Everest Re Group’s (RE) fourth quarter earnings of $3.19 per share missed the Zacks Consensus Estimate of $3.38. The miss was primarily due to an increase in claims expenses.
However, the results were better compared to the prior-year quarter when the company had reported earnings of $2.92 per share. The increase was primarily driven by higher revenues and a mild catastrophe season.
Including realized capital gains and losses, Everest reported net income of $197.2 million or $3.28 per share, compared to a net loss of $16.6 million or 27 cents per share in the year-ago period. Results in the prior-year quarter had been hurt by higher capital losses.
For the full year 2009, Everest reported operating earnings of $12.51 per share, up from $9.10 per share reported a year earlier. Including realized capital gains and losses and the gain on the first quarter’s debt repurchase, the company reported net income of $807.0 million or $13.22 per share, compared to a net loss of $18.8 million or 30 cents per share for 2008.
For the quarter, gross written premiums were $1.0 billion, up 15% from the prior-year quarter. While reinsurance premiums increased 16%, insurance premiums were up 10% from the prior-year quarter. Much of the business was driven by the company’s international business.
Net investment income was $146.4 million, significantly up from $75.4 million in the prior-year period. While the results in the quarter included positive impact from limited partnerships, the company incurred significant losses from limited partnerships in the prior-year period.
After-tax net realized capital gains totaled $5.3 million, compared to after-tax net realized capital losses of $196.1 million in the same period last year. The prior-quarter loss resulted from realized losses from the equity portfolio during the period.
Total claims and expenses increased to $961.8 million from $777.8 million in the year-ago period. The combined ratio deteriorated to 91.7% from 83.5% in the year-ago quarter.
Annualized after-tax operating income return on average adjusted shareholders’ equity was 14.0% in 2009 compared to 10.5% in 2008. Book value per share increased 27% to $102.87 as of Dec 30, 2009, from $80.77 at year-end 2008, benefiting from improved earnings and the financial market recovery.
Everest repurchased approximately 2.4 million shares for the full-year 2009 (1.2 million for the quarter) at a total cost of $190.6 million and an average price of $80.65. The company has a remaining capacity of 3.5 million shares under its current authorization.
A strong capital position, solid diversification of product lines, geography and distribution and strong financial strength ratings give Everest a distinctive advantage over its peers. Going forward, we expect an improvement within the insurance and reinsurance rates, terms and conditions, though the current economic stress will restrict significant top-line growth for the company.
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