RE - Everest Re Group Reports Fourth Quarter and Full Year 2020 Results: Full Year Net Income of $514 Million

February, 08 2021 04:15 PM Everest Re Group Ltd.

15% Growth in Full Year Gross Written Premium with Underlying Profit Improvement

11.4% Year on Year Growth in Book Value Per Share Inclusive of Dividends

Everest Re Group, Ltd. (“Everest” or the “Company”) today reported its 2020 fourth quarter and year end results.

Fourth Quarter 2020 Highlights

Net income of $64 million equal to $1.59 per share
Net operating loss of $(44) million, $(1.12) per common share
Gross written premium growth of 13%
Attritional combined ratio of 86.3%, a 4 point improvement year over year
Pre-tax net catastrophe losses of $70 million, Covid-19 Pandemic (“Pandemic”) losses of $76 million, and a prior year reserve strengthening of $400 million

Full Year 2020 Highlights

Net income of $514 million, $12.78 per diluted common share
Net operating income of $300 million, $7.46 per diluted common share
Growth in diluted book value per share of 11.4% inclusive of dividends
Gross written premium growth of 15%
Attritional combined ratio of 87.5%, ~ 1 point improvement year over year
2020 cash flow from operations of $2.9 billion

The following table summarizes the Company’s net income and related financial metrics and provides details on shareholders’ equity and book value per share.

Net income and operating income

Q4
Full Year

Q4
Full Year
All values in USD millions except for per share amounts and percentages

2020
2020

2019
2019
Everest Re Group






Net income

63.6

514.2


217.6

1,009.5

Net operating income (loss)

(44.2
)
300.1


130.8

872.4








Net income per diluted common share

1.59

12.78


5.32

24.70

Net operating income (loss) per diluted common share

(1.12
)
7.46


3.20

21.34








Net income annualized return on average equity

2.8
%
5.8
%

10.0
%
12.0
%
Net operating income annualized return on average equity

-2.0
%
3.4
%

6.0
%
10.3
%







Year end equity and book value






Shareholders' equity


9,726.2



9,132.9

Book value per share


243.25



223.85

Growth in bvps adjusted for dividends


11.4
%


18.7
%
Notes






1/ Refer to the reconciliation of net income to net operating income found later in this release

Everest Re Group President & CEO Juan C. Andrade commented: “We are relentlessly executing our strategies from a position of strength in this robust market as evidenced by 2020 growth in gross written premiums of 15% and net written premiums of 17% and improvement in underlying underwriting profitability. Our attritional combined ratio improved approximately one point to 87.5% versus the prior year, with our Insurance segment improving 2.3 points to 94.2%. Despite the $511 million Pandemic loss provision and a $400 million prior accident year reserve strengthening, we delivered $300 million in operating income and $514 million in net income providing a return on equity of 5.8%. Everest’s investment income remained resilient at $642 million despite the Pandemic’s impact on financial markets and the sharp decline in interest rates. Our total shareholders’ equity grew to a record $9.7 billion from $9.1 billion during the year, representing net book value per share growth of 11.4% including dividends. Everest has a strong capital position bolstered by the $1.0 billion senior notes offering and a leading global franchise with great momentum entering 2021.”

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
Q4
Full Year

Q4
Full Year

Year on year change
All values in USD millions except for percentages
2020
2020

2019
2019

Q4
Full Year
Gross written premium
2,750.5

10,482.4


2,436.3

9,133.4


12.9
%
14.8
%
Net written premium
2,449.3

9,117.0


2,120.2

7,824.4


15.5
%
16.5
%









Combined ratio
109.1
%
102.9
%

101.5
%
95.5
%

7.6 pts
7.4 pts
Attritional combined ratio
86.3
%
87.5
%

90.3
%
88.4
%

-4.0 pts
-0.9 pts









Pre-tax net catastrophe losses
70.0

425.0


225.0

575.5




Pre-tax net covid losses
76.1

511.1


-

-




Pre-tax net prior year reserve development
400.0

401.4


(19.2
)
(93.6
)



Notes








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

Reinsurance segment

The reinsurance segment achieved strong growth with gross written premiums up 12% for the quarter and 15% for the year, driven by new business opportunities, growth with existing customers, and improved rates and terms and conditions.
The combined ratio for the quarter and full year 2020 reflected the impact of catastrophe losses, Covid-19 pandemic losses, and a reserve adjustment in the amount of $400 million.
We have a more profitable portfolio driven by the consistent execution of our underwriting initiatives.

