8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

January 30, 2006

Everest Re Group, Ltd.

 

(Exact name of registrant as specified in its charter)

Bermuda	1-15731	98-0365432
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)
Wessex House – 2nd Floor 45 Reid Street PO Box HM 845 Hamilton HM DX, Bermuda		Not Applicable
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code 441-295-0006

Not Applicable

 

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On January 30, 2006, the registrant issued a news release announcing its fourth quarter 2005 results. A copy of that news release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The news release furnished herewith contains information regarding the registrant’s operating income (loss). Operating income (loss) differs from net income, the most directly comparable generally accepted accounting principle financial measure, only by the exclusion of realized capital gains and losses on investments. Management believes that presentation of operating income (loss) provides useful information to investors because it more accurately measures and predicts the registrant’s results of operations by removing the variability arising from the management of the registrant’s investment portfolio. In addition, management, analysts and investors use operating income (loss) to evaluate the financial performance of the registrant and the insurance industry in general.

In accordance with general instruction B.2 of Form 8-K, the information in this report, including exhibits, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.

Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits

Exhibit No. Description

99.1 News Release of the registrant,

dated January 30, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EVEREST RE GROUP, LTD.

By:	/s/ STEPHEN L. LIMAURO
	Stephen L. Limauro Executive Vice President and Chief Financial Officer

Dated: January 30, 2006

EXHIBIT INDEX

Exhibit

Number Description of Document Page No.

99.1	News Release of the registrant,
	dated January 30, 2006	5

EX-99.1

NEWS RELEASE

EVEREST RE GROUP, LTD.

Wessex House, 45 Reid Street, 2^nd 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 Fourth Quarter Results

HAMILTON, Bermuda – January 30, 2006 -- Everest Re Group, Ltd. (NYSE: RE) reported a fourth quarter 2005 after-tax operating loss¹, which excludes realized capital gains and losses, of $185.8 million, or ($3.01) per share, a significant decrease compared to after-tax operating income of $94.7 million, or $1.66 per diluted share, in the fourth quarter of 2004. The principal drivers of the Company's loss, as commented on previously in its press release of January 12, 2006, were increased loss estimates for Hurricanes Katrina, Rita and Wilma, which, in total, resulted in $422 million of after-tax losses in the quarter. The Company therefore reported a net loss of $162.2 million or ($2.63) per share in the fourth quarter 2005 compared to net income of $93.3 million or $1.64 per diluted share in the fourth quarter 2004. Operating income (loss) differs from net income (loss) only by the exclusion of realized gains and losses on investments.

For the year ended December 31, 2005, the Company’s after-tax operating loss was $286.1 million, or ($4.96) per share, as compared to after-tax operating income of $425.3 million, or $7.48 per diluted share, in 2004. The net loss for the full year 2005 was $218.7 million, or ($3.79) per share, as compared to net income of $494.9 million, or $8.71 per diluted share, in 2004.

Gross written premiums for the fourth quarter of 2005 were $871 million, a 26% decrease compared to $1.18 billion for the fourth quarter of 2004. Net written premiums were $835 million, a decrease of 25.6% from $1.12 billion for the fourth quarter of 2004. The Company’s GAAP combined ratio in the fourth quarter was 142.5% compared to 102.8% in the fourth quarter of 2004. Net investment income for the fourth quarter was $135.0 million compared to $134.4

1

million for the fourth quarter of 2004. Cash flow from operations for the fourth quarter of 2005 was $73.4 million, compared to $197.0 million in the fourth quarter of 2004.

For the year ended December 31, 2005, gross written premiums were $4.11 billion, a 12.7% decrease from $4.70 billion in 2004. Net written premiums for the year decreased 12.3% to $3.97 billion from $4.53 billion in 2004. The GAAP combined ratio for 2005 was 120.2% compared to 98.8% in 2004. Net investment income for the year was $522.8 million, an increase of 5.4% from $495.9 million in 2004. Cash flow from operations for 2005 was $1.07 billion compared to $1.49 billion in 2004.

At December 31, 2005, the Company's shareholders’ equity was $4.14 billion, or $64.04 per outstanding share. The change in book value represents a 3.1% decrease from $66.09 per outstanding share, at December 31, 2004.

Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, “We are disappointed by the extreme nature of the events that led to the significant loss for the year but point to the fact that our business fundamentals remain strong. Our business strategy, while not without risk, remains targeted at providing superior shareholder returns over the long term.”

