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Everest Re Group Reports First Quarter 2021 Results

·17 min read

Net Income of $342 Million Including $260 Million of Net Operating Income

14% Growth in Gross Written Premium with

Continued Attritional Underwriting Margin Improvement

Everest Re Group, Ltd. ("Everest" or the "Company") today reported its 2021 first quarter results.

First Quarter 2021 Highlights

  • Net income of $342 million equal to $8.52 per share

  • Net operating income of $260 million, equal to $6.49 per share

  • Gross written premium growth of 14% and net written premium growth of 16%

  • Attritional combined ratio of 87.3%, a 2.5-point improvement year over year

  • Underwriting income of $45 million inclusive of pre-tax net catastrophe losses of $270 million ($260 million net of reinstatement premiums)

  • No change to the Covid-19 Pandemic ("Pandemic") loss provision

  • Combined ratio of 98.1%

  • Operating cashflow of $904 million for the quarter

The following table summarizes the Company’s net income and related financial metrics.

Net income and operating income

Q1

Year to Date

Q1

Year to Date

All values in USD millions except for per share amounts and percentages

2021

2021

2020

2020

Everest Re Group

Net income

341.9

341.9

16.6

16.6

Net operating income (loss)

260.2

260.2

164.4

164.4

Net income per diluted common share

8.52

8.52

0.41

0.41

Net operating income per diluted common share

6.49

6.49

4.03

4.03

Net income annualized return on average equity

15.0%

15.0%

0.8%

0.8%

Net operating income annualized return on average equity

11.4%

11.4%

7.6%

7.6%

Everest Re Group President & CEO Juan C. Andrade commented on the Company’s results:

"Firstly, our thoughts are with those impacted by the U.S. winter storms and the flooding in Australia. I am very proud of the work our claims team is doing on the ground to help those affected rebuild their lives.

Everest had a strong start to 2021 with robust growth, strong overall profitability, continued improvement in attritional underwriting margins, and excellent investment performance. Our first quarter results further illustrate the earnings power of Everest and our success in implementing our strategy to build a broadly diversified company with a relentless focus on strong operational performance and disciplined underwriting."

The following information summarizes the Company’s underwriting results, on a consolidated basis and also by segment – Reinsurance and Insurance, with selected commentary on results by segment.

Underwriting information - Everest Re Group

Q1

Year to Date

Q1

Year to Date

Year on Year Change

All values in USD millions except for percentages

2021

2021

2020

2020

Q1

Year to Date

Gross written premium

2,931.4

2,931.4

2,570.9

2,570.9

14.0%

14.0%

Net written premium

2,553.9

2,553.9

2,201.5

2,201.5

16.0%

16.0%

Combined ratio

98.1%

98.1%

98.6%

98.6%

-0.5 pts

-0.5 pts

Attritional combined ratio

87.3%

87.3%

89.8%

89.8%

-2.5 pts

-2.5 pts

Pre-tax net catastrophe losses

260.0

260.0

30.0

30.0

Pre-tax net covid losses

-

-

150.0

150.0

Pre-tax net prior year reserve development

-

-

(2.6)

(2.6)

Notes

1/ Attritional ratios exclude prior year reserve development, Covid-19 pandemic impact, catastrophe losses, and reinstatement premiums

2/Pre-tax net catastrophe losses are net of reinsurance and reinstatement premiums

Reinsurance segment

  • The Reinsurance segment achieved strong growth with gross written premiums up 16% for the quarter, driven by a successful January 1 renewal season. The targeted and disciplined growth was driven by rate, increased shares on profitable deals, and new opportunities in property, casualty, specialty lines, and facultative business.

  • The improved attritional combined ratio for the quarter included proactive underwriting actions to improve risk adjusted returns and achieve a lower loss ratio, while the acquisition expense ratio declined primarily due to changes in business mix. We continue to write a stronger, more diversified, and more profitable book.

  • The April renewal season was successfully completed with the Reinsurance segment capturing rate increases on Japanese and retrocessional business and pro-rata business benefitting from primary rate improvement.

