Everest Re Group Reports Second Quarter 2018 Results
For the six months ended
Commenting on the Company’s results, President and Chief Executive Officer,
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 inOman andYemen and late winter storms inthe 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 endedJune 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 atDecember 31, 2017 to$201.70 atJune 30, 2018 .
This news release contains forward-looking statements within the meaning of the
A conference call discussing the second quarter results will be held at
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), 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 | Six Months Ended | |||||||||||||||||||||||||||||||
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(Dollars in thousands, except per share amounts) | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||||||
Per | Per Diluted | Per | Per Diluted | |||||||||||||||||||||||||||||
Common | Common | Common | Common | |||||||||||||||||||||||||||||
Amount | Share | Amount | Share | Amount | Share | Amount | Share | |||||||||||||||||||||||||
Net income (loss) | $ | 69,895 | $ | 1.70 | $ | 245,674 | $ | 5.95 | $ | 280,213 | $ | 6.81 | $ | 537,317 | $ | 13.02 | ||||||||||||||||
After-tax net realized capital gains (losses) | 10,519 | 0.26 | 18,224 | 0.44 | (8,836 | ) | (0.21 | ) | 50,334 | 1.22 | ||||||||||||||||||||||
After-tax net foreign exchange income (expense) | 19,026 | 0.46 | (6,267 | ) | (0.15 | ) | 28,959 | 0.70 | (13,825 | ) | (0.33 | ) | ||||||||||||||||||||
Impact of TCJA enactment | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
After-tax operating income (loss) | $ | 40,350 | $ | 0.98 | $ | 233,717 | $ | 5.66 | $ | 260,090 | $ | 6.32 | $ | 500,808 | $ | 12.13 | ||||||||||||||||
(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.
2Adjusted shareholders’ equity excludes net after-tax unrealized (appreciation) depreciation of investments
--Financial Details Follow--
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CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
AND COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
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(Dollars in thousands, except per share amounts) | 2018 | 2017 | 2018 | 2017 | |||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||
REVENUES: | |||||||||||||||||
Premiums earned | $ | 1,729,818 | $ | 1,369,681 | $ | 3,349,245 | $ | 2,681,778 | |||||||||
Net investment income | 141,322 | 134,508 | 279,616 | 256,797 | |||||||||||||
Net realized capital gains (losses): | |||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (888 | ) | (2,475 | ) | (958 | ) | (3,703 | ) | |||||||||
Other-than-temporary impairments on fixed maturity securities | |||||||||||||||||
transferred to other comprehensive income (loss) | - | - | - | - | |||||||||||||
Other net realized capital gains (losses) | 16,664 | 27,743 | (8,167 | ) | 81,699 | ||||||||||||
Total net realized capital gains (losses) | 15,776 | 25,268 | (9,125 | ) | 77,996 | ||||||||||||
Net derivative gain (loss) | 2,987 | 766 | 3,260 | 3,396 | |||||||||||||
Other income (expense) | 3,036 | 388 | 15,100 | (4,578 | ) | ||||||||||||
Total revenues | 1,892,939 | 1,530,611 | 3,638,096 | 3,015,389 | |||||||||||||
CLAIMS AND EXPENSES: | |||||||||||||||||
Incurred losses and loss adjustment expenses | 1,341,314 | 861,275 | 2,398,491 | 1,632,063 | |||||||||||||
Commission, brokerage, taxes and fees | 383,402 | 299,956 | 741,041 | 582,225 | |||||||||||||
Other underwriting expenses | 93,099 | 78,869 | 189,383 | 154,756 | |||||||||||||
Corporate expenses | 6,633 | 6,919 | 15,629 | 15,376 | |||||||||||||
Interest, fees and bond issue cost amortization expense | 7,728 | 8,059 | 15,146 | 17,023 | |||||||||||||
Total claims and expenses | 1,832,176 | 1,255,078 | 3,359,690 | 2,401,443 | |||||||||||||
INCOME (LOSS) BEFORE TAXES | 60,763 | 275,533 | 278,406 | 613,946 | |||||||||||||
Income tax expense (benefit) | (9,132 | ) | 29,859 | (1,807 | ) | 76,629 | |||||||||||