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 catastrophes, particularly catastrophes of unusual frequency and/or severity, 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, 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

2

casualty insurance to policyholders in the U.S. Everest Indemnity Insurance 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 fourth quarter results will be held at 8:30 a.m. Eastern Time on January 31, 2006. 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 income (loss) consists of net income (loss) excluding after-tax realized gains (losses) as the following reconciliation displays:

	Three Months Ended December 31,												Twelve Months Ended December 31,
(Dollars in thousands, except per share amounts)	2005						2004						2005						2004
	(unaudited)
		amount			per share			amount			per diluted share			amount			per share			amount		per diluted share
Net (loss) income	($	162,197	)	($	2.63	)	$	93,327		$	1.64		($	218,667	)	($	3.79	)	$	494,858	$	8.71
After-tax realized gains		23,613			0.38		(	1,323	)	(	0.02	)		67,481			1.17			69,516		1.22
After-tax operating (loss) income	($	185,810	)	($	3.01	)	$	94,650		$	1.66		($	286,148	)	($	4.96	)	$	425,342	$	7.48

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 (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.

— Financial Details Follow —

3

EVEREST RE GROUP, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
	Three Months Ended December 31,						Twelve Months Ended December 31,
(Dollars in thousands, except per share amounts)	2005			2004			2005			2004
	(unaudited)
REVENUES:
Premiums earned	$	905,269		$	1,225,897		$	3,963,093		$	4,425,082
Net investment income		134,967			134,382			522,833			495,908
Net realized capital gains		32,799			(2,284	)		90,284			89,614
Net derivative income (expense)		380			3,305			(2,638	)		(2,660	)
Other (expense) income		(4,787	)		912			(18,473	)		741
Total revenues		1,068,628			1,362,212			4,555,099			5,008,685
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		1,045,742			941,508			3,724,317			3,291,139
Commission, brokerage, taxes and fees		211,276			289,443			914,847			975,176
Other underwriting expenses		33,212			29,424			123,462			107,120
Interest expense on senior notes		7,785			12,745			35,514			41,954
Interest expense on junior subordinated debt		9,363			9,362			37,449			32,392
Interest and fee expense on credit facility		99			196			431			1,193
Total claims and expenses		1,307,477			1,282,678			4,836,020			4,448,974
(LOSS) INCOME BEFORE TAXES		(238,849	)		79,534			(280,921	)		559,711
Income tax (benefit) expense		(76,652	)		(13,793	)		(62,254	)		64,853
NET (LOSS) INCOME	$	(162,197	)	$	93,327		$	(218,667	)	$	494,858
Other comprehensive (loss) income, net of tax		(48,540	)		86,126			(107,591	)		48,660
COMPREHENSIVE (LOSS) INCOME	$	(210,737	)	$	179,453		$	(326,258	)	$	543,518
PER SHARE DATA:
Average shares outstanding (000's)		61,779			56,041			57,649			55,929
Net (loss) income per common share - basic	$	(2.63	)	$	1.67		$	(3.79	)	$	8.85
Average diluted shares outstanding (000's)		62,733			56,928			58,567			56,826
Net (loss) income per common share - diluted	$	(2.63	)	$	1.64		$	(3.79	)	$	8.71

EVEREST RE GROUP, LTD. CONSOLIDATED BALANCE SHEETS
	December 31,
(Dollars in thousands, except par value per share)	2005			2004
ASSETS:
Fixed maturities - available for sale, at market value
(amortized cost: 2005, $9,872,239; 2004, $9,609,617)	$	10,042,134		$	9,947,172
Equity securities, at market value (cost: 2005, $922,090; 2004, $571,717)		1,090,825			650,871
Short-term investments		1,443,751			585,875
Other invested assets (cost: 2005, $285,385; 2004, $160,188)		286,812			161,324
Cash		107,275			184,930
Total investments and cash		12,970,797			11,530,172
Accrued investment income		133,213			130,216
Premiums receivable		1,188,866			1,314,160
Reinsurance receivables		1,048,749			1,210,795
Funds held by reinsureds		286,856			195,944
Deferred acquisition costs		352,745			331,909
Prepaid reinsurance premiums		84,798			84,646
Deferred tax asset		230,938			159,874
Current federal income tax receivable		78,645			-
Other assets		98,932			115,050
TOTAL ASSETS	$	16,474,539		$	15,072,766
LIABILITIES:
Reserve for losses and adjustment expenses	$	9,126,702		$	7,836,306
Future policy benefit reserve		133,155			152,179
Unearned premium reserve		1,596,309			1,595,630
Funds held under reinsurance treaties		190,641			282,472
Losses in the course of payment		19,434			19,069
Contingent commissions		19,378			2,509
Other net payable to reinsurers		50,354			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		199,446			199,341
5.4% Senior notes due 10/15/2014		249,617			249,584
Junior subordinated debt securities payable		546,393			546,393
Accrued interest on debt and borrowings		10,041			16,426
Other liabilities		193,375			131,047
Total liabilities		12,334,845			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) 64.6 million and (2004) 56.2 million issued		646			566
Additional paid-in capital		1,748,797			983,025
Unearned compensation		(17,051	)		(7,108	)
Accumulated other comprehensive income, net of deferred income taxes of
$134.9 million at 2005 and $135.6 million at 2004		221,146			328,737
Retained earnings		2,186,156			2,430,248
Treasury shares, at cost; 0.0 million shares at 2005 and 0.5 million shares at 2004		-			(22,950	)
Total shareholders' equity		4,139,694			3,712,518
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	16,474,539		$	15,072,766