Underwriting information - Reinsurance segment

Q1

Year to Date

Q1

Year to Date

Year on Year Change

All values in USD millions except for percentages

2021

2021

2020

2020

Q1

Year to Date

Gross written premium

2,059.0

2,059.0

1,777.8

1,777.8

15.8%

15.8%

Net written premium

1,912.9

1,912.9

1,613.1

1,613.1

18.6%

18.6%

Combined ratio

97.5%

97.5%

96.6%

96.6%

0.9 pts

0.9 pts

Attritional combined ratio

85.5%

85.5%

87.8%

87.8%

-2.3 pts

-2.3 pts

Pre-tax net catastrophe losses

212.5

212.5

24.5

24.5

Pre-tax net covid losses

-

-

110.0

110.0

Pre-tax net prior year reserve development

(1.8)

(1.8)

(2.6)

(2.6)

Notes

1/ Attritional ratios exclude prior year reserve development, Covid-19 pandemic impact, catastrophe losses, and reinstatement premiums

2/Pre-tax net catastrophe losses are net of reinsurance and reinstatement premiums

Insurance segment

  • The Company’s Insurance segment achieved strong growth with gross written premiums, up 10% for the quarter (20% excluding worker’s compensation) with notable growth in specialty casualty, property/short-tail and professional liability classes of business, offset by reductions in workers’ compensation as we purposely sought growth in lines with more attractive pricing.

  • The improved attritional combined ratio for the quarter reflected a more profitable mix of business resulting from continued disciplined cycle management, with reductions in both the loss and expense ratios.

  • Continued strong rate growth in excess of trend with renewal rate increases of 16% in the quarter excluding workers compensation, and up 10% including workers compensation.

Underwriting information - Insurance segment

Q1

Year to Date

Q1

Year to Date

Year on Year Change

All values in USD millions except for percentages

2021

2021

2020

2020

Q1

Year to Date

Gross written premium

872.4

872.4

793.1

793.1

10.0%

10.0%

Net written premium

641.0

641.0

588.4

588.4

8.9%

8.9%

Combined ratio

99.9%

99.9%

103.9%

103.9%

-4.0 pts

-4.0 pts

Attritional combined ratio

92.2%

92.2%

94.9%

94.9%

-2.7 pts

-2.7 pts

Pre-tax net catastrophe losses

47.5

47.5

5.5

5.5

Pre-tax net covid losses

-

-

40.0

40.0

Pre-tax net prior year reserve development

-

-

-

-

Notes

1/ Attritional ratios exclude prior year reserve development, Covid-19 pandemic impact, catastrophe losses, and reinstatement premiums

2/Pre-tax net catastrophe losses are net of reinsurance and reinstatement premiums

Investments and Shareholders’ Equity

  • Net investment income of $260.4 million for the quarter including alternative investment gains of $120.3 million for the quarter

  • Total invested assets and cash of $25.9 billion at March 31, 2021, 1.9% growth versus year end 2020

  • Shareholders’ equity remained flat at $9.7 billion as of March 31, 2021, versus year end 2020

  • Book value per diluted share of $241.57 at March 31, 2021

  • Common share dividends declared and paid in the quarter of $1.55 per share, equal to $62.2 million

  • Common share repurchases of $23.5 million during the quarter, representing 97,462 shares at an average price of $241.58 per share

Equity and Book Value per Share

Q1

Q1

All values in USD millions except per share amounts

2021

2020

Beginning shareholders' equity

9,726.2

9,132.9

Net income

341.9

16.6

Change in investment unrealized gains (URAD)

(292.3

)

(248.0

)

Dividends to shareholders

(62.2

)

(63.3

)

Purchase of treasury shares

(23.5

)

(200.0

)

Other

(7.2

)

(57.3

)

Ending shareholders' equity

9,682.9

8,580.9

Diluted common shares outstanding

40.1

40.0

Book value per diluted common share

241.57

214.59

Common share dividends paid - last 12 months

6.20

5.90

Dividend adjusted growth in BVPS - last 12 months

15.5

%

7.2

%

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 and investment income fluctuations, trends in insured and paid losses, catastrophes, pandemic, 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.

About Everest Re Group, Ltd.

Everest Re Group, Ltd. ("Everest") is a leading global provider of reinsurance and insurance, operating for close to 50 years through subsidiaries in the U.S., Europe, Singapore, Canada, Bermuda, and other territories.

Everest offers property, casualty, and specialty products through its various operating affiliates located in key markets around the world.

Everest common stock (NYSE:RE) is a component of the S&P 500 index.

Additional information about Everest, our people, and our products can be found on our website at www.everestre.com. All issuing companies may not do business in all jurisdictions.

