Everest Re Group Reports Second Quarter 2018 Results
HAMILTON, Bermuda--(BUSINESS WIRE)--Jul 30, 2018--Everest Re Group, Ltd. (NYSE:RE) today reported second quarter 2018 net income of $69.9 million, or $1.70 per diluted common share, compared to net income of $245.7 million, or $5.95 per diluted common share for the second quarter of 2017. After-tax operating income 1 was $40.4 million, or $0.98 per diluted common share, for the second quarter of 2018, compared to after-tax operating income¹ of $233.7 million, or $5.66 per diluted common share, for the same period last year.
For the six months ended June 30, 2018, net income was $280.2 million, or $6.81 per diluted common share, compared to net income of $537.3 million, or $13.02 per diluted common share, for the six months ended June 30, 2017. After-tax operating income¹ was $260.1 million, or $6.32 per diluted common share, compared to after-tax operating income¹ of $500.8 million or $12.13 per diluted common share, for the same period in 2017.
Commenting on the Company’s results, President and Chief Executive Officer, Dominic J. Addesso said, “Everest generated an annualized, net income return on equity of 7%, despite the previously announced charge for net reserve adjustments. The underlying results were quite strong with an attritional combined ratio of 85.3% year to date. We continue to see positive momentum across the underwriting operations, with profitable growth opportunities materializing for both our insurance and reinsurance segments.”
Effective this year, the Company changed its reporting of operating income, a non-GAAP financial measure. Historically operating income represented net income, excluding realized capital gains and losses and the tax impact related to the enactment of the Tax Cuts and Jobs Act in 2017. Starting in first quarter 2018, the Company further adjusted operating income to exclude foreign exchange gains and losses as it believes the impact of foreign currency movements on income is not indicative of the performance of the underlying business in a particular period.
Operating highlights for the second quarter of 2018 included the following:Gross written premiums for the quarter were $2.1 billion, an increase of 29% compared to the second quarter of 2017. Worldwide reinsurance premiums were up 38% to $1.4 billion, with growth across each segment primarily driven by increased casualty and property pro-rata premium, rate improvement, increased shares on existing business and profitable new opportunities. Direct insurance premiums were up 13%, from second quarter 2017, to $645.9 million, continuing with the growth trends noted in recent years. The combined ratio was 105.1% for the quarter compared to 90.5% in the second quarter of 2017. Excluding catastrophe losses, reinstatement premiums and the favorable prior period loss development, the current quarter attritional combined ratio was 83.5% compared to 86.7% in the same period last year. Catastrophe losses, net of reinsurance and reinstatement premiums, amounted to $464.8 million in the quarter, with $399.8 million primarily related to the 2017 storm events and $65.0 million of current year catastrophe losses from Cyclone Mekunu in Oman and Yemen and late winter storms in the United States. Net investment income increased 5% for the quarter to $141.3 million. Net after-tax realized gains amounted to $10.5 million and net after-tax unrealized capital losses were $41.5 million, for the quarter. Cash flow from operations was $132.6 million for the six months ended June 30, 2018 compared to $634.4 million for the same period in 2017. During the second quarter, the Company purchased 112,747 shares at a total cost of $25.3 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 1.7 million shares available. Shareholders’ equity ended the quarter at $8.2 billion compared to $8.4 billion at year end 2017. Book value per share was down from $204.95 at December 31, 2017 to $201.70 at June 30, 2018.
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), dac, provides reinsurance to non-life insurers in Europe. Everest Insurance ® refers to the primary insurance operations of Everest Re Group, Ltd., and its affiliated companies which offer property, casualty and specialty lines insurance on both an admitted and non-admitted basis in the U.S. and internationally. The Company also operates within the Lloyd’s insurance market through Syndicate 2786. In addition, through Mt. Logan Re, Ltd., the Company manages segregated accounts, capitalized by the Company and third party investors that provide reinsurance for property catastrophe risks. 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 second quarter results will be held at 10:30 a.m. Eastern Time on July 31, 2018. 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.
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:
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.
2 Adjusted shareholders’ equity excludes net after-tax unrealized (appreciation) depreciation of investments
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