24 April 2014 News

Everest Re enjoys growth; commits to alternative capacity

Everest Re posted strong growth but a drop in its net profits in its results for the first quarter of 2014. But its chief executive also warned on challenging market conditions and also noted that alternative reinsurance capacity is increasingly part of its strategy in both an offensive and defensive way.

The reinsurer’s gross written premiums increased by 7 percent to $1.3 billion compared with the first quarter of 2013. Worldwide, its reinsurance premiums, including its Mt. Logan Re segment, grew 12 percent, primarily, it said, driven by new growth opportunities at the January renewals. Its insurance premiums dropped by 9 percent for the quarter largely due to a premium adjustment for its crop business on lower than expected premium for the winter crop season.

The company made a net profit of $293.9 million in the quarter, a 23.5 percent drop on the $384.3 million it made in the first quarter of 2013. Its combined ratio for the period was 80 percent for the quarter compared to 80.7 percent in the first quarter of 2013. It said that excluding catastrophe losses, reinstatement premiums, and prior year development, which were minimal in both quarters, the attritional combined ratio was comparable quarter over quarter.

Dominic Addesso, the company’s chief executive, said he was pleased with the results in what he described as a challenging market. But he also highlighted the company’s strategic desire to leverage the alternative capacity available in the market. The company expects to close its first catastrophe bond very soon.

“Everest had another excellent quarter producing $281 million of after-tax operating income and a net income return on equity of 17 percent, driven by strong underwriting results with a combined ratio of 80 percent,” Addesso said. “The market is always challenging but we are continuing to find opportunities to grow premium and risk-adjusted returns, demonstrating the strength of our franchise and operating strategies.

“We expect to close shortly on our first catastrophe bonds that will provide $450 million of property-catastrophe risk coverage at very optimal pricing and terms and conditions. Alternative reinsurance capacity is increasingly part of our strategy, coming into play both offensively and defensively, as we seek ways to optimize our returns.”

He added: “During the quarter, we repurchased $250 million of our common shares and paid dividends of $35 million, the largest return of capital to shareholders in any single quarter, and yet shareholders equity held constant at $7 billion. We continue to build value for our shareholders with book value per share, adjusted for dividends, climbing 5% in the quarter.”

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