EX-99.1 4 prwithfin.htm GROUP 3Q 2006 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 Another Quarter of Record Earnings

 

HAMILTON, Bermuda – October 23, 2006 -- Everest Re Group, Ltd. (NYSE: RE) reported third quarter 2006 after-tax operating income1, which excludes realized capital gains and losses, of $240.2 million, or $3.68 per diluted share, as compared to an after-tax operating loss of $438.9 million, or ($7.79) per share, in the third quarter of 2005. Net income for the third quarter 2006 of $245.7 million, or $3.76 per diluted share, also compares favorably to the third quarter of 2005 which had a net loss of $417.7 million, or ($7.41) per share. Operating income differs from net income only by the exclusion of realized gains and losses on investments.

 

For the nine months ended September 30, 2006, after-tax operating income was $616.8 million, or $9.44 per diluted share, as compared to an after-tax operating loss of $100.3 million, or ($1.78) per share, in 2005. Net income in the first nine months of 2006 was $634.5 million, or $9.71 per diluted share in contrast to the net loss of $56.5 million, or ($1.00) per share, in 2005.

 

Operating highlights for the third quarter of 2006 included the following:

 

 

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The GAAP combined ratio in the third quarter was 83.1% compared to 162.3% in the same period last year. While 2005 was impacted by significant catastrophe losses from Hurricanes Katrina, Rita, and Wilma, 2006 has been a relatively benign period for such event losses. Favorable market conditions, particularly in the U.S. Reinsurance segment, as well as net favorable reserve development on 2005 and prior accident years of $29.0 million also benefited the current period.

 

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Gross premiums written were $1.05 billion, a 3.0% decline compared to $1.08 billion in the third quarter of 2005. Our global reinsurance writings were down 8.2% from 2005 but up 11.7% sequentially as our reinsurance portfolio continues to transition. Our U.S. insurance writings were up 18.3% generally reflecting the expected contribution from new programs.

 

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Net investment income increased by 25.5% to $147.5 million as compared to $117.5 million in 2005.

 

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Cash flow from operations amounted to $180.9 million for the period as compared to $377.2 million in 2005. These include catastrophe loss payouts of $202.2 million and $61.7 million, respectively, for the three months ended September 30, 2006 and 2005.

 

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The annualized return on average shareholders’ equity was 21.5% for the quarter and 19.3% for the first nine months of 2006; and

 

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Shareholders’ equity was up $444.8 million for the quarter to $4.82 billion or $74.26 per outstanding share representing a 16.5% increase from shareholders’ equity of $4.14 billion, or $64.04 per outstanding share at December 31, 2005.

 

Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, “Our strong performance trend continues with quarterly earnings again reaching new levels and shareholder equity up over 10% for the quarter. This is a reflection of the underlying strength of our diversified business platform as well as still favorable market conditions, particularly in the U.S. While top line continues to lag last year’s volume, the gap is closing and we still expect strong production in the fourth quarter to further close this gap.”

 

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

 

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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 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 third quarter results will be held at 8:30 a.m. Eastern Time on October 24, 2006. 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.everestre.com in the “Financial Reports” section of the “Investor Center”. The supplemental financial information may also be obtained by contacting the Company directly.

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1 The Company generally uses after-tax operating income, a non-GAAP financial measure, to evaluate its performance. After-tax operating income consists of net income 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)		 2006 2005 2006 2005
(unaudited) (unaudited)
amount per
diluted
share		 amount per
diluted
share		 amount per
diluted
share		 amount per
diluted
share
Net income       $ 245,678   $ 3.76   ($ 417,745)   ($ 7.41)       $ 634,477   $ 9.71   ($ 56,470)   ($ 1.00)  
After-tax realized gains     5,493   0.08   21,147     0.38         17,717     0.27     43,868   0.78
After-tax
operating income		   $ 240,185   $ 3.68   ($ 438,892)   ($ 7.79)     $ 616,760   $ 9.44   ($ 100,338)   ($ 1.78)  

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 –

 

