EG Everest Group Ltd

Net Income of $670 million and Record Operating Income of $627 million 22.3%1 GWP2 Growth, Led by Record Reinsurance Growth of 26.9%1 and Strong Pricing Momentum 87.7% Combined Ratio Improved 410 Basis Points Year-Over-Year

Everest Group, Ltd. (NYSE: EG), a global underwriting leader providing best-in-class property, casualty, and specialty reinsurance and insurance solutions, today reported its second quarter 2023 results.

Second Quarter 2023 Highlights

• Record Operating Income of $627 million; Net Income of $670 million driven by continued underwriting margin improvement
• 23.3% Net Income ROE and 21.8% Operating Income ROE; Record Total Shareholder Return of 25.3% annualized
• $4.2 billion in gross written premium with year-over-year growth of 22.3% in constant dollars as reported for the Group, 26.9% in constant dollars for Reinsurance and 14.1% in constant dollars for Insurance
• Combined ratios of 87.7% for the Group, 85.9% for Reinsurance and 92.7% for Insurance driven by improved pricing and lower catastrophe losses year-over-year
• Attritional combined ratios of 86.7% for the Group, 84.7% for Reinsurance and 92.1% for Insurance
• Pre-tax underwriting income of $401 million versus $240 million in the prior year
• $27 million of pre-tax catastrophe losses net of recoveries and reinstatement premiums versus $85 million in the prior year
• Net investment income improved to $357 million versus $226 million in the prior year second quarter, driven by strong fixed income and alternative investment returns
• Completed successful $1.5 billion public equity offering in May 2023
• Strong operating cashflow for the quarter of $1.1 billion versus $715 million in the second quarter 2022

Footnote 1 in header denotes constant currency figure. Footnote 2 in header denotes gross written premium (“GWP”).

“Everest’s second quarter performance was outstanding as we leaned into the hard reinsurance market. We continued to grow premiums, while expanding margins, resulting in strong increases in quarterly underwriting profits, net income, and record operating income. We delivered an operating ROE of 21.8% and a record annualized Total Shareholder Return in excess of 25%,” said Juan C. Andrade, Everest President & CEO. “Our lead market position in reinsurance, combined with best-in-class execution and dynamic capital deployment, enabled us to take advantage of favorable market conditions and drive significantly higher risk adjusted returns. We also continued to advance our diversified and disciplined global primary insurance franchise, which is benefiting from firming rates. In addition to the excellent underwriting profit in the quarter, we generated nearly $360 million in net investment income with our well positioned portfolio. Our exceptional talent, diversified platform and underwriting discipline give us significant firepower to continue delivering on our objectives and capitalizing on abundant market opportunities, which are expected to continue well into 2024.”

Summary of Second Quarter 2023 Net Income and Other Items

• Net Income of $670 million, equal to $16.26 per diluted share versus second quarter 2022 net income of $123 million, equal to $3.11 per diluted share
• Operating income of $627 million, equal to $15.21 per diluted share versus second quarter 2022 net operating income of $386 million, equal to $9.79 per diluted share
• GAAP combined ratio of 87.7%, including 0.8 points of catastrophe losses, versus the second quarter 2022 figure of 91.8%, including 2.9 points of catastrophe losses

The following table summarizes the Company’s Net Income and related financial metrics.

      Net income and operating income

Q2

 

Year to Date

Q2

 

Year to Date

All values in USD millions except for per share amounts and percentages

2023

 

2023

2022

 

2022

Everest Group     Net income (loss)

670

 

1,035

123

 

420

Operating income (loss) (1)

627

 

1,070

386

 

792

      Net income (loss) per diluted common share

16.26

 

25.74

3.11

 

10.67

Net operating income (loss) per diluted common share

15.21

 

26.61

9.79

 

20.10

      Net income (loss) return on average equity (annualized)

23.3%

 

18.3%

4.8%

 

8.4%

After-tax operating income (loss) return on average equity (annualized)

21.8%

 

18.9%

15.3%

 

15.8%

            Notes     (1) Refer to the reconciliation of net income to net operating income found on page 6 of this press release       Shareholders' Equity and Book Value per Share Q2   Year to Date Q2   Year to Date All values in USD millions except for per share amounts and percentages

2023

 

2023

2022

 

2022

Beginning shareholders' equity

9,014

 

8,441

9,528

 

10,139

Net income (loss)

670

 

