiums for the Chile earthquake, reinsurance premiums were down 5%. Lower premium from U.S. casualty, crop reinsurance, marine, and European business offset the continued strong growth in U.S. property, South America and Asia-Pacific markets. Insurance premiums, which are entirely derived from the U.S. markets, were up 11% as specialty markets continued to provide growth opportunities. |
| · | The loss and combined ratios were 97.8% and 124.9%, respectively, for the quarter compared to 61.1% and 89.3%, respectively, in the first quarter of 2009. Excluding the previously cited catastrophe losses, the current year attritional loss ratio was 59.5%, up from the 55.7% reported for last year’s first quarter. |
| · | Net investment income was $161.5 million, up significantly when compared to last year’s net investment income of $68.8 million. The first quarter of 2009 had been impacted by large losses on limited partnership investments compared to income from these same investments in the current quarter. Adjusting for limited partnerships, underlying investment income increased 3% quarter over quarter. |
| · | Net after-tax realized capital gains totaled $51.1 million for the quarter, primarily due to the sale of foreign bonds and the after-tax fair value adjustments to the public equity portfolio. This compares to net after-tax realized capital losses of $48.5 million in the first quarter of 2009. |
| · | Net after-tax unrealized capital gains increased $34.6 million during the quarter, driven by changes in interest rates. |
| · | Cash flow from operations was $271.3 million compared to cash flows of $180.5 million in the same quarter last year. |
| · | The Company repurchased 562,306 of its common shares during the quarter at an average price of $83.64 for a total cost of $47 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 7.9 million shares available. |
| · | Shareholders’ equity at March 31, 2010, was $6,037 million, down from the $6,102 million at December 31, 2009. Adjusting for share repurchases and dividend payments in the quarter, shareholders’ equity was flat compared to year end 2009. Book value per share was $102.46 as of March 31, 2010 compared to $102.87 at December 31, 2009. |
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 an d 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. 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 first quarter results will be held at 10:30 a.m. Eastern Time on April 29, 2010. 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.everestre.com in the “Financial Reports” section of the “Investor Center”. The supplemental financial information may also be obtained by contacting the Company directly.
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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) and after-tax gain on debt repurchase as the following reconciliation displays:
| | | Three Months Ended | |
| | | March 31, | |
(Dollars in thousands, except per share amounts) | | 2010 | | | 2009 | |
| | | | | | (unaudited) | | | | |
| | | | | | Per | | | | | | Per Diluted | |
| | | | | | Common | | | | | | Common | |
| | | Amount | | | Share | | | Amount | | | Share | |
| | | | | | | | | | | | | |
| Net (loss) income | | $ | (22,652 | ) | | $ | (0.38 | ) | | $ | 108,556 | | | $ | 1.76 | |
After-tax net realized capital gains (losses) | | | 51,141 | | | | 0.86 | | | | (48,463 | ) | | | (0.79 | ) |
| After-tax gain on debt repurchase | | | - | | | | - | | | | 50,876 | | | | 0.83 | |
| | | | | | | | | | | | | | | | | |
| After-tax operating (loss) income | | $ | (73,793 | ) | | $ | (1.25 | ) | | $ | 106,143 | | | $ | 1.72 | |
| | | | | | | | | | | | | | | | | |
(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.
--Financial Details Follow--
EVEREST RE GROUP, LTD.