Underwriting information - Reinsurance segment
Q4
Full Year

Q4
Full Year

Year on year change
All values in USD millions except for percentages
2020
2020

2019
2019


Q4
Full Year
Gross written premium
1,878.6

7,281.7


1,677.6

6,355.9


12.0
%
14.6
%
Net written premium
1,793.5

6,767.6


1,519.3

5,732.3


18.0
%
18.1
%









Combined ratio
112.4
%
103.0
%

103.9
%
95.4
%

8.5 pts
7.6 pts
Attritional combined ratio
83.9
%
85.2
%

87.4
%
85.5
%

-3.5 pts
-0.3 pts









Pre-tax net catastrophe losses
60.0

357.0


225.0

574.8




Pre-tax net covid losses
56.1

407.1


-

-




Pre-tax net prior year reserve development
400.0

396.9


(2.7
)
(77.2
)



Notes








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

Insurance segment

The Company’s insurance segment achieved strong growth with gross written premiums up 15% for the quarter and 15% for the year, driven primarily by new business opportunities, strong renewal retention, and rate improvement.
The combined ratio for the quarter and full year 2020 reflected the impact of catastrophe losses and Covid-19 pandemic losses.
We achieved record renewal rate increases of +21% in the fourth quarter excluding workers compensation, and up 14% including workers compensation where we are seeing rates flatten.

Underwriting information - Insurance segment
Q4
Full Year

Q4
Full Year

Year on year change
All values in USD millions except for percentages
2020
2020

2019
2019

Q4
Full Year
Gross written premium
871.9

3,200.6


758.7

2,777.5


14.9
%
15.2
%
Net written premium
655.8

2,349.4


600.9

2,092.2


9.1
%
12.3
%









Combined ratio
99.0
%
102.6
%

95.1
%
95.8
%

3.9 pts
6.8 pts
Attritional combined ratio
93.8
%
94.2
%

98.1
%
96.5
%

-4.3 pts
-2.3 pts









Pre-tax net catastrophe losses
10.0

68.0


0.0

0.7




Pre-tax net covid losses
20.0

104.0


-

-




Pre-tax net prior year reserve development
-

4.6


(16.4
)
(16.4
)



Notes








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

Investments and capital

Net investment income of $222 million for the quarter and $647 million for the year, including limited partnership gains of $91 million for the quarter and $113 million for the year
Total invested assets and cash of $25.5 billion at December 31, 2020, 23% growth year over year
Shareholders’ equity increased to a record $9.7 billion at December 31, 2020
Book value per diluted share at December 31, 2020 of $243.25, up 11.4% on a dividend adjusted basis since year end 2019
Common share dividends declared and paid of $1.55 per share, equal to $62 million for the quarter
The Company repurchased no common shares in the quarter

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 February 9, 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

Twelve Months Ended


December 31,

December 31,
(Dollars in thousands, except per share amounts)

2020

2019

2020

2019


(unaudited)

(unaudited)





















Per Diluted



Per Diluted



Per Diluted



Per Diluted




Common



Common



Common



Common


Amount

Share

Amount

Share

Amount

Share

Amount

Share

















Net income (loss)

$
63,601


$
1.59


$
217,644

$
5.32

$
514,151


$
12.78


$
1,009,461


$
24.70

After-tax net realized capital gains (losses)


149,950



3.74



61,052


1.49


217,017



5.39



150,808



3.69

After-tax net foreign exchange income (expense)


(42,165
)


(1.05
)


25,763


0.63


(2,932
)


(0.07
)


(13,767
)


(0.34
)

















After-tax operating income (loss)

$
(44,184
)

$
(1.12
)

$
130,828

$
3.20

$
300,066


$
7.46


$
872,420


$
21.34


















(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

Twelve Months Ended

December 31,

December 31,
(Dollars in thousands, except per share amounts)

2020



2019



2020



2019


(unaudited)

(unaudited)
REVENUES:







