Everest Re Reports $233 Million Q3 Net Loss; $2.2 Million for 9 Months

The Bermuda-based Everest Re Group reported third quarter 2008 after-tax operating income, which excludes realized capital gains and losses, of $12.6 million, or $0.21 per share, compared to after-tax operating income of $232.5 million, or $3.68 per diluted share, in the third quarter of 2007.

However, when net realized capital gains and losses were included the Group reported a net loss of $233.1 million, or $3.80 per share, for the third quarter of 2008 compared to net income of $246.6 million, or $3.90 per diluted share, for the same period last year.

For the nine months ended September 30, 2008, after-tax operating income was $383.2 million, or $6.20 per share, compared to $713.7 million, or $11.19 per diluted share, for the same period in 2007. Including net realized capital gains and losses, the Company had a net loss of $2.2 million for the first nine months of 2008, or $0.04 per share, compared to net income of $827.0 million, or $12.96 per diluted share, for the first nine months of 2007.

Everest Re’s earnings statement also noted the following operating highlights:
— The GAAP combined ratio in the third quarter was 115.0 percent compared to 86.6 percent in the same period last year. Pre-tax catastrophe losses, net of reinstatement premiums, primarily emanating from Hurricanes Gustav and Ike, were $267.4 million in the quarter. Catastrophe events added 34.2 points to the combined ratio in the quarter compared to 3 points in the third quarter of 2007. Reserve development for the current period was minimally favorable.
— Net after-tax realized capital losses totaled $245.7 million for the quarter compared to net after-tax realized capital gains of $14.1 million in the same period last year. Write-downs for other than temporary impairments, primarily emanating from financial sector bond holdings, comprised $131.1 million of this quarter’s net loss. The remainder of the quarter’s loss was about evenly split between fair value accounting adjustments principally related to equity securities and net realized capital losses on sales of securities.
— Gross written premiums were $999.2 million for the quarter, 7 percent lower than in the same period in 2007. Reinsurance premiums, across all segments, were down 5 percent, with reinstatement premiums on catastrophe covers adding 4 percent to the quarter’s totals. Insurance segment premiums were 15 percent lower than in the third quarter of 2007 as written premiums were impacted by softer worker’s compensation, public entity and contractors markets as well as the timing of new business.
— Net investment income was $164.5 million, 5 percent lower than in the third quarter of 2007. Reduced income from limited partnership investments and lower yields on fixed maturity investments were the principal cause of the decline.
— Cash flow from operations was $375.4 million compared to $356.0 million for the same quarter in 2007. The Company had net tax recoveries of $97.4 million in the third quarter of 2008 compared to net tax payments of $107.4 million in the third quarter of 2007.
— Shareholders’ equity ended the quarter at $5.0 billion down from $5.7 billion at December 31, 2007, reflective of year-to-date net unrealized losses on investments of $355.4 million, share repurchases of $150.7 million and dividend payouts of $89.1 million. Book value per share at the end of the quarter was $82.02 compared to $90.43 at December 31, 2007.
— Since year end 2007, the Company has repurchased 1.6 million of its common shares at an average price of $92.35. Since January 2007, the Company has repurchased 4.2 million of its common shares at an average price of $94.31. The total cost to date of the repurchased shares under this program is $392.3 million. The Company’s cumulative share repurchase authorizations allow for additional repurchases of up to 5.8 million shares.

Chairman and CEO Joseph V. Taranto commented: “This quarter was marked by significant losses on both the underwriting and investment side, as two sizeable hurricanes in the gulf occurred in tandem with a meltdown in the financial markets.

“Our conservative capital management and investment strategies enabled us to withstand these tumultuous events and maintain our position of strength. We believe we are in a strong position to continue to serve our clients as well as capitalize on opportunities going forward.”

The complete report and a replay of yesterday’s earnings conference call may be obtained on the Group’s web site at: www.everestre.com.

Source: Everest Re Group