Everest Re Group Reports Third Quarter 2012 Earnings

Everest Re Group Reports Third Quarter 2012 Earnings

HAMILTON, Bermuda--(BUSINESS WIRE)-- Everest Re Group, Ltd. (NYS: RE) today reported third quarter 2012 net income of $250.9 million, or $4.82 per diluted common share, compared to net income of $63.1 million, or $1.16 per diluted common share, for the third quarter of 2011. After-tax operating income1, excluding realized capital gains and losses, was $210.6 million, or $4.05 per diluted common share, for the third quarter of 2012, compared to after-tax operating income1 of $146.7 million, or $2.70 per diluted common share, for the same period last year.

For the nine months ended September 30, 2012, net income was $770.2 million, or $14.61 per diluted common share, compared to a net loss of $121.5 million, or $2.24 per common share, for the first nine months of 2011. After-tax operating income1, excluding realized capital gains and losses, was $673.5 million, or $12.78 per diluted common share, compared to an after-tax operating loss of $42.9 million or $0.79 per common share, for the same period in 2011.

Commenting on the Company's results, Chairman and Chief Executive Officer, Joseph V. Taranto said, "Our record pace continues with another quarter of comprehensive income in excess of $400 million. Through nine months, we have generated almost $1 billion of comprehensive income for our shareholders, resulting in growth in book value per share, adjusted for dividends, of 17.4%."

Operating highlights for the third quarter of 2012 included the following:

  • Gross written premiums were $1.2 billion, an increase of 7% compared to the third quarter of 2011. Worldwide, reinsurance premiums were down 2.5% to $869.5 million, but adjusting for the higher level of reinstatement premiums in 2011 and the effects of foreign currency fluctuations, reinsurance premiums were relatively flat. Insurance premiums increased 42%, quarter over quarter, primarily due to the acquisition of Heartland.
  • The loss and combined ratios for the quarter were 59.8% and 87.2%, respectively, compared to 69.0% and 95.6% in 2011. Excluding catastrophe losses, reinstatement premiums, and prior period loss development, the current quarter attritional loss ratio was 57.5% and the current quarter attritional combined ratio was 84.9%. This compared to 56.6% and 83.5%, respectively, for the same period last year. It should be noted that the current year attritional combined ratio does include a $33.2 million underwriting loss in the quarter for crop business, $20.0 million on primary business and $13.2 million on reinsurance business. Adjusting for this, the current year attritional combined ratio would be 81.6%.
  • Net investment income for the quarter was $152.0 million, down 3% compared to last year, primarily driven by declining reinvestment rates.
  • Net after-tax realized and unrealized capital gains totaled $40.4 million and $118.2 million, respectively, for the quarter.
  • Cash flow from operations was $174.9 million compared to $207.9 million for the same period in 2011. Higher underwriting cash flow was partially offset by lower investment income receipts and higher tax payments in the current quarter.
  • Through nine months, the annualized after-tax operating income1 return on average adjusted shareholders' equity2 was 15.3%.
  • During the quarter, the Company repurchased 229,100 of its common shares at an average price of $109.22 and a total cost of $25 million. For the year, the Company repurchased 2.6 million of its common shares for a total cost of $250 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company's Board of Directors, under which there remains 4.7 million shares available.
  • Shareholders' equity ended the quarter at $6.8 billion, up 12% from the $6.1 billion at December 31, 2011. Book value per share increased 16% from $112.99 at December 31, 2011 to $131.22 at September 30, 2012.

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. 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 25, 2012. 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.


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 EndedNine Months Ended
September 30,September 30,
(Dollars in thousands, except per share amounts)2012   20112012   2011
Per DilutedPer DilutedPer DilutedPer
Amount   ShareAmount   ShareAmount   ShareAmount   Share
Net income (loss)$250,922$4.82$63,054$1.16$770,177$14.61$(121,528)$(2.24)
After-tax net realized capital gains (losses) 40,351    0.78 (83,619)    (1.54) 96,665    1.83 (78,612)    (1.45)
After-tax operating income (loss)$210,571   $4.05$146,673    $2.70 $673,512   $12.78$(42,916)   $(0.79)
(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--

Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands, except per share amounts) 2012  2011  2012  2011 
Premiums earned$1,009,454$1,044,338$3,045,232$3,095,619
Net investment income152,024156,465453,791493,788
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities(3,548)(1,050)(9,902)(15,817)
Other-than-temporary impairments on fixed maturity securities

transferred to other comprehensive income (loss)

Other net realized capital gains (losses) 66,291  (136,621) 154,784  (114,543)
Total net realized capital gains (losses)62,743(137,671)144,882(130,360)
Net derivative gain (loss)703(23,427)(9,420)(19,273)
Other income (expense) (5,943) (14,911) 15,675  (31,744)
Total revenues 1,218,981  1,024,794  3,650,160  3,408,030 
Incurred losses and loss adjustment expenses603,654720,7111,813,9902,706,276
Commission, brokerage, taxes and fees221,082227,969724,374701,800
Other underwriting expenses55,76249,437153,932140,290
Corporate expenses5,9474,20416,68311,922
Interest, fees and bond issue cost amortization expense 13,331  13,085  39,753  39,199 
Total claims and expenses 899,776  1,015,406  2,748,732  3,599,487 
INCOME (LOSS) BEFORE TAXES319,2059,388901,428(191,457)
Income tax expense (benefit) 68,283  (53,666) 131,251  (69,929)
NET INCOME (LOSS)$250,922$63,054$770,177$(121,528)
Other comprehensive income (loss), net of tax :
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period116,694(14,536)202,22953,141
Less: reclassification adjustment for realized losses (gains) included in net income (loss) 1,512  (20,420) (5,702) (949)
Total URA(D) on securities arising during the period118,206(34,956)196,52752,192
Foreign currency translation adjustments36,252(23,247)27,12516,258
Pension adjustments 1,199  746  3,166  2,238 
Total other comprehensive income (loss), net of tax 155,657  (57,457) 226,818  70,688 
COMPREHENSIVE INCOME (LOSS)$406,579 $5,597 $996,995 $(50,840)
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