1,035

123

 

420

Change - unrealized gains (losses) - Fixed inc. investments

(167)

 

82

(717)

 

(1,528)

Dividends to shareholders

(72)

 

(136)

(65)

 

(126)

Purchase of treasury shares

—

 

—

—

 

(1)

Public equity offering of shares

1,445

 

1,445

—

 

—

Other

11

 

36

(16)

 

(51)

Ending shareholders' equity

10,902

 

10,902

8,853

 

8,853

      Common shares outstanding  

43.4

 

39.4

Book value per common share outstanding  

251.17

 

224.59

Less: Unrealized appreciation/depreciation of fixed maturity investments ("URAD")  

(37.47)

 

(32.68)

Adjusted book value per common share outstanding excluding URAD  

288.64

 

257.27

      Change in BVPS adjusted for dividends  

18.1%

 

(11.8)%

Total Shareholder Return ("TSR") - Annualized  

25.3%

 

6.6%

Common share dividends paid - last 12 months  

6.60

 

6.30

     

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 Group Q2   Year to Date Q2   Year to Date Year on Year Change All values in USD millions except for percentages

2023

 

2023

2022

 

2022

Q2 Year to Date Gross written premium

4,180

 

7,923

3,447

 

6,633

21.3 %

19.4 %

Net written premium

3,674

 

7,003

3,021

 

5,833

21.6 %

20.1 %

      Loss ratio

60.3%

 

61.8%

64.3%

 

64.2%

(4.0)% pts (2.4)% pts Commission and brokerage ratio

21.1%

 

21.2%

21.6%

 

21.6%

(0.5)% pts (0.4)% pts Other underwriting expenses

6.3%

 

6.4%

5.8%

 

5.8%

0.5 % pts 0.6 % pts Combined ratio

87.7%

 

89.4%

91.8%

 

91.7%

(4.1)% pts (2.3)% pts Attritional combined ratio (1)

86.7%

 

87.1%

87.2%

 

87.3%

(0.5)% pts (0.2)% pts       Pre-tax net catastrophe losses (2)

27

 

137

85

 

200

Pre-tax net Russia/Ukraine losses

—

 

—

45

 

45

Pre-tax net prior year reserve development

0

 

0

(1)

 

(2)

      Notes     (1) Attritional ratios exclude catastrophe losses, net CAT reinstatement premiums earned, prior year development, COVID-19 losses, CECL and losses from the Russia/Ukraine war (2) Pre-tax net catastrophe losses are net of reinsurance and reinstatement premiums      

Reinsurance Segment – Quarterly Highlights

• Gross written premiums grew 26.9% on a constant dollar basis to approximately $2.8 billion, a new quarterly premium record for the segment. Growth was broad-based across geographies and lines.
• Growth was driven by 34.7% growth in property pro-rata, 29.6% growth in property Cat, and 16.2% in Casualty pro-rata as pricing increases and a flight to quality continues globally.
• Robust pricing momentum continued in the second quarter, with Cat pricing up 47.5% in North America and 29.2% Internationally, with improved terms/conditions.
• Attritional loss ratio improved 120 basis points over last year to 57.6%, and the attritional combined ratio improved to 84.7% vs 86.0% a year ago.
• Pre-tax catastrophe losses fell to $27 million net of estimated recoveries and reinstatement premiums, from $80 million a year ago. Catastrophe losses in the quarter were partially offset by $30 million of catastrophe bond recoveries related to Hurricane Ian.

      Underwriting information - Reinsurance segment Q2   Year to Date Q2   Year to Date Year on Year Change All values in USD millions except for percentages

2023

 

2023

2022

 

2022

Q2 Year to Date Gross written premium

2,766

 

5,403

2,201

 

4,387

25.7 %

23.2 %

Net written premium

2,639

 

5,093

2,122

 

4,204

24.4 %

21.2 %

      Loss ratio

58.8%

 

60.8%

64.6%

 

64.4%

(5.8)% pts (3.6)% pts Commission and brokerage ratio

24.5%

 

24.7%

24.8%

 

24.8%

(0.3)% pts (0.1)% pts Other underwriting expenses

2.6%

 

2.7%

2.4%

 

2.4%

0.2 % pts 0.3 % pts Combined ratio

85.9%

 

88.2%

91.8%

 

91.6%

(5.9)% pts (3.4)% pts Attritional combined ratio (1)

84.7%

 

