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 Grows Book Value per Share 5% in Second Quarter 2010 to $107.31
HAMILTON, Bermuda – July 28, 2010 -- Everest Re Group, Ltd. (NYSE: RE) reported second quarter 2010 after-tax operating income1, which excludes net realized capital gains and losses, of $184.8 million, or $3.18 per diluted common share, compared to after-tax operating income1 of $256.2 million, or $4.16 per diluted common share, in the second quarter of 2009. Net income, including net realized capital gains and losses, was $156.7 million, or $2.70 per diluted common share, for the second quarter of 2010 compared to $272.6 million, or $4.43 per diluted common share, for the same period last year.
For the six months ended June 30, 2010, after-tax operating income1 was $111.0 million, or $1.89 per diluted common share, compared to $362.4 million or $5.88 per diluted common share, for the first six months of 2009. Net income, including net realized capital gains and losses, was $134.0 million, or $2.28 per diluted common share, for the first six months of 2010, compared to $381.1 million, or $6.19 per diluted common share, for the same period in 2009.
Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, “Although markets remain generally competitive, we have been able to selectively grow our business by focusing on those markets that present the best opportunities. We were pleased with the results generated this quarter and given our very well capitalized position, we continue to invest these earnings into buying back the Company’s shares at prices that we believe are very attractive. Since the beginning of the year, we have bought back almost 6% of the Company’s outstanding shares.”
Mr. Taranto added, “At December 31, 2010, I will retire as CEO. I will remain Chairman of the Board. Ralph Jones will become CEO on January 1, 2011. It has been an honor to
work with many wonderful people at Everest to build the Company from a modest size in 1995 to the global company it is today with over $6 billion of capital. The Board and I have great confidence that Ralph, and our team, will continue to effectively grow Everest in the future.”
Operating highlights for the second quarter of 2010 included the following:
| · | Gross written premiums increased 4% to $1,013.5 million compared to the same period in 2009. Adjusting for the effects of foreign exchange, gross written premiums were up approximately 5%. Worldwide, reinsurance premiums increased 6% to $808.6 million with premium derived from the U.S. markets up 3% and the international markets up 9%. New business opportunities coupled with rate increases on select covers and insurance market growth in some international regions contributed to this increased volume. Insurance premiums were down 4% primarily due to underwriting actions that were taken in response to unprofitable business. |
| · | The loss ratio and combined ratio were 65.1% and 93.2%, respectively, for the quarter, compared to 59.2% and 87.5%, respectively, for the second quarter of 2009. Excluding $9.8 million of prior year favorable development and $69.7 million of catastrophe losses, which were primarily attributable to development on first quarter events, the current year attritional loss ratio was 59.0%, up from the 57.7% reported for last year’s second quarter. |
| · | Net investment income was down 1% to $165.7 million when compared to last year’s second quarter. Eliminating the impact of limited partnership investments on each quarter, investment income was up 2% in 2010 compared to the same period in 2009. |
| · | Net after-tax realized capital losses amounted to $28.1 million for the quarter compared to net after-tax realized capital gains of $16.3 million in the same period last year. The losses for the current quarter were primarily attributable to fair value adjustments on the equity portfolio. |
| · | Net after-tax unrealized capital gains increased $113.3 million during the quarter, primarily due to changes in interest rates. |
| · | Cash flow from operations was $221.5 million compared to $103.4 million for the same period in 2009. Much of the variance was attributable to a tax recovery in the current quarter whereas tax payments were made in the second quarter of 2009. |
| · | For the quarter, the annualized after-tax operating income1 return on average adjusted shareholders’ equity2 was 13.1% compared to 19.2% in 2009. |
| · | During the quarter, the Company repurchased 2.7 million of its common shares at an average price of $74.64 and a total cost of $200.1 million. For the year, the Company repurchased 3.2 million of its common shares, or 5.5% of its total outstanding shares at year end 2009, for a total cost of $247.1 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 5.2 million shares available. |
| · | Shareholders’ equity ended the quarter at $6,036 million, down 1% from the $6,102 million at December 31, 2009. Adjusting for share repurchases and |
| | dividend payments, shareholder’s equity was up 4% from year end. Book value per share was $107.31 as of June 30, 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 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. 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& #8217;s web site at www.everestre.com.
A conference call discussing the second quarter results will be held at 10:30 a.m. Eastern Time on July 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 | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| (Dollars in thousands, except per share amounts) | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | (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) | | $ | 156,673 | | | $ | 2.70 | | | $ | 272,588 | | | $ | 4.43 | | | $ | 134,021 | | | $ | 2.28 | | | $ | 381,144 | | | $ | 6.19 | |
| After-tax net realized capital gains (losses) | | | (28,141 | ) | | | (0.48 | ) | | | 16,343 | | | | 0.27 | | | | 23,000 | | | | 0.39 | | | | (32,120 | ) | | | (0.52 | ) |
| After-tax gain on debt repurchase | | | | | | | | | | | | | | | | | | | | | | | | | | | 50,876 | | | | 0.83 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| After-tax operating income (loss) | | $ | 184,814 | | | $ | 3.18 | | | $ | 256,245 | | | $ | 4.16 | | | $ | 111,021 | | | $ | 1.89 | | | $ | 362,388 | | | $ | 5.88 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 f or 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--