A conference call discussing the second quarter results will be held at 8:00 a.m. Eastern Time on April 29, 2021. The call will be available on the Internet through the Company’s web site at everestre.com/investors.

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 "Investors/Financial Reports/Quarterly Reports" section of the website. The supplemental financial information may also be obtained by contacting the Company directly.

_______________________________________________

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) and after-tax net foreign exchange income (expense) as the following reconciliation displays:

Three Months Ended March 31,

(Dollars in thousands, except per share amounts)

2021

2020

(unaudited)

Per Diluted

Per Diluted

Common

Common

Amount

Share

Amount

Share

Net income (loss)

$

341,862

$

8.52

$

16,612

$

0.41

After-tax net realized capital gains (losses)

30,035

0.75

(172,364

)

(4.22

)

After-tax net foreign exchange income (expense)

51,618

1.29

24,604

0.60

After-tax operating income (loss)

$

260,209

$

6.49

$

164,372

$

4.03

(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.

--Financial Details Follow--

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended

March 31,

(Dollars in thousands, except per share amounts)

2021

2020

(unaudited)

REVENUES:

Premiums earned

$

2,387,865

$

2,036,814

Net investment income

260,413

147,800

Net realized capital gains (losses):

Credit allowances on fixed maturity securities

(6,977

)

(21,774

)

Other-than-temporary impairments on fixed maturity securities

-

-

Other net realized capital gains (losses)

45,879

(188,814

)

Total net realized capital gains (losses)

38,902

(210,588

)

Other income (expense)

56,593

7,990

Total revenues

2,743,773

1,982,016

CLAIMS AND EXPENSES:

Incurred losses and loss adjustment expenses

1,711,419

1,430,840

Commission, brokerage, taxes and fees

489,011

448,522

Other underwriting expenses

142,231

128,860

Corporate expenses

12,378

9,833

Interest, fees and bond issue cost amortization expense

15,639

7,583

Total claims and expenses

2,370,678

2,025,638

INCOME (LOSS) BEFORE TAXES

373,095

(43,622

)

Income tax expense (benefit)

31,233

(60,234

)

NET INCOME (LOSS)

$

341,862

$

16,612

Other comprehensive income (loss), net of tax:

Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period

(288,615

)

(279,398

)

Reclassification adjustment for realized losses (gains) included in net income (loss)

(3,666

)

31,399

Total URA(D) on securities arising during the period

(292,281

)

(247,999

)

Foreign currency translation adjustments

(9,582

)

(50,824

)

Reclassification adjustment for amortization of net (gain) loss included in net income (loss)

2,043

920

Total benefit plan net gain (loss) for the period

2,043

920

Total other comprehensive income (loss), net of tax

(299,820

)

(297,903

)

COMPREHENSIVE INCOME (LOSS)

$

42,042

$

(281,291

)

EARNINGS PER COMMON SHARE:

Basic

$

8.53

$

0.41

Diluted

8.52

0.41

EVEREST RE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

March 31,

December 31,

(Dollars and share amounts in thousands, except par value per share)

2021

2020

(unaudited)

ASSETS:

Fixed maturities - available for sale, at market value

$

20,407,480

$

20,040,173

(amortized cost: 2021, $19,932,190; 2020, $19,225,067, credit allowances: 2021, ($8,723); 2020, ($1,745))

Equity securities, at fair value

1,400,674

1,472,236

Short-term investments (cost: 2021, $826,777; 2020, $1,135,088)

826,769

1,134,950

Other invested assets (cost: 2021, $2,173,221; 2020, $2,012,581)

2,173,221

2,012,581

Cash

1,132,660

801,651

Total investments and cash

25,940,804

25,461,591

Accrued investment income

156,330

141,304

Premiums receivable

2,789,602

2,680,562

Reinsurance receivables

2,029,734

1,994,555

Funds held by reinsureds

740,554

716,655

Deferred acquisition costs

663,560

622,053

Prepaid reinsurance premiums

441,606

412,015

Income taxes

31,738

17,253

Other assets

801,424

742,369

TOTAL ASSETS

$

33,595,352

$

32,788,357

LIABILITIES:

Reserve for losses and loss adjustment expenses

17,090,644

16,398,997

Future policy benefit reserve

37,561

37,723

Unearned premium reserve

3,704,189

3,501,359

Funds held under reinsurance treaties

13,875

15,807

Other net payable to reinsurers

402,379

294,347

Losses in course of payment

139,382

127,971

Senior notes due 6/1/2044

397,224

397,194

Senior notes due 10/1/2050

979,654

979,524

Long term notes due 5/1/2067

223,699

223,674

Borrowings from FHLB

310,000

310,000

Accrued interest on debt and borrowings

24,035

10,460

Unsettled securities payable

151,174

206,693

Other liabilities

438,654

558,432

Total liabilities

23,912,470

23,062,181

SHAREHOLDERS' EQUITY:

Preferred shares, par value: $0.01; 50,000 shares authorized; no shares issued and outstanding

-

-

Common shares, par value: $0.01; 200,000 shares authorized; (2021) 69,816 and (2020) 69,620 outstanding before treasury shares

698

696

Additional paid-in capital

2,245,737

2,245,301

Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) of $41,161 at 2021 and $80,451 at 2020

235,079

534,899

Treasury shares, at cost; 29,734 shares (2021) and 29,636 shares (2020)

(3,645,717

)

(3,622,172

)

Retained earnings

10,847,085

10,567,452

Total shareholders' equity

9,682,882

9,726,176

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

33,595,352

$

32,788,357

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

March 31,

(Dollars in thousands)

2021

2020

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

341,862

$

16,612

Adjustments to reconcile net income to net cash provided by operating activities:

Decrease (increase) in premiums receivable

(105,460

)

(119,548

)

Decrease (increase) in funds held by reinsureds, net

(25,584

)

(28,973

)

Decrease (increase) in reinsurance receivables

(14,518

)

(130,593

)

Decrease (increase) in income taxes

24,908

(65,114

)

Decrease (increase) in prepaid reinsurance premiums

(27,071

)

(10,572

)

Increase (decrease) in reserve for losses and loss adjustment expenses

655,054

406,257

Increase (decrease) in future policy benefit reserve

(162

)

(915

)

Increase (decrease) in unearned premiums

196,631

158,744

Increase (decrease) in other net payable to reinsurers

105,390

95,555

Increase (decrease) in losses in course of payment

11,980

(1,422

)

Change in equity adjustments in limited partnerships

(116,767

)

(8,512

)

Distribution of limited partnership income

18,125

11,108

Change in other assets and liabilities, net

(149,464

)

(45,259

)

Non-cash compensation expense

11,021

9,393

Amortization of bond premium (accrual of bond discount)

17,323

8,640

Net realized capital (gains) losses

(38,902

)

210,588

Net cash provided by (used in) operating activities

904,366

505,989

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from fixed maturities matured/called - available for sale, at market value

818,352

656,070

Proceeds from fixed maturities sold - available for sale, at market value

228,278

501,953

Proceeds from fixed maturities sold - available for sale, at fair value

-

-

Proceeds from equity securities sold, at fair value

281,313

112,841

Distributions from other invested assets

52,211

104,085

Cost of fixed maturities acquired - available for sale, at market value

(1,776,730

)

(1,359,281

)

Cost of equity securities acquired, at fair value

(174,981

)

(76,513

)

Cost of other invested assets acquired

(98,939

)

(152,269

)

Net change in short-term investments

308,585

(27,882

)

Net change in unsettled securities transactions

(93,610

)

(17,185

)

Net cash provided by (used in) investing activities

(455,521

)

(258,181

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Common shares issued during the period for share-based compensation, net of expense

(10,583

)

(12,573

)

Purchase of treasury shares

(23,545

)

(200,020

)

Dividends paid to shareholders

(62,229

)

(63,277

)

Proceeds from revolving credit borrowings

-

50,000

Cost of debt repurchase

-

(1,198

)

Cost of shares withheld on settlements of share-based compensation awards

(12,507

)

(13,982

)

Net cash provided by (used in) financing activities

(108,864

)

(241,050

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH

(8,972

)

2,832

Net increase (decrease) in cash

331,009

9,590

Cash, beginning of period

801,651

808,036

Cash, end of period

$

1,132,660

$

817,626

SUPPLEMENTAL CASH FLOW INFORMATION:

Income taxes paid (recovered)

$

6,417

$

4,920

Interest paid

1,880

2,817

View source version on businesswire.com: https://www.businesswire.com/news/home/20210428006040/en/

Contacts

Media: Dane Lopes
Chief Communications Officer
Everest Global Services, Inc.
203.388.3977

Investors: Jon Levenson
Head of Investor Relations
Everest Global Services, Inc.
908.604.3169