85.3%

86.0%

 

86.1%

(1.3)% pts (0.8)% pts       Pre-tax net catastrophe losses (2)

27

 

135

80

 

190

Pre-tax net Russia/Ukraine losses

—

 

—

45

 

45

Pre-tax net prior year reserve development

0

 

0

(1)

 

(2)

      Notes     (1) Attritional ratios exclude catastrophe losses, net CAT reinstatement premiums earned, prior year development, COVID-19 losses, CECL and losses from the Russia/Ukraine war (2) Pre-tax net catastrophe losses are net of reinsurance and reinstatement premiums      

Insurance Segment – Quarterly Highlights

• Gross written premiums rose to $1.4 billion, a 14.1% increase year-over-year in constant dollars, a new quarterly record, led by a diversified mix of property, marine, aviation, energy and other specialty lines
• Strong cycle management delivered an underwriting profit of $64 million.
• Catastrophe losses were benign in the quarter demonstrating our de-risking actions on the portfolio.
• Disciplined expense management drove a total expense ratio of 28.3% with continued investment in global systems and our platform.
• Pricing continues to exceed loss trend.

      Underwriting information - Insurance segment Q2   Year to Date Q2   Year to Date Year on Year Change All values in USD millions except for percentages

2023

 

2023

2022

 

2022

Q2 Year to Date Gross written premium

1,414

 

2,520

1,246

 

2,247

13.5 %

12.2 %

Net written premium

1,035

 

1,910

899

 

1,630

15.0 %

17.2 %

      Loss ratio

64.4%

 

64.6%

63.6%

 

63.9%

0.8 % pts 0.7 % pts Commission and brokerage ratio

11.8%

 

11.8%

12.8%

 

12.7%

(1.0)% pts (0.9)% pts Other underwriting expenses

16.5%

 

16.2%

15.1%

 

15.2%

1.4 % pts 1.0 % pts Combined ratio

92.7%

 

92.5%

91.5%

 

91.7%

1.2 % pts 0.8 % pts Attritional combined ratio (1)

92.1%

 

91.9%

90.2%

 

90.6%

1.9 % pts 1.3 % pts       Pre-tax net catastrophe losses (2)

—

 

2

5

 

10

Pre-tax net Russia/Ukraine losses

—

 

—

—

 

—

Pre-tax net prior year reserve development

—

 

—

—

 

1

      Notes     (1) Attritional ratios exclude catastrophe losses, net CAT reinstatement premiums earned, prior year development, COVID-19 losses, CECL and losses from the Russia/Ukraine war (2) Pre-tax net catastrophe losses are net of reinsurance and reinstatement premiums

Investments and Shareholders’ Equity as of June 30, 2023

• Total invested assets and cash of $33.6 billion versus $29.9 billion on December 31, 2022
• Shareholders’ equity of $10.9 billion vs. $8.4 billion on December 31, 2022, including $1.6 billion of unrealized net losses on AFS fixed maturity investments
• Shareholders’ equity excluding unrealized gains (losses) on AFS fixed maturity investments of $12.5 billion versus $10.1 billion on December 31, 2022
• Book value per share of $251.17 versus $215.54 at December 31, 2022
• Book value per share excluding unrealized gains (losses) on AFS fixed maturity investments of $288.64, versus $259.18 at December 31, 2022
• Common share dividends declared and paid in the quarter of $1.65 per share equal to $72 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

Everest Group, Ltd. (Everest) is a global underwriting leader providing best-in-class property, casualty, and specialty reinsurance and insurance solutions that address customers’ most pressing challenges. Known for a 50-year track record of disciplined underwriting, capital and risk management, Everest, through its global operating affiliates, is committed to underwriting opportunity for colleagues, customers, shareholders, and communities worldwide.

Everest common stock (NYSE: EG) 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.everestglobal.com.

A conference call discussing the results will be held at 8:00 a.m. Eastern Time on July 27, 2023. The call will be available on the Internet through the Company’s website at https://www.everestglobal.com/investor-relations.

