RE - Everest Re Group Reports Third Quarter 2022 Results

October, 26 2022 04:15 PM Everest Re Group Ltd.

Gross Written Premiums Up 6.3%¹ led by Consistent Double-Digit Growth in the Insurance Segment

Underwriting Discipline Drove Strong Attritional Combined Ratio of 87.6%

Consistent Execution of Diversification Strategy Mitigated Losses During Active Catastrophe Quarter

Everest Re Group, Ltd. (“Everest” or the “Group”) today reported its third quarter 2022 results.

Third Quarter 2022 Highlights

Net Operating Loss of $205 million, and Net Loss of $319 Million driven by an active catastrophe quarter and volatile market conditions. YTD 2022 Net Operating Income of $587 million, Net Income of $101 million, and Underwriting income of $109 million
$3.7 billion in gross written premium (“GWP”) with year over year growth of 6.3% in constant dollars for the Group, 13.1% in constant dollars for Insurance, and 3.4% in constant dollars for Reinsurance
Combined ratios of 112.0% for the Group, 115.0% for Reinsurance and 103.5% for Insurance elevated due to catastrophe losses in the quarter as previously announced
Strong attritional combined ratios of 87.6% for the Group, 86.8% for Reinsurance and 89.8% for Insurance, which is a new record for that segment
Pre-tax underwriting loss of $367 million including $730 million of pre-tax catastrophe losses net of estimated recoveries and reinstatement premiums as previously announced. The losses were primarily from Hurricane Ian and other events including European Hailstorms, Hurricane Fiona and Typhoon Nanmadol
Net investment income of $151 million, driven by stronger fixed income returns as new money yields continue to improve partially offset by volatile equity markets and the lag in private equity reporting

¹In constant dollars

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

“The third quarter’s heightened risk environment, including global catastrophe events and continued global economic uncertainty further underscored the strength of Everest’s business and commitment to support our customers with solutions vital to navigating this turbulent period in history. Everest’s diversification strategy and underwriting discipline were key to mitigating our exposure to one of the industry’s largest hurricane losses in U.S. history. With our well-defined strategy, we’re poised to take advantage of the hardening market, focused on segments with the best risk adjusted returns.

Despite the challenging macroeconomic environment, both underwriting businesses delivered sub-90 attritional combined ratios and we continue to make an underwriting, operating, and net income profit on a year-to-date basis. We continued to grow and diversify across geographies, businesses and product lines with top talent leading our platform. We are focused on executing our strategic plan as we continue to build the company for the long-term.”

Summary of Third Quarter 2022 Net Income and Other Items

Net loss of $319 million, equal to $(8.22) per diluted share versus third quarter 2021 net loss of $73 million, equal to $(1.88) per diluted share
Net operating loss of $205 million, equal to $(5.28) per diluted share versus third quarter 2021 net operating loss of $53 million, equal to $(1.34) per diluted share
GAAP combined ratio of 112.0% including 27.4 points of catastrophe losses versus the third quarter 2021 figures of 112.2% including 26.2 points of catastrophe losses
Strong operating cashflow for the quarter of $1.1 billion which is flat versus the third quarter 2021

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

Net income and operating income
Q3
Year to Date

Q3
Year to Date
All values in USD millions except for per share amounts and percentages
2022
2022

2021
2021
Everest Re Group





Net income (loss)
(319)
101

(73)
948
Net operating income (loss)
(205)
587

(53)
795






Net income (loss) per diluted common share
(8.22)
2.57

(1.88)
23.72
Net operating income (loss) per diluted common share
(5.28)
14.91

(1.34)
19.87






Net income (loss) annualized return on average equity
-12.9%
1.4%

-3.0%
13.6%
Net operating income (loss) annualized return on average equity
-8.3%
8.0%

-2.2%
11.4%

Notes

1/ Refer to the reconciliation of net income to net operating income found on page 7 of this press release