EVEREST RE GROUP, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended December 31,						Twelve Months Ended December 31,
(Dollars in thousands)	2005			2004			2005			2004
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(162,197	)	$	93,327		$	(218,667	)	$	494,858
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Decrease (increase) in premiums receivable		97,157			(53,368	)		113,548			(254,723	)
Increase in funds held by reinsureds, net		(46,411	)		(38,383	)		(198,243	)		(137,490	)
Decrease in reinsurance receivables		28,424			50,340			139,423			85,119
Increase in deferred tax asset		(28,160	)		(27,936	)		(67,424	)		(31,150	)
Increase in reserve for losses and loss adjustment expenses		273,017			232,015			1,398,935			1,387,555
Decrease in future policy benefit reserve		(4,745	)		(2,940	)		(19,024	)		(53,096	)
(Decrease) increase in unearned premiums		(63,314	)		(92,867	)		8,178			86,541
(Decrease) increase in other assets and liabilities		3,146			27,043			(31,338	)		(26,730	)
Non-cash compensation expense		1,479			502			3,092			1,375
Amortization of bond premium		7,760			6,914			27,298			24,719
Amortization of underwriting discount on senior notes		35			57			162			204
Realized capital (gains) losses		(32,799	)		2,284			(90,284	)		(89,614	)
Net cash provided by operating activities		73,392			196,988			1,065,656			1,487,568
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale		212,406			147,550			704,687			659,426
Proceeds from fixed maturities sold - available for sale		103,935			245,686			1,420,287			1,451,166
Proceeds from equity securities sold		100,976			-			217,909			17,995
Proceeds from other invested assets sold		14,368			1,112			53,565			6,814
Cost of fixed maturities acquired - available for sale		(435,979	)		(506,691	)		(2,423,060	)		(3,215,214	)
Cost of equity securities acquired		(8,995	)		(134,346	)		(555,778	)		(437,132	)
Cost of other invested assets acquired		(57,666	)		(20,816	)		(175,782	)		(31,511	)
Net purchases of short-term securities		(799,483	)		(58,473	)		(853,499	)		(432,279	)
Net increase (decrease) in unsettled securities transactions		30,070			(68,496	)		159			(19,273	)
Net cash used in investing activities		(840,368	)		(394,474	)		(1,611,512	)		(2,000,008	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period		732,084			4,413			752,817			25,146
Dividends paid to shareholders		(6,809	)		(5,616	)		(25,425	)		(22,421	)
Sale of treasury shares		22,950			-			22,950			-
Proceeds (repayment) from issuance of senior notes		-			246,651			(250,000	)		246,651
Net proceeds from issuance of junior subordinated notes		-			-			-			319,997
Repayments on revolving credit agreement		-			(70,000	)		-			(70,000	)
Net cash provided by financing activities		748,225			175,448			500,342			499,373
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(9,553	)		28,002			(32,141	)		13,138
Net (decrease) increase in cash		(28,304	)		5,964			(77,655	)		71
Cash, beginning of period		135,579			178,966			184,930			184,859
Cash, end of period	$	107,275		$	184,930		$	107,275		$	184,930
SUPPLEMENTAL CASH FLOW INFORMATION
Cash transactions:
Income taxes paid, net	$	1,042		$	2,101		$	110,945		$	100,007
Interest paid	$	16,211		$	9,849		$	79,617		$	72,605
Non-cash financing transactions:
Issuance of common shares	$	-		$	-		$	13,035		$	3,226