The Bermuda-based Everest Re Group, Ltd. reported fourth quarter 2007 after-tax operating income, which excludes realized capital gains and losses, of $63.2 million, or $1.00 per diluted share, compared to after-tax operating income of $201.2 million, or $3.07 per diluted share, in the fourth quarter of 2006.
Net income, which includes net realized capital gains and losses, was $12.2 million, or 19 cents per diluted share, for the fourth quarter of 2007 compared to $206.4 million or $3.15 per diluted share for the same period last year.
For the year ended December 31, 2007, after-tax operating income was $776.9 million, or $12.21 per diluted share, compared to $817.9 million, or $12.52 per diluted share for 2006. Net income, including net realized capital gains and losses, was $839.3 million for the full year 2007, just below the $840.8 million reported for 2006. However the announcement indicated that on a per diluted share basis, net income was $13.19, an increase of 2.5 percent from $12.87 per diluted share reported for 2006.
Operating highlights for the fourth quarter and full year 2007 included the following:
— Gross written premiums were $1.1 billion, a 6.4 percent increase compared to $987.3 million in the fourth quarter of 2006. The Company assumed, effective December 31, 2007, the unearned premium on a newly incepted program which resulted in a 37 percent increase in the U.S. Insurance segment’s gross written premiums and drove the overall increase in writings for the quarter. Otherwise, the quarter’ s gross written premiums were approximately equal to last year’ s fourth quarter.
— Net investment income was down 5 percent to $174.1 million compared to $183.5 million for the fourth quarter of 2006. The reduction was largely driven by lower income from limited partnership investments.
— Cash flow from operations was $235.7 million for the period compared to $142.1 million for the fourth quarter of 2006. Lower catastrophe loss payouts in the current quarter of $87.9 million compared to $188.4 million in the fourth quarter of 2006 contributed to this positive swing.
— The GAAP combined ratio in the fourth quarter was 108.4 percent compared to 92.9 percent in the same period last year. The Company experienced net adverse development on its prior accident year loss reserves of $211.6 million in the quarter, which increased the combined ratio by 21 points and included the previously announced net asbestos reserve strengthening of $311.2 million, following the completion of its study. In addition, the Company experienced $99.6 million of favorable development on its core reserves, excluding mass action.
— For the year, the after-tax operating income return on average adjusted shareholders’ equity 2 was 14.6 percent compared to 18.7 percent in 2006.
— Shareholders’ equity grew from $5.1 billion to $5.7 billion during 2007, after share repurchases of $241.6 million and dividend payouts of $121.4 million. Book value per share grew 15.2 percent from $78.53 at year end 2006 to $90.43 at December 31, 2007.
Since year end 2006, the Company has repurchased 2.5 million of its common shares at an average price of $95.57. The total cost of the repurchased shares is $241.6 million. The repurchases were made pursuant to a 5 million share repurchase authorization provided by the Company’ s Board of Directors, leaving 2.5 million shares available under the authorization.
Chairman and CEO Joseph V. Taranto called the year’s results “exceptional,” indicating that the Company had “net income in excess of $800 million, which provided a return on shareholders’ equity of 16 percent and book value growth per share of 15 percent. This was accomplished while strengthening our balance sheet and returning capital to shareholders. As we look at 2008, we feel extremely well positioned to deal with any challenges that the market may bring.”
For further information and a replay of the earnings conference call go to: the Company’s web site at: www.everestre.com or at at www.streetevents.com.
Source: Everest Re
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