NET INCOME (LOSS) | $ | 69,895 | $ | 245,674 | $ | 280,213 | $ | 537,317 | |||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period | (41,776 | ) | 4,868 | (232,400 | ) | 24,416 | |||||||||||
Reclassification adjustment for realized losses (gains) included in net income (loss) | 249 | (8,993 | ) | (8,523 | ) | (11,192 | ) | ||||||||||
Total URA(D) on securities arising during the period | (41,527 | ) | (4,125 | ) | (240,923 | ) | 13,224 | ||||||||||
Foreign currency translation adjustments | (63,652 | ) | 35,667 | (45,953 | ) | 47,560 | |||||||||||
Reclassification adjustment for amortization of net (gain) loss included in net income (loss) | 1,815 | 2,004 | 3,630 | 4,008 | |||||||||||||
Total benefit plan net gain (loss) for the period | 1,815 | 2,004 | 3,630 | 4,008 | |||||||||||||
Total other comprehensive income (loss), net of tax | (103,364 | ) | 33,546 | (283,246 | ) | 64,792 | |||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | (33,469 | ) | $ | 279,220 | $ | (3,033 | ) | $ | 602,109 | |||||||
EARNINGS PER COMMON SHARE: | |||||||||||||||||
Basic | $ | 1.71 | $ | 5.98 | $ | 6.85 | $ | 13.10 | |||||||||
Diluted | 1.70 | 5.95 | 6.81 | 13.02 | |||||||||||||
Dividends declared | 1.30 | 1.25 | 2.60 | 2.50 | |||||||||||||
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CONSOLIDATED BALANCE SHEETS | |||||||||
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(Dollars and share amounts in thousands, except par value per share) | 2018 | 2017 | |||||||
(unaudited) | |||||||||
ASSETS: | |||||||||
Fixed maturities - available for sale, at market value | $ | 14,242,890 | $ | 14,756,834 | |||||
(amortized cost: 2018, |
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Fixed maturities - available for sale, at fair value | 3,192 | - | |||||||
Equity securities - available for sale, at market value (cost: 2018, |
- | 129,530 | |||||||
Equity securities - available for sale, at fair value | 1,220,770 | 963,572 | |||||||
Short-term investments | 293,191 | 509,682 | |||||||
Other invested assets (cost: 2018, |
1,826,148 | 1,631,850 | |||||||
Cash | 619,493 | 635,067 | |||||||
Total investments and cash | 18,205,684 | 18,626,535 | |||||||
Accrued investment income | 98,585 | 97,704 | |||||||
Premiums receivable | 1,961,388 | 1,844,881 | |||||||
Reinsurance receivables | 1,779,581 | 1,348,226 | |||||||
Funds held by reinsureds | 368,680 | 292,927 | |||||||
Deferred acquisition costs | 418,167 | 411,587 | |||||||
Prepaid reinsurance premiums | 368,665 | 288,211 | |||||||
Income taxes | 280,696 | 299,438 | |||||||
Other assets | 404,439 | 382,283 | |||||||
TOTAL ASSETS | $ | 23,885,885 | $ | 23,591,792 | |||||
LIABILITIES: | |||||||||
Reserve for losses and loss adjustment expenses | $ | 12,043,334 | $ | 11,884,321 | |||||
Future policy benefit reserve | 48,845 | 51,014 | |||||||
Unearned premium reserve | 2,141,399 | 2,000,556 | |||||||
Funds held under reinsurance treaties | 17,087 | 18,030 | |||||||
Other net payable to reinsurers | 312,474 | 218,017 | |||||||
4.868% Senior notes due |
396,894 | 396,834 | |||||||
6.6% Long term notes due |
236,610 | 236,561 | |||||||
Accrued interest on debt and borrowings | 3,010 | 2,727 | |||||||
Equity index put option liability | 9,218 | 12,477 | |||||||
Unsettled securities payable | 54,563 | 38,743 | |||||||
Other liabilities | 381,102 | 363,280 | |||||||
Total liabilities | 15,644,536 | 15,222,560 | |||||||
SHAREHOLDERS' EQUITY: | |||||||||
Preferred shares, par value: |
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no shares issued and outstanding | - | - | |||||||
Common shares, par value: |
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and (2017) 69,044 outstanding before treasury shares | 692 | 691 | |||||||
Additional paid-in capital | 2,172,701 | 2,165,768 | |||||||
Accumulated other comprehensive income (loss), net of deferred income tax expense | |||||||||
(benefit) of ( |
(445,338 | ) | (160,891 | ) | |||||
|
(3,347,548 | ) | (3,322,244 | ) | |||||
Retained earnings | 9,860,842 | 9,685,908 | |||||||
Total shareholders' equity | 8,241,349 | 8,369,232 | |||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 23,885,885 | $ | 23,591,792 | |||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
