EX-99.1 4 prwfinancials.htm EVEREST RE GROUP - PR WITH FINANCIALS

 

 


NEWS RELEASE



 

 

EVEREST RE GROUP, LTD.

Wessex House, 45 Reid Street, 2nd Floor, Hamilton HM DX, Bermuda

 

Contact:

Elizabeth B. Farrell

Vice President, Investor Relations

Everest Global Services, Inc.

908.604.3169

For Immediate Release

 

 

Everest Re Group Reports Third Quarter Results

 

HAMILTON, Bermuda – October 24, 2005 -- Everest Re Group, Ltd. (NYSE: RE) reported a third quarter 2005 after-tax operating loss1, which excludes realized capital gains and losses, of $438.9 million, or ($7.79) per share, a significant decrease compared to after-tax operating income of $4.8 million, or $0.08 per diluted share, in the third quarter of 2004. The principal drivers of the Company's loss, as commented on previously in its press releases of September 13, 2005 and October 6, 2005, were catastrophe losses, the net pre-tax impact of which totaled $ 784.6 million, including $652.7 million related to Hurricane Katrina. The third quarter 2005 net loss was $417.7 million, or ($7.41) per share, as compared to net income of $11.5 million, or $0.20 per diluted share, for the third quarter of 2004. Operating income (loss) differs from net income (loss) only by the exclusion of realized gains and losses on investments.

 

For the nine months ended September 30, 2005, the Company’s after-tax operating loss was $100.3 million, or ($1.78) per share, as compared to after-tax operating income of $330.7 million, or $5.82 per diluted share, in 2004. The net loss in the first nine months of 2005 was $56.5 million, or ($1.00) per share, as compared to net income of $401.5 million, or $7.07 per diluted share, in 2004.

 

Gross written premiums for the third quarter of 2005 were $1.08 billion, an 11.2% decrease compared to $1.22 billion in 2004. Net written premiums were $1.05 billion, a decrease of 10.9% from $1.18 billion for the third quarter of 2004. The Company’s GAAP combined ratio in the third quarter was 162.2% compared to 108.5% in 2004. Net investment income for the third quarter was $117.5 million compared to $123.8 million for the third quarter of 2004. Cash flow from

 

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operations for the third quarter of 2005 was $376.0 million, a decrease of 24.5% from $498.1 million in the third quarter of 2004.

 

For the nine months ended September 30, 2005, gross written premiums were $3.24 billion, an 8.2% decrease from $3.53 billion in the first nine months of 2004. Net written premiums for the same period decreased 8.0% to $3.14 billion from $3.41 billion in 2004. The GAAP combined ratio for the first nine months of 2005 was 113.6% compared to 97.3% in 2004. Net investment income for the nine months ended September 30, 2005 was $387.9 million, an increase of 7.3% from $361.5 million in 2004. Cash flow from operations for the first nine months was $992.3 million compared to $1.29 billion for the first nine months of 2004.

 

At September 30, 2005, the Company's shareholders’ equity was $3.60 billion, or $63.57 per outstanding share. The change in book value represents a 3.0% decrease from shareholders’ equity of $3.71 billion, or $66.09 per outstanding share, at December 31, 2004.

 

Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, “Losses from Hurricane Katrina have made this a most disappointing quarter. Going forward, our newly raised capital will allow us to participate in positive market changes, while we continue to offer our clients the highest quality security.”

 

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 National Insurance Company and Everest Security Insurance Company provide property and casualty insurance to policyholders in the U.S. Everest Indemnity Insurance

 

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Company offers excess and surplus lines insurance in the U.S. Additional information on Everest Re Group companies can be found at the Group’s web site at www.everestre.com.

 

A conference call discussing the second quarter results will be held at 10:00 a.m. Eastern Time on October 25, 2005. The call will be available on the Internet through the Company’s web site or at www.streetevents.com.

 

Anyone receiving this release by wire or through the Internet may 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 (loss) income consists of net income (loss) excluding after-tax realized gains (losses) as the following reconciliation displays:




Three Months Ended
September 30,		 Nine Months Ended
September 30,
(Dollars in thousands, except per share amounts) 2005 2004 2005 2004
(unaudited) (unaudited)
amount per
share		 amount per
diluted
share		 amount per
share		 amount per
diluted
share
Net (loss) income        ($  417,745)    ($ 7.41)   $ 11,463   $ 0.20        ($ 56,470)    ($ 1.00)   $ 401,531   $ 7.07  
After-tax realized gains     21,147   0.38   6,697     0.12         43,868     0.78     70,839   1.25
After-tax operating (loss) income    ($ 438,892)    ($ 7.79)   $ 4,766   $ 0.08      ($ 100,338)    ($ 1.78)   $ 330,692   $ 5.82  

Although realized capital gains (losses) are an integral part of the Company’s insurance operations, the determination of realized capital gains (losses) is independent of the insurance underwriting process. The Company believes that the level of realized 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 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 in their analyses for the reasons discussed above. The Company provides after-tax operating income to investors so that they have what management believes to be a useful supplement to GAAP information concerning the Company’s performance.

