Everest Re Group’s net income almost halved to US$171.7 million in 2016 Q1 from prior-year quarter

Net income available to common shareholders of Everest Re Group Ltd. was US$171.7 million in the first quarter of 2016 compared to US$323.0 million in the same quarter of 2015, the company reported Monday.

The after-tax operating income available to common shareholders for the first quarter of 2016 was US$222.7 million compared to $329.9 million in the same period of 2015, notes a statement from Everest Re Group, a Bermuda holding company that operates through subsidiaries, including Everest Reinsurance Company, Everest Reinsurance (Bermuda), Ltd., Everest Reinsurance Company (Ireland), Limited and Everest Insurance Company of Canada, which provides property and casualty insurance to policyholders in Canada.

“Against the backdrop of what continues to be significant challenges affecting both investment and underwriting activities, Everest produced strong results with an annualized operating return on equity (ROE) of 12% for the quarter,” Dominic Addesso, president and CEO of Everest Re Group, notes in a company statement. (The 11.7% annualized ROE in 2016 Q1 compares to 18.1% for 2015 Q1.)

“While foreign currency headwinds and declining rates are hampering growth in our reinsurance book, we are seeing strong and profitable growth in our insurance book as new initiatives take hold,” Addesso continues.

While worldwide, reinsurance premiums were down 8% on a constant dollar basis in 2016 Q1 compared to the prior-year quarter, Everest Re reports that insurance premiums were up 11%.

Overall, premiums earned amounted to US$1.2 billion in the first quarter of 2016, down slightly from US$1.3 billion in 2015 Q1. (Figures show “Catastrophes” amounted to US$9.8 million in the first quarter of 2016 compared to US$141,000 in the same quarter of 2015.) As well, underwriting gain for 2016 Q1 was US$171.0 million compared to US$215.5 million. [Click on image below to enlarge]

For the Reinsurance segment, gross written premiums were US$977.0 million in 2016 Q1 compared to US$1.1 billion in 2015 Q1; net written premiums were US$857.5 million compared to US$920.7 million; premiums earned were US$931.4 million compared to US$1.0 billion; underwriting gain was US$173.9 million compared to US$204.8 million; and combined ratio was 81.3% compared to 79.8%.

Looking at the insurance segment, gross written premiums were about US$376.2 million in the first quarter of 2016 compared to US$340.3 million in the same quarter of 2015; net written premiums were about US$324.0 million compared to US$303.6 million; premiums earned were US$287.4 million compared to US$260.1 million; catastrophes (under incurred losses and LAE) were –US$173 million compared to –US$188 million; the underwriting loss was US$2.9 million compared to an underwriting gain of US$10.6 million; and the combined ratio was 101.0% compared to 95.9%.

The consolidated balance sheet shows premiums receivable were about US$1.5 billion in the first quarter of 2016 compared to almost US$1.5 billion in the same quarter of 2015. And reinsurance receivables were US$920.0 million in 2016 Q1 compared to US$894.0 million in the prior-year quarter.

Everest Re reports that gross written premiums decreased 5% to US$1.4 billion in 2016 Q1 compared to 2015 Q1, “but eliminating the unfavourable effects of foreign currency fluctuations, premiums were actually down 3%.”

For the first quarter of 2016, the combined ratio was 86.0% compared to 83.1% in 2015 Q1. “Excluding catastrophe losses arising from the Taiwan earthquake that occurred in the quarter, and prior-year development, the attritional combined ratio was 85.3% compared to 83.1% in the same period last year.”

Other results for 2016 Q1 include the following:

• net investment income was US$102.5 million, including a loss of US$6.2 million on limited partnership investments;
• net after-tax realized capital losses were US$51.0 million, while net after-tax unrealized capital gains totaled US$175.3 million;
• cash flow from operations was US$367.1 million compared to US$350.6 million in 2015 Q1; and
• shareholders’ equity was $7.8 billion, up 3% compared to year-end 2015.