Everest Re (EG) 8-K Everest Re Group Reports Second Quarter 2019 Results

        NEWS RELEASE
                             

EVEREST RE GROUP, LTD.

Seon Place, 141 Front Street, 4^th Floor, Hamilton HM 19, Bermuda

Everest Re Group Reports Second Quarter 2019 Results

HAMILTON, Bermuda--(BUSINESS WIRE – July 29, 2019)

Everest Re Group, Ltd. (“Everest”) (NYSE: RE) today reported second quarter 2019 net income of $342.9 million, or $8.39 per diluted common share, compared to net income of $69.9 million, or $1.70 per diluted common share for the second quarter of 2018.  After-tax operating income¹ was $320.9 million, or $7.85 per diluted common share, for the second quarter of 2019, compared to after-tax operating income¹ of $40.4 million, or $0.98 per diluted common share, for the same period last year.

For the six months ended June 30, 2019, net income was $691.8 million, or $16.93 per diluted common share, compared to net income of $280.2 million, or $6.81 per diluted common share for the six months ended June 30, 2018.  After-tax operating income¹ was $603.2 million, or $14.76 per diluted common share, for the six months ended June 30, 2019, compared to after-tax operating income¹ of $260.1 million, or $6.32 per diluted common share, for the same period last year.

Commenting on the Company’s results, President and Chief Executive Officer Dominic J. Addesso said: “Everest delivered outstanding results for the quarter, with a 16.1% annualized net income return on equity, driven by both solid underwriting and investment performance. With nearly $9 billion in common equity and strong franchises in both reinsurance and insurance, our ability to adjust the mix of business to optimize our portfolio was again evident this quarter, as Everest added top line in insurance and casualty reinsurance along with a strong property cat renewal to take advantage of the improved market conditions.”

Operating highlights for the second quarter of 2019 included the following:

• Gross written premiums for the quarter were $2.2 billion, an increase of 5% compared to the second quarter of 2018. Direct insurance premiums were up 17%, from second quarter 2018, to $757.1 million, continuing with the diversified growth trends noted in recent years. Worldwide reinsurance premiums were essentially flat at $1.4 billion for both the second quarter of 2019 and 2018.

• The combined ratio was 89.2% for the quarter compared to 105.1% in the second quarter of 2018.  Excluding catastrophe losses, reinstatement premiums and the favorable prior period loss development, the current quarter attritional combined ratio was 88.6% compared to 83.5% in the same period last year.

• There were no current year catastrophe losses incurred in the quarter.

• There was $30 million of adverse development recorded in the quarter related to prior year catastrophe events, mostly offset by $21 million of favorable prior year attritional losses.

• Net investment income increased 27% for the quarter to $179.0 million.

• Net after-tax realized capital gains amounted to $26.0 million for the quarter compared to $10.5 million during the second quarter of 2018.

• Cash flow from operations was $853.5 million for the six months ended June 30, 2019 compared to $132.6 million for the same period in 2018.

• During the quarter, the Company purchased 39,440 shares at a total cost of $8.5 million.  The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 1.3 million shares available.

• Shareholders’ equity ended the quarter at $8.9 billion compared to $7.9 billion at year end 2018.  Book value per share was up from $194.43 at December 31, 2018 to $218.07 at June 30, 2019.

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.

About Everest Re Group, Ltd.

Everest Re Group, Ltd. (“Everest”) is a leading global provider of reinsurance and insurance, operating for more than 40 years through subsidiaries in the U.S., Europe, Bermuda and other territories.

Everest offers property, casualty, and specialty products through its various operating affiliates located in key markets around the world.

Everest common stock (NYSE:RE) is a component of the S&P 500 index.

A conference call discussing the second quarter results will be held at 10:30 a.m. Eastern Time on July 30, 2019. The call will be available on the Internet through the Company’s web site or at www.streetevents.com.

Additional information about Everest, our people, and our products can be found on our website at www.everestre.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.