Recipients are encouraged to visit the Company’s website to view supplemental financial information on the Company’s results. The supplemental information is located at www.everestglobal.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:

      (Dollars in millions, except per share amounts) Three Months Ended June 30,     Six Months Ended June 30,

2023

 

2022

   

2023

 

2022

(unaudited)     (unaudited) Amount   Per DilutedShare   Amount   Per DilutedShare     Amount   Per DilutedShare   Amount   Per DilutedShare After-tax operating income (loss)

$

627

 

$

15.21

 

$

386

 

$

9.79

   

$

1,070

 

$

26.61

 

$

792

 

$

20.10

After-tax net gains (losses) on investments

 

4

 

 

0.11

 

 

(189)

 

 

(4.79)

   

 

10

 

 

0.25

 

 

(312)

 

 

(7.93)

After-tax net foreign exchange income (expense)

 

39

 

 

0.94

 

 

(74)

 

 

(1.88)

   

 

(45)

 

 

(1.12)

 

 

(59)

 

 

(1.49)

                  Net income (loss)

$

670

 

$

16.26

 

$

123

 

$

3.11

   

$

1,035

 

$

25.74

 

$

420

 

$

10.67

                  (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 GROUP, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)   Three Months Ended Six Months Ended June 30, June 30, (Dollars in millions, except per share amounts)

2023

2022

2023

2022

(unaudited) (unaudited) REVENUES: Premiums earned

$

3,251

$

2,916

$

6,352

$

5,708

Net investment income

 

357

 

226

 

617

 

469

Total net gains (losses) on investments

 

5

 

(236)

 

10

 

(390)

Other income (expense)

 

38

 

(71)

 

(42)

 

(56)

Total revenues

 

3,650

 

2,835

 

6,936

 

5,731

  CLAIMS AND EXPENSES: Incurred losses and loss adjustment expenses

 

1,960

 

1,876

 

3,927

 

3,666

Commission, brokerage, taxes and fees

 

686

 

630

 

1,347

 

1,236

Other underwriting expenses

 

205

 

170

 

405

 

331

Corporate expenses

 

17

 

15

 

36

 

29

Interest, fees and bond issue cost amortization expense

 

33

 

24

 

65

 

48

Total claims and expenses

 

2,901

 

2,715

 

5,779

 

5,310

  INCOME (LOSS) BEFORE TAXES

 

750

 

119

 

1,157

 

421

Income tax expense (benefit)

 

80

 

(4)

 

122

 

1

  NET INCOME (LOSS)

$

670

$

123

$

1,035

 

420

  Other comprehensive income (loss), net of tax: Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period

 

(169)

 

(732)

 

77

 

(1,548)

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

 

2

 

16

 

5

 

20

Total URA(D) on securities arising during the period

 

(167)

 

(717)

 

82

 

(1,528)

  Foreign currency translation adjustments

 

(1)

 

(28)

 

30

 

(62)

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

 

—

 

1

 

1

 

2

Total benefit plan net gain (loss) for the period

 

—

 

1

 

1

 

2

Total other comprehensive income (loss), net of tax

 

(168)

 

(744)

 

113

 

(1,588)

  COMPREHENSIVE INCOME (LOSS)

$

502

$

(621)

$

1,148

$

(1,168)

  EARNINGS PER COMMON SHARE: Basic

$

16.26

$

3.11

$

25.74

$

10.67

Diluted

 

16.26

 

3.11

 

25.74

 

10.67

  EVEREST GROUP, LTD. CONSOLIDATED BALANCE SHEETS   June 30, December 31, (Dollars and share amounts in millions, except par value per share)

2023

2022

(unaudited) ASSETS: Fixed maturities - available for sale, at fair value   (amortized cost: 2023, $26,372; 2022, $24,191, credit allowances: 2023, ($63); 2022, ($54))

$

24,489

$

22,236

Fixed maturities - held to maturity, at amortized cost   (fair value: 2023, $781; 2022, $821, net of credit allowances: 2023 ($8); 2022, ($9))

 

798

 

839

Equity securities, at fair value

 

259

 

281

Other invested assets

 

4,262

 

4,085

Short-term investments

 

1,675

 

1,032

Cash

 

2,067

 

1,398

Total investments and cash

 

33,550

 

29,872

Accrued investment income

 

266

 

217

Premiums receivable (net of credit allowances: 2023, ($34); 2022, ($29))

 

4,263

 

3,619

Reinsurance paid loss recoverables (net of credit allowances: 2023, ($24); 2022, ($23))

 

201

 

136

Reinsurance unpaid loss recoverables

 

2,175

 

2,105

Funds held by reinsureds

 

1,075

 

1,056

Deferred acquisition costs

 

1,086

 

962

Prepaid reinsurance premiums

 

