The Bermuda-based Everest Re Group reported first quarter 2009 after-tax operating income, which excludes realized capital gains and losses and gain on debt repurchase, of $106.1 million, or $1.73 per diluted share, compared to after-tax operating income of $190.6 million, or $3.03 per diluted share, in the first quarter of 2008.
Net income, including net realized capital gains and losses and the gain on debt repurchase, was $108.6 million, or $1.77 per diluted share, for the first quarter of 2009 compared to $77.9 million, or $1.24 per diluted share, for the same period last year.
The Group’s first quarter 2009 “operating highlights” included the following:
— Gross written premiums increased 14 percent to $997.8 million in 2009 from $877.5 million in the first quarter of 2008. Globally, reinsurance premiums were up almost 19 percent while insurance premiums were down 3 percent. International reinsurance business, across almost all regions, saw the largest increases, despite period over period currency devaluations relative to strengthening of the U.S. dollar. The U.S. Reinsurance segment also saw growth with new business opportunities in select markets such as crop hail and treaty casualty. Improving conditions across most markets, due to shrinking capacity and financial security concerns, are catalysts for growth.
— The GAAP combined ratio in the first quarter was 89.7 percent compared to 89.1 percent in the same period last year. The current year attritional loss ratio, which excludes prior year development and catastrophe losses, was up slightly from 55.2 percent in the first quarter last year to 55.6 percent in the current quarter. Reserve development and catastrophe losses in both periods were modest.
— Net investment income was $68.8 million compared to $150.1 million in the first quarter of 2008. The reduction primarily resulted from losses of $72.9 million on limited partnership investments, whose results are generally received on a one quarter lag. Most of this loss emanated from the reported fourth quarter results of private equity partnerships. Excluding the impact of limited partnership investments, investment income was down 9 percent compared to the first quarter of 2008.
— Net loss on derivatives totaled $19.7 million for the quarter compared to $3.8 million in the same period last year.
— Net after-tax realized capital losses totaled $48.5 million compared to $112.7 million in the first quarter of 2008. The current quarter loss was primarily due to the sale of long dated financial sector bonds, where the accumulated exposures of merged banking entities exceeded the Company’s risk tolerance levels for a single issuer. Included in the 2009 net after-tax realized capital losses were other-than-temporary impairments of $7.6 million.
— During the quarter, the Company completed a cash tender offer for the purchase of its 6.6 percent Fixed to Floating Rate Long Term Subordinated Notes (“LoTSSM”) due 2067. It purchased approximately 40 percent of the outstanding notes, reducing debt by $161.3 million at an approximate cost of $83 million. This transaction resulted in an after-tax gain of $50.9 million.
— For the quarter, the annualized after-tax operating income1 return on average adjusted shareholders’ equity2 was 8.3 percent compared to 13.6 percent in 2008.
— Cash flow from operations was $180.5 million for the period compared to $250.6 million for the first quarter of 2008. Higher paid losses in the current quarter compared to last year resulted in this reduction although last year’s level of paid losses was unusually low compared to all subsequent quarters due to the timing on settlement of accounts.
— Shareholders’ equity ended the quarter at $5.0 billion, up $79 million from year end 2008. Net income of $108.6 million and after-tax unrealized gains of $46.9 million were offset by foreign currency translation adjustments of $49.7 million and shareholder dividend payments of $29.5 million. Book value per share ended the quarter at $81.89, up 1.4 percent from $80.77 at December 31, 2008.
Chairman and CEO Joseph V. Taranto commented: “We are pleased with the opportunities we are seeing in our markets. Everest’s solid franchise, long term relationships, sound balance sheet, and excellent financial ratings, have facilitated growth as our clients seek stability and security from their reinsurance partners.”
The full report, additional information and details on accessing the earnings conference call held on April 30 may be obtained on the group’s web site at: www.everestre.com.
Source: Everest Re
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