Shareholders' Equity and Book Value per Share
Q3
Year to Date

Q3
Year to Date
All values in USD millions except for per share amounts and percentages
2022
2022

2021
2021
Beginning shareholders' equity
8,853
10,139

10,417
9,726
Net income (loss)
(319)
101

(73)
948
Change- unrealized gains (losses) - Fixed inc. investments
(671)
(2,199)

(101)
(308)
Dividends to shareholders
(65)
(191)

(61)
(186)
Purchase of treasury shares
(58)
(60)

(160)
(200)
Other
(91)
(141)

(43)
(2)
Ending shareholders' equity
7,649
7,649

9,979
9,979






Common shares outstanding

39.2


39.4
Book value per common share outstanding

195.27


253.40
Less: Unrealized on fixed inc. investments ("URAD")

(50.02)


10.57
Book value excl. URAD per common share outstanding

245.29


242.83






Change in BVPS adjusted for dividends

-22.5%



Total Shareholder Return ("TSR") - Annualized

-1.0%



Common share dividends paid - last 12 months

6.40


6.20

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

Underwriting information - Everest Re Group
Q3
Year to Date

Q3
Year to Date
All values in USD millions except for percentages
2022
2022

2021
2021
Gross written premium
3,680
10,313

3,498
9,619
Net written premium
3,323
9,156

3,026
8,389






Loss ratio
85.5%
71.7%

85.6%
73.3%
Commission and brokerage ratio
20.9%
21.4%

21.2%
21.2%
Other underwriting expenses
5.5%
5.7%

5.3%
5.6%
Combined ratio
112.0%
98.8%

112.2%
100.1%
Attritional combined ratio
87.6%
87.4%

87.9%
87.6%






Pre-tax net catastrophe losses
730
930

635
940
Pre-tax net covid losses
-
-

-
-
Pre-tax net Russian / Ukraine War losses
-
45

-
-
Pre-tax net prior year reserve development
-
(2)

(2)
(6)

Notes

1/ Attritional combined ratio excludes catastrophe losses, reinstatement premiums, prior year development,

Covid-19 losses, CECL, and losses from the Russian/Ukraine war.

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

Reinsurance Segment – Quarterly Highlights

Gross written premiums of $2.6 billion for the quarter versus $2.5 billion a year ago. The quarter includes $110 million of reinstatement premiums (vs $60 million a year ago). Growth was driven by casualty lines and continued international expansion offset by targeted reductions in property and headwinds from the strong dollar
Pre-tax catastrophe losses of $620 million net of estimated recoveries and reinstatement premiums, primarily driven by Hurricane Ian (compared with $555 million a year ago)
Improved risk-adjusted profitability of the portfolio driven by targeted underwriting actions, resulting in a 110-basis point improvement in the attritional loss ratio for the quarter vs. the prior year (59.1% vs. 60.2%) and an attritional combined ratio of 86.8% (vs 87.1% a year ago)
Continued expense discipline resulting in an operating expense ratio for the quarter of 2.4%, in line with a year ago

Underwriting information - Reinsurance segment
Q3
Year to Date

Q3
Year to Date
All values in USD millions except for percentages
2022
2022

2021
2021
Gross written premium
2,551
6,938

2,488
6,696
Net written premium
2,460
6,664

2,293
6,266






Loss ratio
88.7%
72.8%

89.4%
74.1%
Commission and brokerage ratio
23.9%
24.5%

23.8%
23.8%
Other underwriting expenses
2.4%
2.4%

2.3%
2.5%
Combined ratio
115.0%
99.8%

115.5%
100.5%
Attritional combined ratio
86.8%
86.3%

87.1%
86.3%






Pre-tax net catastrophe losses
620
810

555
803
Pre-tax net covid losses
-
-

-
-
Pre-tax net Russian / Ukraine War losses
-
45

-
-
Pre-tax net prior year reserve development
-
(2)

(2)
(5)

Notes

1/ Attritional combined ratio excludes catastrophe losses, reinstatement premiums, prior year development,

Covid-19 losses, CECL, and losses from the Russian/Ukraine war.