Premiums earned
$
2,396,483


$
1,948,071


$
8,681,513


$
7,403,686

Net investment income

222,349



146,077



642,465



647,139

Net realized capital gains (losses):







Credit allowances on fixed maturity securities

17,896



-



(1,745
)


-

Other-than-temporary impairments on fixed maturity securities



(5,495
)


-



(20,899
)
Other net realized capital gains (losses)

165,490



80,938



269,394



205,903

Total net realized capital gains (losses)

183,386



75,443



267,649



185,004

Other income (expense)

(40,819
)


44,495



6,487



(4,660
)
Total revenues

2,761,399



2,214,086



9,598,114



8,231,169









CLAIMS AND EXPENSES:







Incurred losses and loss adjustment expenses

1,976,771



1,407,794



6,550,837



4,922,898

Commission, brokerage, taxes and fees

513,080



450,226



1,873,250



1,703,726

Other underwriting expenses

125,372



118,923



511,237



440,899

Corporate expenses

11,934



10,344



41,118



32,966

Interest, fees and bond issue cost amortization expense

14,847



7,721



36,323



31,693

Total claims and expenses

2,642,004



1,995,008



9,012,765



7,132,182









INCOME (LOSS) BEFORE TAXES

119,395



219,078



585,349



1,098,987

Income tax expense (benefit)

55,794



1,434



71,198



89,526









NET INCOME (LOSS)
$
63,601


$
217,644


$
514,151


$
1,009,461









Other comprehensive income (loss), net of tax:







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

87,375



(28,159
)


423,210



496,430

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

(16,165
)


(8,393
)


(3,476
)


(12,613
)
Total URA(D) on securities arising during the period

71,210



(36,552
)


419,734



483,817









Foreign currency translation adjustments

55,937



29,235



86,327



14,030









Benefit plan actuarial net gain (loss) for the period

(5,615
)


(12,591
)


(5,615
)


(12,591
)
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)

1,768



1,788



6,300



5,453

Total benefit plan net gain (loss) for the period

(3,847
)


(10,803
)


685



(7,138
)
Total other comprehensive income (loss), net of tax

123,300



(18,120
)


506,746



490,709









COMPREHENSIVE INCOME (LOSS)
$
186,901


$
199,524


$
1,020,897


$
1,500,170









EARNINGS PER COMMON SHARE:







Basic
$
1.59


$
5.34


$
12.81


$
24.77

Diluted

1.59



5.32



12.78



24.70

EVEREST RE GROUP, LTD.




CONSOLIDATED BALANCE SHEETS
















December 31,
(Dollars and share amounts in thousands, except par value per share)


2020



2019



(unaudited)


ASSETS:




Fixed maturities - available for sale, at market value

$
20,040,173


$
16,824,944

(amortized cost: 2020, $19,225,068; 2019, $16,473,491, credit allowances: 2020, ($1,745); 2019, $0)




Fixed maturities - available for sale, at fair value


-



5,826

Equity securities, at fair value


1,472,236



931,457

Short-term investments (cost: 2020, $1,135,088; 2019, $414,639)


1,134,950



414,706

Other invested assets (cost: 2020, $2,012,581; 2019, $1,763,531)


2,012,581



1,763,531

Cash


801,651



808,036

Total investments and cash


25,461,591



20,748,500

Accrued investment income


141,304



116,804

Premiums receivable


2,680,562



2,259,088

Reinsurance receivables


1,994,555



1,763,471

Funds held by reinsureds


716,655



489,901

Deferred acquisition costs


622,053



581,863

Prepaid reinsurance premiums


412,015



445,716

Income taxes


17,253



305,711

Other assets


742,369



612,997

TOTAL ASSETS

$
32,788,357


$
27,324,051






LIABILITIES:




Reserve for losses and loss adjustment expenses


16,398,997



13,611,313

Future policy benefit reserve


37,723



42,592

Unearned premium reserve


3,501,359



3,056,735

Funds held under reinsurance treaties


15,807



10,668

Other net payable to reinsurers


294,347



291,660

Losses in course of payment


127,971



51,950

Senior notes due 6/1/2044


397,194



397,074

Senior notes due 10/1/2050


979,524



-

Long term notes due 5/1/2067


223,674



236,758

Borrowings from FHLB


310,000



-

Accrued interest on debt and borrowings


10,460



2,878

Unsettled securities payable


206,693



30,650

Other liabilities


558,432



458,848

Total liabilities


23,062,181



18,191,126






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; (2020) 69,620




and (2019) 69,464 outstanding before treasury shares


696



694

Additional paid-in capital


2,245,301



2,219,660

Accumulated other comprehensive income (loss), net of deferred income tax expense