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EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
Three Months Ended
September 30,
 Nine Months Ended
September 30,
(Dollars in thousands, except per share amounts) 2006
 2005
 2006
 2005
(unaudited) (unaudited)
REVENUES:                    
Premiums earned   $ 958,343   $ 959,409   $ 2,873,465   $ 3,057,824  
Net investment income    147,470    117,532    445,829    387,866  
Net realized capital gains    8,651    27,699    24,724    57,485  
Net derivative (expense) income    (6,201 )  5,019    (1,006 )  (3,018 )
Other income (expense)    5,626    (5,958 )  1,294    (8,888 )
Total revenues    1,113,889    1,103,701    3,344,306    3,491,269  
CLAIMS AND EXPENSES:  
Incurred losses and loss adjustment expenses    546,670    1,319,706    1,789,250    2,678,575  
Commission, brokerage, taxes and fees    215,971    204,664    659,876    703,571  
Other underwriting expenses    34,118    32,561    96,777    94,264  
Interest expense on senior notes    7,788    7,785    23,361    27,729  
Interest expense on junior subordinated debt    9,362    9,362    28,086    28,086  
Amortization of bond issue costs    235    235    704    784  
Interest and fee expense on credit facilities    90    124    285    332  
Total claims and expenses    814,234    1,574,437    2,598,339    3,533,341  
INCOME (LOSS) BEFORE TAXES    299,655    (470,736 )  745,967    (42,072 )
Income tax expense (benefit)    53,977    (52,991 )  111,490    14,398  
NET INCOME (LOSS)   $ 245,678   $ (417,745 ) $ 634,477   $ (56,470 )
Other comprehensive income (loss), net of tax    204,250    (64,584 )  45,633    (59,051 )
COMPREHENSIVE INCOME (LOSS)   $ 449,928   $ (482,329 ) $ 680,110   $ (115,521 )
PER SHARE DATA:  
Average shares outstanding (000's)    64,733    56,361    64,688    56,257  
Net income (loss) per common share - basic   $ 3.80   $ (7.41 ) $ 9.81   $ (1.00 )
Average diluted shares outstanding (000's)    65,375    56,361    65,325    56,257  
Net income (loss) per common share - diluted   $ 3.76   $ (7.41 ) $ 9.71   $ (1.00 )


EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value per share) September 30,
2006
 December 31,
2005
(unaudited)
ASSETS:            
Fixed maturities - available for sale, at market value  
   (amortized cost: 2006, $10,126,101; 2005, $9,872,239)   $ 10,241,261   $ 10,042,134  
Equity securities, at market value (cost: 2006, $1,210,787; 2005, $922,090)    1,460,325    1,090,825  
Short-term investments    1,338,366    1,443,751  
Other invested assets (cost: 2006, $386,646; 2005, $285,385)    388,356    286,812  
Cash    209,762    107,275  
   Total investments and cash    13,638,070    12,970,797  
Accrued investment income    136,068    133,213  
Premiums receivable    1,125,934    1,188,866  
Reinsurance receivables    852,485    1,048,749  
Funds held by reinsureds    292,087    286,856  
Deferred acquisition costs    382,807    352,745  
Prepaid reinsurance premiums    63,012    84,798  
Deferred tax asset    218,141    234,562  
Current federal income taxes receivable    -    75,022  
Other assets    132,152    98,932  
TOTAL ASSETS   $ 16,840,756   $ 16,474,539  
LIABILITIES:  
Reserve for losses and loss adjustment expenses   $ 8,862,231   $ 9,126,702  
Future policy benefit reserve    111,296    133,155  
Unearned premium reserve    1,637,009    1,596,309  
Funds held under reinsurance treaties    100,214    190,641  
Losses in the course of payment    46,800    19,434  
Contingent commissions    15,984    19,378  
Other net payable to reinsurers    38,419    50,354  
Current federal income taxes payable    16,120    -  
8.75% Senior notes due 3/15/2010    199,531    199,446  
5.4% Senior notes due 10/15/2014    249,643    249,617  
Junior subordinated debt securities payable    546,393    546,393  
Accrued interest on debt and borrowings    9,041    10,041  
Other liabilities    184,219    193,375  
   Total liabilities    12,016,900    12,334,845  
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;  
   (2006) 65.0 million and (2005) 64.6 million issued    650    646  
Additional paid-in capital    1,759,171    1,731,746  
Accumulated other comprehensive income, net of deferred income taxes of  
   $157.2 million at 2006 and $134.9 million at 2005    266,779    221,146  
Retained earnings    2,797,256    2,186,156  
   Total shareholders' equity    4,823,856    4,139,694  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 16,840,756   $ 16,474,539  


EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 30,
 Nine Months Ended
September 30,
(Dollars in thousands) 2006
 2005
 2006
 2005
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:                    
Net income (loss)   $ 245,678   $ (417,745 ) $ 634,477   $ (56,470 )
Adjustments to reconcile net income to net cash provided by  
operating activities:  
Decrease in premiums receivable    6,005    9,848    75,067    16,391  
Increase in funds held by reinsureds, net    (37,722 )  (58,709 )  (80,331 )  (151,832 )
Decrease (increase) in reinsurance receivables    113,109    (6,195 )  216,310    110,999  
Increase in deferred tax asset    (851 )  (30,082 )  (5,836 )  (39,264 )
(Decrease) increase in reserve for losses and loss adjustment expenses    (195,795 )  848,575    (373,306 )  1,125,918  
Decrease in future policy benefit reserve    (5,507 )  (4,505 )  (21,859 )  (14,279 )
Increase in unearned premiums    53,403    89,995    29,022    71,492  
Decrease (increase) in other assets and liabilities, net    2,017    (36,524 )  16,493    (34,484 )
Non-cash compensation expense    3,205    1,896    9,555    5,013  
Amortization of bond premium    6,015    8,261    19,230    19,538  
Amortization of underwriting discount on senior notes    38    36    111    127  
Realized capital gains    (8,651 )  (27,699 )  (24,724 )  (57,485 )
Net cash provided by operating activities    180,944    377,152    494,209    995,664  
CASH FLOWS FROM INVESTING ACTIVITIES:  
Proceeds from fixed maturities matured/called - available for sale    258,708    163,592    617,797    492,281  
Proceeds from fixed maturities sold - available for sale    2,215    144,353    154,590    1,316,352  
Proceeds from equity securities sold    66,273    106,602    186,495    116,933  
Proceeds from other invested assets sold    15,618    8,475    42,321    39,197  
Cost of fixed maturities acquired - available for sale    (107,552 )  (432,147 )  (950,459 )  (1,987,081 )
Cost of equity securities acquired    (62,580 )  (146,066 )  (440,350 )  (546,783 )
Cost of other invested assets acquired    (74,076 )  (28,938 )  (133,028 )  (118,116 )
Net (purchases) sales of short-term securities    (237,254 )  (60,210 )  116,610    (54,016 )
Net decrease in unsettled securities transactions    (8,726 )  (100,843 )  (9,926 )  (29,911 )
Net cash used in investing activities    (147,374 )  (345,182 )  (415,950 )  (771,144 )
CASH FLOWS FROM FINANCING ACTIVITIES:  
Common shares issued during the period    (545 )  5,841    17,873    17,333  
Dividends paid to shareholders    (7,799 )  (6,216 )  (23,378 )  (18,616 )
Repayment of senior notes    -    -    -    (250,000 )
Net cash used in financing activities    (8,344 )  (375 )  (5,505 )  (251,283 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH    9,113    (8,965 )  29,733    (22,588 )
Net increase (decrease) in cash    34,339    22,630    102,487    (49,351 )
Cash, beginning of period    175,423    112,949    107,275    184,930  
Cash, end of period   $ 209,762   $ 135,579   $ 209,762   $ 135,579  
SUPPLEMENTAL CASH FLOW INFORMATION  
Cash transactions:  
Income taxes paid, net   $ 37,718   $ 2,452   $ 12,632   $ 109,903  
Interest paid   $ 18,103   $ 18,237   $ 52,621   $ 63,406