Everest Re misses as Q4 catastrophes bite

Everest Re reported an after-tax operating loss per common share of $5.89 in 2018’s fourth quarter after taking a $875mn hit from catastrophes during the period, net of reinsurance and reinstatement premiums.

The result was a miss versus the after-tax operating loss per share of $5.31 estimated by 13 analysts as compiled by MarketWatch. In the fourth quarter of 2017, Everest Re reported an after-tax operating profit of $12.98 per diluted common share. 

On underwriting, the company reported a combined ratio of 134.1 percent for the fourth quarter of 2018, up 64.1 percentage points year-on-year.

Excluding catastrophe losses, reinstatement premiums and favourable prior-period loss development, Everest Re’s fourth quarter 2018 combined ratio was 90.4 percent, up from the 83.7 percent in the same three months in 2017.  

The reinsurer suffered $875mn of catastrophe losses, net of reinsurance and reinstatement premiums, in the fourth quarter of 2018. This is in line with its previously announced forecast that its fourth quarter 2018 numbers would include $695mn of catastrophe losses, net of reinsurance, reinstatements and taxes.

The losses were primarily related to Hurricane Michael, the California Camp and Woolsey wildfires, and an Australia hailstorm event.

In 2017’s fourth quarter, Everest Re faced $161.5mn of catastrophe claims. 

On the top line, Everest Re reported gross written premium of $2.3bn for 2018’s fourth quarter, up 18 percent year on year. As the company explained, worldwide reinsurance premiums increased by 26 percent compared with 2017’s fourth quarter to $1.7bn owing to growth across each of its business segments, “including increased casualty and property pro-rata premium, increased shares on existing business and profitable new growth”. 

The firm reported net investment income of $140.2mn in 2018’s fourth quarter, down $8.9mn compared with the prior year period. 

Book value per share was $194.43 at 31 December, 2018, down from $204.95 at the same point in the previous year. 

“During 2018 there were nearly $90bn of insured industry losses, the fourth highest on record,” said Dominic Addesso, Everest Re’s president and chief executive officer. 

“Despite these events, Everest had both positive net income and operating income for the year. This result is testament to the diversification of our business across geographies, classes of business, and sources of capital. Everest’s long-term returns remain impressive, with five and 10 year average returns on equity still in excess of 10 percent.”

The release of Everest Re’s fourth quarter 2018 results come just over a month after the company revealed Addesso would be retiring at the end of this year after over a decade of success with the company.

Addesso, who has spent almost 40 years in the (re)insurance industry, has served as Everest Re’s CEO since 1 January 2014 when he succeeded Taranto in the role. He has been the company’s president since the middle of June 2011.

“Dom has done a great job of growing Everest and positioning us for the future. We are thankful for his continued leadership,” said Joseph Taranto, the chairman of Everest Re’s board, when news of Addesso's retirement was made.

Addesso first joined the Everest Re group of businesses in May 2009 as executive vice president and chief financial officer, replacing Craig Eisenacher who had himself retired.

He joined Everest Re from Munich Re America where his last role had been as president for the firm’s regional clients division. Before joining Munich Re America in 1997, Addesso served Selective Insurance Group as its CFO.

An earlier version of this article incorrectly stated that Everest Re's 2018 fourth quarter results included catastrophe losses that were higher than previously announced. We would like to clarify that is not the case and they were in fact in line with the original announcement.