EVEREST RE GROUP, LTD.
Contact: Elizabeth B. Farrell
Everest Global Services, Inc.
Everest Re Group Reports Third Quarter 2013 Earnings and
Record Underwriting Income of $500 million through Nine Months
HAMILTON, Bermuda – October 23, 2013 -- Everest Re Group, Ltd. (NYSE: RE) today reported third quarter 2013 net income available to common shareholders of $234.8 million, or $4.81 per diluted common share, compared to net income of $250.9 million, or $4.82 per diluted common share, for the third quarter of 2012. After-tax operating income1available to common shareholders, excluding realized capital gains and losses, was $205.0 million, or $4.20 per diluted common share, for the third quarter of 2013, compared to after-tax operating income1 of $210.6 million, or $4.05 per diluted common share, for the same period last year. A significant item impacting the quarter’s earnings was an increase in the annualized effective tax rate, reducing operating income by $24.3 million, or $0.50 per diluted common share. This change in the annualized effective tax rate was driven by lower than planned catastrophe losses in the quarter.
For the nine months ended September 30, 2013, net income available to common shareholders was $894.7 million, or $17.94 per diluted common share, compared to $770.2 million, or $14.61 per diluted common share, for the first nine months of 2012. After-tax operating income1available to common shareholders, excluding realized capital gains and losses, was $759.2 million, or $15.22 per diluted common share, compared to $673.5 million or $12.78 per diluted common share, for the same period in 2012.
Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, “Through the first nine months we had $895 million of net income for a 19% return on equity and grew premium by 24%. Over the last several years we have strategically focused on expanding our global footprint and improving our risk adjusted
returns. I want to thank our staff, which I believe is the best in the business, for their terrific work that helped us achieve these goals.”
Operating highlights for the third quarter of 2013 included the following:
| · | Gross written premiums were $1.5 billion, an increase of 22% compared to the third quarter of 2012. Total Reinsurance premiums were up 24% to $1.1 billion with continued strong growth emanating from expansion initiatives in the property reinsurance markets. Insurance premiums also rose with an increase of 12% for the quarter primarily driven by California workers’ compensation and non-standard automobile business. |
| · | The combined ratio for the quarter was 88.0% compared to 87.2% in the third quarter of 2012. Excluding catastrophe losses, reinstatement premiums, and prior period loss development, the current quarter attritional combined ratio was 82.3% compared to 84.9% for the same period last year. |
| · | Catastrophe losses were $75.0 million for the quarter arising from the German hailstorms and flood events in Canada, including an increase in estimated losses for the flooding in Alberta, Canada due to an escalation of the industry loss. The net impact of these losses in the quarter, after reinstatement premiums and taxes, was $65.0 million. |
| · | Net investment income for the quarter was $127.9 million and includes $4.6 million of limited partnership income. |
| · | Interest expense on debt has declined from $13.3 million in the third quarter of 2012 to $7.6 million in the current quarter as a result of the redemption of the 6.2% junior subordinated debt securities in May of this year. |
| · | Net after-tax realized capital gains amounted to $29.8 million in the quarter, offset, in part, by $22.5 million of unrealized losses, net of tax, on the fixed income portfolio. |
| · | Cash flow from operations was $380.4 million compared to $174.9 million for the same period in 2012. |
| · | The year-to-date effective tax rate on operating income increased from 12.3% at June 30, 2013 to 15.0% at September 30, 2013 resulting in a $24.3 million, or $0.50 per diluted common share, impact and an effective tax rate of 21.7% for the quarter. The increase in the effective tax rate was primarily attributable to lower than planned catastrophe losses, resulting in higher than expected income for the year. |
| · | Through nine months, the annualized after-tax operating income1 return on average adjusted shareholders’ equity2 was 16.1% compared to 15.3% in 2012. For this same period, the annualized net income return on average adjusted shareholders’ equity2 was 19.0% compared to 17.5% in 2012. |
| · | During the quarter, the Company repurchased 724,654 of its common shares at an average price of $137.98 and a total cost of $100.0 million. For the year, the Company repurchased 4.3 million of its common shares for a total cost of $550.0 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 5.0 million shares available. |
| · | Shareholders’ equity ended the quarter at $6.7 billion, relatively flat to the level at December 31, 2012. Book value per share increased 7% from $130.96 at December 31, 2012 to $140.20 at September 30, 2013. |
Effective July 1, 2013, Mt. Logan Re established separate segregated accounts and issued non-voting, redeemable preferred shares to capitalize the segregated accounts. Mt. Logan Re meets the definition of a variable interest entity. Accordingly, the financial position and operating results for Mt. Logan Re are consolidated with the Company. The non-controlling interests in Mt. Logan Re’s operating results and equity are presented as separate captions in the Company’s financial statements. The Company’s financial supplement, located on the website at www.everestregroup.com, now includes an additional segment for the activities related to Mt. Logan Re to assist investors with the impact of this new entity on the Company’s financials.
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. Mt. Logan Re, a segregated cell company, capitalized by the Company and third party investors, is a specialty reinsurer of catastrophe risks. 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. 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 third quarter results will be held at 10:30 a.m. Eastern Time on October 24, 2013. 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.
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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) as the following reconciliation displays:
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
(Dollars in thousands, except per share amounts) | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| | | | | | (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)* | | $ | 234,759 | | | $ | 4.81 | | | $ | 250,922 | | | $ | 4.82 | | | $ | 894,744 | | | $ | 17.94 | | | $ | 770,177 | | | $ | 14.61 | |
| After-tax net realized capital gains (losses) | | | 29,781 | | | | 0.61 | | | | 40,351 | | | | 0.78 | | | | 135,544 | | | | 2.72 | | | | 96,665 | | | | 1.83 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| After-tax operating income (loss)* | | $ | 204,978 | | | $ | 4.20 | | | $ | 210,571 | | | $ | 4.05 | | | $ | 759,200 | | | $ | 15.22 | | | $ | 673,512 | | | $ | 12.78 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* attributable to common shareholders | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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--