(benefit) of $80,451 at 2020 and $30,996 at 2019


534,899



28,152

Treasury shares, at cost; 29,636 shares (2020) and 28,665 shares (2019)


(3,622,172
)


(3,422,152
)
Retained earnings


10,567,452



10,306,571

Total shareholders' equity


9,726,176



9,132,925

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$
32,788,357


$
27,324,051

EVEREST RE GROUP, LTD.




CONSOLIDATED STATEMENTS OF CASH FLOWS
















Twelve Months Ended


December 31,
(Dollars in thousands)


2020



2019



(unaudited)


CASH FLOWS FROM OPERATING ACTIVITIES:




Net income (loss)

$
514,151


$
1,009,461

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




Decrease (increase) in premiums receivable


(387,123
)


(62,018
)
Decrease (increase) in funds held by reinsureds, net


(219,321
)


(56,722
)
Decrease (increase) in reinsurance receivables


(150,753
)


67,444

Decrease (increase) in income taxes


239,883



237,479

Decrease (increase) in prepaid reinsurance premiums


55,334



(95,207
)
Increase (decrease) in reserve for losses and loss adjustment expenses


2,627,813



402,380

Increase (decrease) in future policy benefit reserve


(4,869
)


(4,186
)
Increase (decrease) in unearned premiums


404,049



521,709

Increase (decrease) in other net payable to reinsurers


(24,163
)


66,477

Increase (decrease) in losses in course of payment


74,759



(33,557
)
Change in equity adjustments in limited partnerships


(103,772
)


(108,332
)
Distribution of limited partnership income


122,326



81,300

Change in other assets and liabilities, net


(95,968
)


(54,176
)
Non-cash compensation expense


39,209



34,018

Amortization of bond premium (accrual of bond discount)


49,673



30,936

Net realized capital (gains) losses


(267,649
)


(185,004
)
Net cash provided by (used in) operating activities


2,873,579



1,852,002






CASH FLOWS FROM INVESTING ACTIVITIES:




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


2,586,405



2,302,299

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


1,945,867



3,280,237

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


4,907



2,917

Proceeds from equity securities sold, at fair value


376,347



283,965

Distributions from other invested assets


309,912



284,558

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


(7,189,301
)


(6,613,917
)
Cost of fixed maturities acquired - available for sale, at fair value


-



(4,243
)
Cost of equity securities acquired, at fair value


(637,082
)


(329,417
)
Cost of other invested assets acquired


(557,473
)


(425,438
)
Net change in short-term investments


(717,527
)


(167,290
)
Net change in unsettled securities transactions


194,574



(26,163
)
Net cash provided by (used in) investing activities


(3,683,371
)


(1,412,492
)





CASH FLOWS FROM FINANCING ACTIVITIES:




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


(13,566
)


(3,134
)
Purchase of treasury shares


(200,020
)


(24,604
)
Dividends paid to shareholders


(249,056
)


(234,322
)
Proceeds from issuance of senior notes


979,417



-

Cost of debt repurchase


(10,647
)


-

FHLB advances (repayments)


310,000



-

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


(15,908
)


(13,627
)
Net cash provided by (used in) financing activities


800,220



(275,687
)





EFFECT OF EXCHANGE RATE CHANGES ON CASH


3,187



(11,882
)





Net increase (decrease) in cash


(6,385
)


151,941

Cash, beginning of period


808,036



656,095

Cash, end of period

$
801,651


$
808,036






SUPPLEMENTAL CASH FLOW INFORMATION:




Income taxes paid (recovered)

$
(169,748
)

$
(148,585
)
Interest paid


33,570



31,689

View source version on businesswire.com: https://www.businesswire.com/news/home/20210208005816/en/

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

Company Name:	Everest Re Group Ltd.
Stock Symbol:	RE
Market:	NYSE

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