Six Months Ended | |||||||||
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(Dollars in thousands) | 2018 | 2017 | |||||||
(unaudited) | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
Net income (loss) | $ | 280,213 | $ | 537,317 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Decrease (increase) in premiums receivable | (126,355 | ) | (337,069 | ) | |||||
Decrease (increase) in funds held by reinsureds, net | (77,794 | ) | (7,980 | ) | |||||
Decrease (increase) in reinsurance receivables | (467,011 | ) | 8,270 | ||||||
Decrease (increase) in income taxes | 43,516 | 18,362 | |||||||
Decrease (increase) in prepaid reinsurance premiums | (86,044 | ) | (87,091 | ) | |||||
Increase (decrease) in reserve for losses and loss adjustment expenses | 223,202 | 97,493 | |||||||
Increase (decrease) in future policy benefit reserve | (2,169 | ) | (836 | ) | |||||
Increase (decrease) in unearned premiums | 151,528 | 161,009 | |||||||
Increase (decrease) in other net payable to reinsurers | 101,970 | 65,929 | |||||||
Increase (decrease) in losses in course of payment | 162,073 | 288,557 | |||||||
Change in equity adjustments in limited partnerships | (45,898 | ) | (31,032 | ) | |||||
Distribution of limited partnership income | 42,269 | 22,992 | |||||||
Change in other assets and liabilities, net | (111,220 | ) | (61,763 | ) | |||||
Non-cash compensation expense | 17,566 | 15,725 | |||||||
Amortization of bond premium (accrual of bond discount) | 17,677 | 22,475 | |||||||
Net realized capital (gains) losses | 9,125 | (77,996 | ) | ||||||
Net cash provided by (used in) operating activities | 132,648 | 634,362 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Proceeds from fixed maturities matured/called - available for sale, at market value | 1,099,762 | 1,145,162 | |||||||
Proceeds from fixed maturities sold - available for sale, at market value | 1,225,373 | 991,209 | |||||||
Proceeds from fixed maturities sold - available for sale, at fair value | 1,065 | - | |||||||
Proceeds from equity securities sold - available for sale, at market value | - | 18,802 | |||||||
Proceeds from equity securities sold - available for sale, at fair value | 576,382 | 258,226 | |||||||
Distributions from other invested assets | 2,978,865 | 2,476,399 | |||||||
Cost of fixed maturities acquired - available for sale, at market value | (2,163,331 | ) | (2,880,188 | ) | |||||
Cost of fixed maturities acquired - available for sale, at fair value | (4,381 | ) | - | ||||||
Cost of equity securities acquired - available for sale, at market value | - | (2,610 | ) | ||||||
Cost of equity securities acquired - available for sale, at fair value | (722,797 | ) | (258,543 | ) | |||||
Cost of other invested assets acquired | (3,168,655 | ) | (2,431,281 | ) | |||||
Net change in short-term investments | 213,242 | 105,566 | |||||||
Net change in unsettled securities transactions | (33,351 | ) | 47,800 | ||||||
Net cash provided by (used in) investing activities | 2,174 | (529,458 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Common shares issued during the period for share-based compensation, net of expense | (9,431 | ) | (5,847 | ) | |||||
Purchase of treasury shares | (25,304 | ) | - | ||||||
Dividends paid to shareholders | (106,480 | ) | (102,585 | ) | |||||
Cost of shares withheld for taxes on settlements of share-based compensation awards | (14,859 | ) | (12,407 | ) | |||||
Net cash provided by (used in) financing activities | (156,074 | ) | (120,839 | ) | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 5,678 | 3,218 | |||||||
Net increase (decrease) in cash | (15,574 | ) | (12,717 | ) | |||||
Cash, beginning of period | 635,067 | 481,922 | |||||||
Cash, end of period | $ | 619,493 | $ | 469,205 | |||||
SUPPLEMENTAL CASH FLOW INFORMATION: | |||||||||
Income taxes paid (recovered) | $ | (44,151 | ) | $ | 57,772 | ||||
Interest paid | 14,754 | 17,818 | |||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180730005750/en/
Executive Vice President and Chief Financial Officer
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