692

 

610

Income tax asset, net

 

399

 

459

Other assets (net of credit allowances: 2023, ($7); 2022, ($5))

 

961

 

930

TOTAL ASSETS

$

44,668

$

39,966

  LIABILITIES: Reserve for losses and loss adjustment expenses

 

23,405

$

22,065

Future policy benefit reserve

 

28

 

29

Unearned premium reserve

 

5,943

 

5,147

Funds held under reinsurance treaties

 

25

 

13

Amounts due to reinsurers

 

678

 

567

Losses in course of payment

 

150

 

74

Senior notes

 

2,348

 

2,347

Long-term notes

 

218

 

218

Borrowings from FHLB

 

519

 

519

Accrued interest on debt and borrowings

 

19

 

19

Unsettled securities payable

 

21

 

1

Other liabilities

 

412

 

526

Total liabilities

 

33,766

 

31,525

  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; (2023) 74.2 and (2022) 69.9 outstanding before treasury shares

 

1

 

1

Additional paid-in capital

 

3,753

 

2,302

Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) of ($247) at 2023 and ($250) at 2022

 

(1,883)

 

(1,996)

Treasury shares, at cost; 30.8 (2023) and 30.8 shares (2022)

 

(3,908)

 

(3,908)

Retained earnings

 

12,940

 

12,042

Total shareholders' equity

 

10,902

 

8,441

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

44,668

$

39,966

  EVEREST GROUP, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS   Six Months Ended June 30, (Dollars in millions)

2023

2022

(unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)

$

1,035

$

420

Adjustments to reconcile net income to net cash provided by operating activities: Decrease (increase) in premiums receivable

 

(584)

 

(223)

Decrease (increase) in funds held by reinsureds, net

 

(5)

 

(51)

Decrease (increase) in reinsurance recoverables

 

(21)

 

(237)

Decrease (increase) in income taxes

 

56

 

(100)

Decrease (increase) in prepaid reinsurance premiums

 

(40)

 

(110)

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

 

1,142

 

1,360

Increase (decrease) in future policy benefit reserve

 

(1)

 

(2)

Increase (decrease) in unearned premiums

 

732

 

177

Increase (decrease) in amounts due to reinsurers

 

63

 

120

Increase (decrease) in losses in course of payment

 

75

 

(178)

Change in equity adjustments in limited partnerships

 

(56)

 

(157)

Distribution of limited partnership income

 

49

 

105

Change in other assets and liabilities, net

 

(292)

 

(11)

Non-cash compensation expense

 

25

 

24

Amortization of bond premium (accrual of bond discount)

 

(11)

 

35

Net (gains) losses on investments

 

(10)

 

390

Net cash provided by (used in) operating activities

 

2,158

 

1,562

  CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from fixed maturities matured/called/repaid - available for sale

 

1,137

 

1,661

Proceeds from fixed maturities sold - available for sale

 

168

 

772

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

 

61

 

—

Proceeds from equity securities sold

 

46

 

438

Distributions from other invested assets

 

133

 

205

Cost of fixed maturities acquired - available for sale

 

(3,396)

 

(4,071)

Cost of fixed maturities acquired - held to maturity

 

(15)

 

(72)

Cost of equity securities acquired

 

(3)

 

(283)

Cost of other invested assets acquired

 

(298)

 

(308)

Net change in short-term investments

 

(625)

 

878

Net change in unsettled securities transactions

 

41

 

23

Net cash provided by (used in) investing activities

 

(2,752)

 

(757)

  CASH FLOWS FROM FINANCING ACTIVITIES: Common shares issued (redeemed) during the period for share-based compensation, net of expense

 

(19)

 

(15)

Proceeds from public offering of common shares

 

1,445

 

—

Purchase of treasury shares

 

—

 

(1)

Dividends paid to shareholders

 

(136)

 

(126)

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

 

(20)

 

(17)

Net cash provided by (used in) financing activities

 

1,269

 

(159)

  EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

(7)

 

30

  Net increase (decrease) in cash

 

668

 

675

Cash, beginning of period

 

1,398

 

1,441

Cash, end of period

$

2,067

 

2,116

  SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid (recovered)

$

73

$

101

Interest paid

 

64

 

48

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230726044967/en/

Media: Dawn Lauer Chief Communications Officer 908.300.7670

Investors: Matt Rohrmann Head of Investor Relations 908.604.7343