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

Insurance Segment – Quarterly Highlights

Gross written premiums of $1.1 billion, a 13.1% increase year over year in constant currency (11.9% increase when adjusting for FX), driven by balanced and strong diversified growth across most lines of business and geographies.

The attritional combined ratio of 89.8%, a 50-basis point improvement compared to 90.3% in 3Q 2021, is the best in the segment’s history
Rate and exposure increases continue to exceed loss trend.

Underwriting information - Insurance segment
Q3
Year to Date

Q3
Year to Date
All values in USD millions except for percentages
2022
2022

2021
2021
Gross written premium
1,129
3,376

1,009
2,924
Net written premium
862
2,492

733
2,123






Loss ratio
76.8%
68.4%

74.7%
70.8%
Commission and brokerage ratio
12.7%
12.7%

13.7%
13.4%
Other underwriting expenses
14.0%
14.8%

14.1%
14.5%
Combined ratio
103.5%
95.9%

102.5%
98.7%
Attritional combined ratio
89.8%
90.3%

90.3%
91.5%






Pre-tax net catastrophe losses
110
120

80
138
Pre-tax net covid losses
-
-

-
-
Pre-tax net Russian / Ukraine War losses
-
-

-
-
Pre-tax net prior year reserve development
-
1

-
(1)

Notes

1/ Attritional combined ratio excludes catastrophe losses, reinstatement premiums, prior year development,

Covid-19 losses, CECL, and losses from the Russian/Ukraine war.

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

Investments and Shareholders’ Equity at September 30, 2022

Total invested assets and cash of $28.5 billion versus the year end 2021 value of $29.7 billion
$58 million of share repurchases in 3Q 2022 at an average price of $251.98 per share
Repurchased $6.2 million par amount of Long-Term Subordinated Notes due 2067 for $5.1 million plus accrued interest
Shareholders’ equity of $7.6 billion vs. $10.1 billion at year end 2021, largely driven by $2.2 billion of unrealized net losses on fixed maturity investments
Book value per diluted share of $195.27 vs. $258.21 at year end 2021
Book value per diluted share excluding unrealized gains (losses) on fixed maturity investments of $245.29 vs. $252.12 at year end 2021
Common share dividends declared and paid in the quarter of $1.65 per share equal to $65 million

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 results will be held at 8:00 a.m. Eastern Time on October 27, 2022. 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/Financials/Quarterly Results” 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 gains (losses) on investments and after-tax net foreign exchange income (expense) as the following reconciliation displays:


Three Months Ended September 30,




Nine Months Ended September 30,













(Dollars in millions, except per share amounts)
2022
2021




2022
2021














(unaudited)




(unaudited)















Per Diluted







Per Diluted
















Amount
Share
Amount
Share




Amount
Share
Amount
Share













Net income (loss)
$
(319
)
$
(8.22
)
$
(73
)
$
(1.88
)




$
101

$
2.57

$
948
$
23.72
After-tax net gains (losses) on investments
$
(102
)
$
(2.63
)
$
(3
)
$
(0.07
)




$
(415
)
$
(10.53
)
$
111
$
2.78
After-tax net foreign exchange income (expense)
$
(12
)
$
(0.31
)
$
(18
)
$
(0.47
)




$
(71
)
$
(1.80
)
$
43
$
1.06













After-tax operating income (loss)
$
(205
)
$
(5.28
)
$
(53
)
$
(1.34
)




$
587

$
14.91

$
795
$
19.87













(Some amounts may not reconcile due to rounding.)

