Everest Re 2010 Second Quarter Results
Bermuda-based Everest Re Group Ltd. reported second quarter 2010 after-tax operating income which excludes net realized capital gains and losses, of $184.8 million, or $3.18 per diluted common share, compared to after-tax operating income of $256.2 million, or $4.16 per diluted common share, in the second quarter of 2009. Net income, including net realized capital gains and losses, was $156.7 million, or $2.70 per diluted common share, for the second quarter of 2010 compared to $272.6 million, or $4.43 per diluted common share, for the same period last year.
For the six months ended June 30, 2010, after-tax operating income was $111.0 million, or $1.89 per diluted common share, compared to $362.4 million or $5.88 per diluted common share, for the first six months of 2009. Net income, including net realized capital gains and losses, was $134.0 million, or $2.28 per diluted common share, for the first six months of 2010, compared to $381.1 million, or $6.19 per diluted common share, for the same period in 2009.
Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said:
Although markets remain generally competitive, we have been able to selectively grow our business by focusing on those markets that present the best opportunities. We were pleased with the results generated this quarter and given our very well capitalized position, we continue to invest these earnings into buying back the Company’s shares at prices that we believe are very attractive. Since the beginning of the year, we have bought back almost 6% of the Company’s outstanding shares.
At December 31, 2010, I will retire as CEO. I will remain Chairman of the Board. Ralph Jones will become CEO on January 1, 2011. It has been an honor to work with many wonderful people at Everest to build the Company from a modest size in 1995 to the global company it is today with over $6 billion of capital. The Board and I have great confidence that Ralph, and our team, will continue to effectively grow Everest in the future.”
Operating highlights for the second quarter of 2010 included the following:
– Gross written premiums increased 4% to $1,013.5 million compared to the same period in 2009. Adjusting for the effects of foreign exchange, gross written premiums were up approximately 5%. Worldwide, reinsurance premiums increased 6% to $808.6 million with premium derived from the U.S. markets up 3% and the international markets up 9%. New business opportunities coupled with rate increases on select covers and insurance market growth in some international regions contributed to this increased volume. Insurance premiums were down 4% primarily due to underwriting actions that were taken in response to unprofitable business.
– The loss ratio and combined ratio were 65.1% and 93.2%, respectively, for the quarter, compared to 59.2% and 87.5%, respectively, for the second quarter of 2009. Excluding $9.8 million of prior year favorable development and $69.7 million of catastrophe losses, which were primarily attributable to development on first quarter events, the current year attritional loss ratio was 59.0%, up from the 57.7% reported for last year’s second quarter.
– Net investment income was down 1% to $165.7 million when compared to last year’s second quarter. Eliminating the impact of limited partnership investments on each quarter, investment income was up 2% in 2010 compared to the same period in 2009.
– Net after-tax realized capital losses amounted to $28.1 million for the quarter compared to net after-tax realized capital gains of $16.3 million in the same period last year. The losses for the current quarter were primarily attributable to fair value adjustments on the equity portfolio.
– Net after-tax unrealized capital gains increased $113.3 million during the quarter, primarily due to changes in interest rates.
– Cash flow from operations was $221.5 million compared to $103.4 million for the same period in 2009. Much of the variance was attributable to a tax recovery in the current quarter whereas tax payments were made in the second quarter of 2009.
– For the quarter, the annualized after-tax operating income(1) return on average adjusted shareholders’ equity(2) was 13.1% compared to 19.2% in 2009.
– During the quarter, the Company repurchased 2.7 million of its common shares at an average price of $74.64 and a total cost of $200.1 million. For the year, the Company repurchased 3.2 million of its common shares, or 5.5% of its total outstanding shares at year end 2009, for a total cost of $247.1 million. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 5.2 million shares available.
– Shareholders’ equity ended the quarter at $6,036 million, down 1% from the $6,102 million at December 31, 2009. Adjusting for share repurchases and dividend payments, shareholder’s equity was up 4% from year end. Book value per share was $107.31 as of June 30, 2010 compared to $102.87 at December 31, 2009.