_______________________________________________

¹ The 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), after-tax net foreign exchange income (expense), and the tax charge related  to the enactment of the Tax Cuts and Jobs Act of 2017 (TCJA), as the following reconciliation displays:

	Three Months Ended										Three Months Ended
	March 31,										March 31,
(Dollars in thousands, except per share amounts)	2019						2018				2019						2018
				(unaudited)										(unaudited)
				Per					Per Diluted					Per Diluted						Per Diluted
				Common					Common					Common						Common
	Amount			Share			Amount		Share		Amount			Share			Amount			Share
Net income (loss)	$	342,855		$	8.39		$	69,895	$	1.70	$	691,755		$	16.93		$	280,213		$	6.81
After-tax net realized capital gains (losses)		25,994			0.64			10,519		0.26		99,899			2.44			(8,836	)		(0.21	)
After-tax net foreign exchange income (expense)		(4,001	)		(0.10	)		19,026		0.46		(11,374	)		(0.28	)		28,959			0.70
After-tax operating income (loss)	$	320,862		$	7.85		$	40,350	$	0.98	$	603,230		$	14.76		$	260,090		$	6.32
(Some amounts may not reconcile due to rounding.)

Although net realized capital gains (losses) and net foreign exchange income (expense) are an integral part of the Company’s insurance operations, the determination of net realized capital gains (losses) and foreign exchange income (expense) is independent of the insurance underwriting process.  The Company believes that the level of net realized capital gains (losses) and net foreign exchange income (expense) 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.

Return on equity calculations use adjusted shareholders’ equity excluding net after-tax unrealized (appreciation) depreciation of investments.

Contact:

Everest Re Group, Ltd.

Jon Levenson, Head of Investor Relations

Investor.relations@everestre.com

Phone (908) 604-3169

--Financial Details Follow--

EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands, except per share amounts)	2019			2018			2019			2018
	(unaudited)						(unaudited)
REVENUES:
Premiums earned	$	1,817,299		$	1,729,818		$	3,549,996		$	3,349,245
Net investment income		179,028			141,322			320,004			279,616
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities		(5,157	)		(888	)		(8,090	)		(958	)
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss)		-			-			-			-
Other net realized capital gains (losses)		35,429			16,664			130,594			(8,167	)
Total net realized capital gains (losses)		30,272			15,776			122,504			(9,125	)
Net derivative gain (loss)		353			2,987			3,584			3,260
Other income (expense)		(7,977	)		3,036			(17,030	)		15,100
Total revenues		2,018,975			1,892,939			3,979,058			3,638,096
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		1,094,630			1,341,314			2,143,180			2,398,491
Commission, brokerage, taxes and fees		420,950			383,402			810,424			741,041
Other underwriting expenses		104,833			93,099			203,818			189,383
Corporate expenses		7,535			6,633			14,187			15,629
Interest, fees and bond issue cost amortization expense		8,434			7,728			16,065			15,146
Total claims and expenses		1,636,382			1,832,176			3,187,674			3,359,690
INCOME (LOSS) BEFORE TAXES		382,593			60,763			791,384			278,406
Income tax expense (benefit)		39,738			(9,132	)		99,629			(1,807	)
NET INCOME (LOSS)	$	342,855		$	69,895		$	691,755		$	280,213
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period		197,759			(41,776	)		430,824			(232,400	)
Reclassification adjustment for realized losses (gains) included in net income (loss)		(1,869	)		249			(3,691	)		(8,523	)
Total URA(D) on securities arising during the period		195,890			(41,527	)		427,133			(240,923	)
Foreign currency translation adjustments		(25,832	)		(63,652	)		(11,780	)		(45,953	)
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)		1,151			1,815			2,302			3,630
Total benefit plan net gain (loss) for the period		1,151			1,815			2,302			3,630
Total other comprehensive income (loss), net of tax		171,209			(103,364	)		417,655			(283,246	)
COMPREHENSIVE INCOME (LOSS)	$	514,064		$	(33,469	)	$	1,109,410		$	(3,033	)
EARNINGS PER COMMON SHARE:
Basic	$	8.42		$	1.71		$	16.98		$	6.85
Diluted		8.39			1.70			16.93			6.81

EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
	June 30,			December 31,
(Dollars and share amounts in thousands, except par value per share)	2019			2018
	(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value	$	15,804,524		$	15,225,263
(amortized cost: 2019, $15,506,555; 2018, $15,406,572)
Fixed maturities - available for sale, at fair value		-			2,337
Equity securities, at fair value		914,654			716,639
Short-term investments (cost: 2019, $744,486; 2018, $241,010)		744,602			240,987
Other invested assets (cost: 2019, $1,668,705; 2018, $1,591,745)		1,668,705			1,591,745
Cash		661,367			656,095
Total investments and cash		19,793,852			18,433,066
Accrued investment income		109,273			104,619
Premiums receivable		2,389,943			2,218,283
Reinsurance receivables		1,797,866			1,787,648
Funds held by reinsureds		498,043			445,040
Deferred acquisition costs		510,861			511,573
Prepaid reinsurance premiums		476,429			343,343
Income taxes		358,457			592,385
Other assets		453,067			358,042
TOTAL ASSETS	$	26,387,791		$	24,793,999
LIABILITIES:
Reserve for losses and loss adjustment expenses	$	13,249,488		$	13,119,090
Future policy benefit reserve		45,130			46,778
Unearned premium reserve		2,729,376			2,517,612
Funds held under reinsurance treaties		10,899			13,099
Other net payable to reinsurers		346,151			218,439
Senior notes due 6/1/2044		397,014			396,954
Long term notes due 5/1/2067		236,709			236,659
Accrued interest on debt and borrowings		3,063			3,093
Equity index put option liability		8,374			11,958
Unsettled securities payable		145,568			51,112
Other liabilities		331,859			275,401
Total liabilities		17,503,631			16,890,195
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $0.01; 50,000 shares authorized;
no shares issued and outstanding		-			-
Common shares, par value: $0.01; 200,000 shares authorized; (2019) 69,406
and (2018) 69,202 outstanding before treasury shares		694			692
Additional paid-in capital		2,198,461			2,188,777
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $32,754 at 2019 and ($20,697) at 2018		(44,902	)		(462,557	)
Treasury shares, at cost; 28,665 shares (2019) and 28,551 shares (2018)		(3,422,152	)		(3,397,548	)
Retained earnings		10,152,059			9,574,440
Total shareholders' equity		8,884,160			7,903,804
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	26,387,791		$	24,793,999

EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Six Months Ended
	June 30,
(Dollars in thousands)	2019			2018
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	691,755		$	280,213
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable		(178,319	)		(126,355	)
Decrease (increase) in funds held by reinsureds, net		(56,180	)		(77,794	)
Decrease (increase) in reinsurance receivables		(19,319	)		(467,011	)
Decrease (increase) in income taxes		180,285			43,516
Decrease (increase) in prepaid reinsurance premiums		(137,092	)		(86,044	)
Increase (decrease) in reserve for losses and loss adjustment expenses		155,096			223,202
Increase (decrease) in future policy benefit reserve		(1,648	)		(2,169	)
Increase (decrease) in unearned premiums		219,263			151,528
Increase (decrease) in other net payable to reinsurers		132,474			101,970
Increase (decrease) in losses in course of payment		35,738			162,073
Change in equity adjustments in limited partnerships		(57,031	)		(45,898	)
Distribution of limited partnership income		41,321			42,269
Change in other assets and liabilities, net		(60,820	)		(111,220	)
Non-cash compensation expense		17,171			17,566
Amortization of bond premium (accrual of bond discount)		13,321			17,677
Net realized capital (gains) losses		(122,504	)		9,125
Net cash provided by (used in) operating activities		853,511			132,648
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value		1,009,921			1,099,762
Proceeds from fixed maturities sold - available for sale, at market value		2,318,207			1,225,373
Proceeds from fixed maturities sold - available for sale, at fair value		2,706			1,065
Proceeds from equity securities sold, at fair value		149,233			576,382
Distributions from other invested assets		143,752			2,978,865
Cost of fixed maturities acquired - available for sale, at market value		(3,466,331	)		(2,163,331	)
Cost of fixed maturities acquired - available for sale, at fair value		-			(4,381	)
Cost of equity securities acquired, at fair value		(229,070	)		(722,797	)
Cost of other invested assets acquired		(207,323	)		(3,168,655	)
Net change in short-term investments		(499,983	)		213,242
Net change in unsettled securities transactions		88,531			(33,351	)
Net cash provided by (used in) investing activities		(690,357	)		2,174
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period for share-based compensation, net of expense		(7,485	)		(9,431	)
Purchase of treasury shares		(24,604	)		(25,304	)
Dividends paid to shareholders		(114,136	)		(106,480	)
Cost of shares withheld on settlements of share-based compensation awards		(11,748	)		(14,859	)
Net cash provided by (used in) financing activities		(157,973	)		(156,074	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		91			5,678
Net increase (decrease) in cash		5,272			(15,574	)
Cash, beginning of period		656,095			635,067
Cash, end of period	$	661,367		$	619,493
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)	$	(83,995	)	$	(44,151	)
Interest paid		15,984			14,754