Although net gains (losses) on investments and net foreign exchange income (expense) are an integral part of the Company’s insurance operations, the determination of net gains (losses) on investments and foreign exchange income (expense) is independent of the insurance underwriting process. The Company believes that the level of net gains (losses) on investments 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

Nine Months Ended

September 30,

September 30,
(Dollars in millions, except per share amounts)

2022



2021



2022



2021


(unaudited)

(unaudited)
REVENUES:







Premiums earned
$
3,067


$
2,656


$
8,775


$
7,603

Net investment income

151



293



620



960

Net gains (losses) on investments:







Credit allowances on fixed maturity securities

(5
)


(7
)


(18
)


(30
)
Gains (losses) from fair value adjustments

(136
)


(5
)


(462
)


128

Net realized gains (losses) from dispositions

12



8



(39
)


41

Total net gains (losses) on investments

(129
)


(4
)


(519
)


139

Other income (expense)

(16
)


(20
)


(71
)


44

Total revenues

3,073



2,925



8,805



8,746









CLAIMS AND EXPENSES:







Incurred losses and loss adjustment expenses

2,623



2,274



6,289



5,572

Commission, brokerage, taxes and fees

641



564



1,877



1,611

Other underwriting expenses

169



141



500



424

Corporate expenses

16



18



45



46

Interest, fees and bond issue cost amortization expense

25



16



74



47

Total claims and expenses

3,474



3,013



8,785



7,700









INCOME (LOSS) BEFORE TAXES

(401
)


(88
)


20



1,046

Income tax expense (benefit)

(82
)


(14
)


(81
)


97









NET INCOME (LOSS)
$
(319
)

$
(73
)

$
101


$
948









Other comprehensive income (loss), net of tax:







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

(712
)


(100
)


(2,260
)


(304
)
Reclassification adjustment for realized losses (gains) included in net income (loss)

41



(1
)


61



(3
)
Total URA(D) on securities arising during the period

(671
)


(101
)


(2,199
)


(308
)








Foreign currency translation adjustments

(101
)


(54
)


(163
)


(29
)








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

1



2



2



6

Total benefit plan net gain (loss) for the period

1



2



2



6

Total other comprehensive income (loss), net of tax

(771
)


(153
)


(2,360
)


(331
)








COMPREHENSIVE INCOME (LOSS)
$
(1,090
)

$
(227
)

$
(2,259
)

$
617









EARNINGS PER COMMON SHARE:







Basic
$
(8.22
)

$
(1.88
)

$
2.57


$
23.74

Diluted

(8.22
)


(1.88
)


2.57



23.72

EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS









September 30,

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

2022



2021


(unaudited)


ASSETS:



Fixed maturities - available for sale, at fair value
$
21,009


$
22,308

(amortized cost: 2022, $23,204; 2021, $22,064, credit allowances: 2022, ($38); 2021, ($30))



Fixed maturities - held to maturity, at amortized cost, net of credit allowances



(fair value: 2022, $817, credit allowances: 2022, ($9))

837



-

Equity securities, at fair value

1,301



1,826

Short-term investments (cost: 2022, $611; 2021, $1,178)

611



1,178

Other invested assets

3,079



2,920

Cash

1,679



1,441

Total investments and cash

28,516



29,673

Accrued investment income

200



149

Premiums receivable

3,452



3,294

Reinsurance recoverables

2,240



2,053

Funds held by reinsureds

893



869

Deferred acquisition costs

867



872

Prepaid reinsurance premiums

556



515

Income tax asset, net

544



2

Other assets

876



757

TOTAL ASSETS
$
38,144


$
38,185





LIABILITIES:



Reserve for losses and loss adjustment expenses

21,222



19,009

Future policy benefit reserve

34



36

Unearned premium reserve

4,795



4,610

Funds held under reinsurance treaties

18



18

Other net payable to reinsurers

511



450

Losses in course of payment

110



261

Senior notes

2,347



2,346

Long term notes

218



224

Borrowings from FHLB

519



519

Accrued interest on debt and borrowings

39



17

Unsettled securities payable

134



17

Other liabilities

548



540

Total liabilities

30,495



28,046





SHAREHOLDERS' EQUITY:



Preferred shares, par value: $0.01; 50.0 shares authorized;



no shares issued and outstanding

-



-

Common shares, par value: $0.01; 200.0 shares authorized; (2022) 69.9



and (2021) 69.8 outstanding before treasury shares

1



1

Additional paid-in capital

2,293



2,274

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



(benefit) of ($269) at 2022 and $27 at 2021

(2,348
)


12

Treasury shares, at cost; 30.8 (2022) and 30.5 shares (2021)

(3,907
)


(3,847
)
Retained earnings

11,610



11,700

Total shareholders' equity

7,649



10,139

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
38,144


$
38,185

EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS









Nine Months Ended

September 30,
(Dollars in millions)

2022



2021


(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:



Net income (loss)
$
101


$
948

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



Decrease (increase) in premiums receivable

(405
)


(737
)
Decrease (increase) in funds held by reinsureds, net

(35
)


(93
)
Decrease (increase) in reinsurance recoverables

(662
)


(231
)
Decrease (increase) in income taxes

(249
)


57

Decrease (increase) in prepaid reinsurance premiums

(194
)


(147
)
Increase (decrease) in reserve for losses and loss adjustment expenses

3,117



2,560

Increase (decrease) in future policy benefit reserve

(2
)


(1
)
Increase (decrease) in unearned premiums

435



928

Increase (decrease) in other net payable to reinsurers

242



199

Increase (decrease) in losses in course of payment

(150
)


24

Change in equity adjustments in limited partnerships

(126
)


(543
)
Distribution of limited partnership income

139



106

Change in other assets and liabilities, net

(134
)


(230
)
Non-cash compensation expense

35



33

Amortization of bond premium (accrual of bond discount)

49



57

Net (gains) losses on investments

519



(139
)
Net cash provided by (used in) operating activities

2,680



2,791





CASH FLOWS FROM INVESTING ACTIVITIES:



Proceeds from fixed maturities matured/called/repaid - available for sale

2,171



2,757

Proceeds from fixed maturities matured/called/repaid - held to maturity

18



-

Proceeds from fixed maturities sold - available for sale

1,177



883

Proceeds from equity securities sold, at fair value

1,030



579

Distributions from other invested assets

244



217

Cost of fixed maturities acquired - available for sale

(5,958
)


(5,671
)
Cost of fixed maturities acquired - held to maturity

(133
)


-

Cost of equity securities acquired, at fair value

(960
)


(508
)
Cost of other invested assets acquired

(455
)


(604
)
Net change in short-term investments

568



423

Net change in unsettled securities transactions

102



(177
)
Net cash provided by (used in) investing activities

(2,196
)


(2,102
)




CASH FLOWS FROM FINANCING ACTIVITIES:



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

(16
)


(12
)
Purchase of treasury shares

(60
)


(200
)
Dividends paid to shareholders

(191
)


(186
)
Cost of debt repurchase

(6
)


-

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

(19
)


(15
)
Net cash provided by (used in) financing activities

(292
)


(413
)




EFFECT OF EXCHANGE RATE CHANGES ON CASH

46



(9
)




Net increase (decrease) in cash

238



267

Cash, beginning of period

1,441



802

Cash, end of period
$
1,679


$
1,068





SUPPLEMENTAL CASH FLOW INFORMATION:



Income taxes paid (recovered)
$
167


$
40

Interest paid

51



33





NON-CASH TRANSACTIONS:



Reclassification of specific investments from fixed maturity securities, available for sale



at fair value to fixed maturity securities, held to maturity at amortized cost net of credit allowances
$
783


$
-

View source version on businesswire.com: https://www.businesswire.com/news/home/20221026005976/en/

Media: Dawn Lauer
Chief Communications Officer
Everest Global Services, Inc.
908.300.7670

Investors: Matt Rohrmann
Head of Investor Relations
Everest Global Services, Inc.
908.604.7343

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

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