— Financial Details Follow —

EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended
September 30,		 Nine Months Ended
September 30,
(Dollars in thousands, except per share amounts) 2005   2004   2005   2004  
(unaudited) (unaudited)
REVENUES:                    
Premiums earned   $ 959,409   $ 1,139,862   $ 3,057,824   $ 3,199,185  
Net investment income    117,532    123,784    387,866    361,526  
Net realized capital gains    27,699    10,125    57,485    91,898  
Net derivative income (expense)    5,019    (6,595 )  (3,018 )  (5,965 )
Other expense    (7,411 )  (3,582 )  (13,686 )  (171 )
Total revenues    1,102,248    1,263,594    3,486,471    3,646,473  
CLAIMS AND EXPENSES:  
Incurred losses and loss adjustment expenses    1,319,706    962,590    2,678,575    2,349,631  
Commission, brokerage, taxes and fees    204,664    248,068    703,571    685,733  
Other underwriting expenses    31,343    25,729    90,250    77,696  
Interest expense on senior notes    7,785    9,737    27,729    29,209  
Interest expense on junior subordinated debt    9,362    9,363    28,086    23,030  
Interest and fee expense on credit facility    124    339    332    997  
Total claims and expenses    1,572,984    1,255,826    3,528,543    3,166,296  
(LOSS) INCOME BEFORE TAXES    (470,736 )  7,768    (42,072 )  480,177  
Income tax (benefit) expense    (52,991 )  (3,695 )  14,398    78,646  
NET (LOSS) INCOME   $ (417,745 ) $ 11,463   $ (56,470 ) $ 401,531  
Other comprehensive (loss) income, net of tax    (64,584 )  162,138    (59,051 )  (37,466 )
COMPREHENSIVE (LOSS) INCOME   $ (482,329 ) $ 173,601   $ (115,521 ) $ 364,065  
PER SHARE DATA:  
Average shares outstanding (000's)    56,361    55,991    56,257    55,898  
Net (loss) income per common share - basic   $ (7.41 ) $ 0.20   $ (1.00 ) $ 7.18  
Average diluted shares outstanding (000's)    57,275    56,712    57,150    56,798  
Net (loss) income per common share - diluted   $ (7.41 ) $ 0.20   $ (1.00 ) $ 7.07  


EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par value per share)
September 30,
2005		   December 31,
2004		  
(unaudited)
ASSETS:            
Fixed maturities - available for sale, at market value  
  (amortized cost: 2005, $9,771,909; 2004, $9,609,617)   $ 10,000,358   $ 9,947,172  
Equity securities, at market value (cost: 2005, $1,005,723; 2004, $571,717)    1,158,089    650,871  
Short-term investments    642,928    585,875  
Other invested assets (cost: 2005, $243,402; 2004, $160,188)    244,896    161,324  
Cash    135,579    184,930  
          Total investments and cash    12,181,850    11,530,172  
Accrued investment income    126,273    130,216  
Premiums receivable    1,291,022    1,314,160  
Reinsurance receivables    1,085,411    1,210,795  
Funds held by reinsureds    269,429    195,944  
Deferred acquisition costs    361,399    331,909  
Prepaid reinsurance premiums    77,475    84,646  
Deferred tax asset    195,112    159,874  
Taxes recoverable    26,437    -  
Other assets    168,345    115,050  
TOTAL ASSETS   $ 15,782,753   $ 15,072,766  
LIABILITIES:  
Reserve for losses and adjustment expenses   $ 8,898,752   $ 7,836,306  
Future policy benefit reserve    137,900    152,179  
Unearned premium reserve    1,663,437    1,595,630  
Funds held under reinsurance treaties    211,341    282,472  
Losses in the course of payment    14,308    19,069  
Other net payable to reinsurers    72,582    47,462  
Current federal income taxes    -    31,854  
8.5% Senior notes due 3/15/2005    -    249,976  
8.75% Senior notes due 3/15/2010    199,419    199,341  
5.4% Senior notes due 10/15/2014    249,609    249,584  
Junior subordinated debt securities payable    546,393    546,393  
Accrued interest on debt and borrowings    9,041    16,426  
Other liabilities    179,244    133,556  
          Total liabilities    12,182,026    11,360,248  
SHAREHOLDERS' EQUITY:  
Preferred shares, par value: $0.01; 50 million shares authorized;  
  no shares issued and outstanding    -    -  
Common shares, par value: $0.01; 200 million shares authorized;  
  (2005) 56.6 million and (2004) 56.2 million issued    571    566  
Additional paid-in capital    1,016,788    983,025  
Unearned compensation    (18,530 )  (7,108 )
Accumulated other comprehensive income, net of deferred income taxes of  
  $140.9 million at 2005 and $135.6 million at 2004    269,686    328,737  
Retained earnings    2,355,162    2,430,248  
Treasury shares, at cost; 0.5 million shares (2005 and 2004)    (22,950 )  (22,950 )
          Total shareholders' equity    3,600,727    3,712,518  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 15,782,753   $ 15,072,766  


EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended
September 30,		 Nine Months Ended
September 30,
(Dollars in thousands) 2005   2004   2005   2004  
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:                    
Net (loss) income   $ (417,745 ) $ 11,463   $ (56,470 ) $ 401,531  
Adjustments to reconcile net income to net cash provided by  
  operating activities:  
     Decrease (increase) in premiums receivable    9,848    (42,010 )  16,391    (201,355 )
     Increase in funds held by reinsureds, net    (58,709 )  (45,519 )  (151,832 )  (99,107 )
     (Increase) decrease in reinsurance receivables    (6,195 )  35,307    110,999    34,779  
     (Increase) decrease in deferred tax asset    (30,082 )  12,140    (39,264 )  (3,214 )
     Increase in reserve for losses and loss adjustment expenses    848,575    534,296    1,125,918    1,155,540  
     Decrease in future policy benefit reserve    (4,505 )  (2,863 )  (14,279 )  (50,156 )
     Increase in unearned premiums    89,995    36,669    71,492    179,408  
     Decrease in other assets and liabilities    (36,524 )  (35,948 )  (34,484 )  (53,773 )
     Non-cash compensation expense    720    301    1,613    873  
     Amortization of bond premium    8,261    4,304    19,538    17,805  
     Amortization of underwriting discount on senior notes    36    50    127    147  
     Realized capital gains    (27,699 )  (10,125 )  (57,485 )  (91,898 )
Net cash provided by operating activities    375,976    498,065    992,264    1,290,580  
CASH FLOWS FROM INVESTING ACTIVITIES:  
Proceeds from fixed maturities matured/called - available for sale    163,592    151,995    492,281    511,876  
Proceeds from fixed maturities sold - available for sale    144,353    66,805    1,316,352    1,205,480  
Proceeds from equity securities sold    106,602    10,000    116,933    17,995  
Proceeds from other invested assets sold    8,475    1,390    39,197    5,702  
Cost of fixed maturities acquired - available for sale    (432,147 )  (907,752 )  (1,987,081 )  (2,708,523 )
Cost of equity securities acquired    (146,066 )  (93,094 )  (546,783 )  (302,786 )
Cost of other invested assets acquired    (28,938 )  (2,243 )  (118,116 )  (10,695 )
Net (purchases) sales of short-term securities    (60,210 )  306,441    (54,016 )  (373,806 )
Net (decrease) increase in unsettled securities transactions     (100,843 )  68,113    (29,911 )  49,223  
Net cash used in investing activities    (345,182 )  (398,345 )  (771,144 )  (1,605,534 )
CASH FLOWS FROM FINANCING ACTIVITIES:  
Common shares issued during the period    7,017    703    20,733    20,733  
Dividends paid to shareholders    (6,216 )  (5,608 )  (18,616 )  (16,805 )
Repayment of senior notes    -    -    (250,000 )  -  
Net proceeds from issuance of junior subordinated notes    -    -    -    319,997  
Net cash provided by (used in) financing activities    801    (4,905 )  (247,883 )  323,925  
EFFECT OF EXCHANGE RATE CHANGES ON CASH    (8,965 )  (20,436 )  (22,588 )  (14,864 )
Net increase (decrease) in cash    22,630    74,379    (49,351 )  (5,893 )
Cash, beginning of period    112,949    104,587    184,930    184,859  
Cash, end of period   $ 135,579   $ 178,966   $ 135,579   $ 178,966  
SUPPLEMENTAL CASH FLOW INFORMATION  
Cash transactions:  
       Income taxes paid, net   $ 2,452   $ 41,727   $ 109,903   $ 97,906  
       Interest paid   $ 18,237   $ 29,072   $ 63,406   $ 62,756  
Non-cash financing transactions:  
       Issuance of common shares   $ 12,147   $ 3,226   $ 13,035   $ 3,226