Everest Group, Ltd. · NYSE:EG
Everest — Everest Re Group — Q3 2010 Earnings Presentation
28 slides from Everest's earnings presentation, 2010
Slide 1: Investor Presentation Third Quarter 2010
… good underwriters, good partners Investor Presentation Third Quarter 2010
Slide 2: Cautionary note on forward-looking statements
Cautionary note on forward-looking statements This presentation 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 secur
Slide 3: Corporate Objectives
Corporate Objectives Everest Re Group is a worldwide multi-line reinsurance and insurance company. Our key objectives are to: Maximize book value per common share over time, and Earn a mid teens ROE over each market cycle. 3
Slide 4: Financial Highlights
Financial Highlights For the year ended December 31, ($ millions) 2005 2006 2007 2008 2009 Income Statement Data: Gross Premiums Written $ 4,108.6 $ 4,000.9 $ 4,077.6 $ 3,678.1 $ 4,129.0 Net Premiums Earned 3,963.1 3,853.2 3,997.5 3,694.3 3,894.1 Net Investment Income 522.8 629.4 682.4 565.9 547.8 O
Slide 5: Long Term Performance
Long Term Performance Demonstrates Strong Cycle Management Key Profitability Measures 5 Year 10 Year ITD 2004-2009 1999 -2009 1995-2009 Combined Ratio* 97.0% 98.1% 98.7% Pretax Operating ROR 15.1% 14.2% 14.4% Operating ROE 10.0% 11.6% 12.0% BVPS CAGR 9.3% 13.7% 12.9% Strong results despite challenge
Slide 6: Generating Shareholder Value
Generating Shareholder Value $120.00 Total Value Creation, defined as growth in book value per share + dividends, has averaged close to 15% annually over the last 10 years $100.00 1995 – 2009: 13.3% CAGR $80.00 1999 – 2009: 14.5% CAGR 2004 – 2009: 10.6% CAGR $60.00 $40.00 $20.00 $- 1995 1996 1997 19
Slide 7: Value Creation (BVPS Growth + Dividends)
Shareholder Value Creation (2002 to 2009) Risk/Return: Reinsurance Peers 25.0% Value Creation (BVPS Growth + Dividends) ACE 20.0% PRE ACGL RNR 15.0% RE AXS Reinsurer TRH Average PTP ENH 10.0% MAX MRH 5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Volatility (Standard Deviation of BVPS Growth + Dividen
Slide 8: Pretax Operating Return on Revenue
Outperformance over the Long Term 35% 30% Pretax Operating Return on Revenue 25% 20% 15% 10% 5% 0% 2009 5 Year 10 Year * Renaissance Re’s Operating ROR was 63% in 2009 8
Slide 9: Leading Business Franchise
Leading Business Franchise Strong Brand Recognition Top ratings (A+, Aa3) Experienced Management Team and Board of Directors Winning Culture – disciplined, focused on profitable growth, accountable – results oriented, flat and nimble in decision making Efficient Operating Structure – 4.2%
Slide 10: Key Strategy Drivers
Key Strategy Drivers Emphasize underwriting profitability, not volume Understand and control risks Provide top quality client service Operate efficiently and effectively Attract and retain high quality staff Maintain superior financial strength 10
Slide 11: Multiple Distribution Channels
Multiple Distribution Channels Ability to Respond to Global Opportunities Key Operating Subsidiaries are International Operations are conducted located in the United States, through London, Ireland, Toronto, Ireland and Bermuda. Brussels, Cologne, Brazil and Singapore. London Germany Canada NY & NJ
Slide 12: Experienced Management Team
Experienced Management Team Average Years of Service is 15 Years 12
Slide 13: Strategic Management of the Portfolio
Strategic Management of the Portfolio 2009 2003 US Reins US Reins 21% 23% By Segment 28% Specialty Specialty 38% Intl Intl 19% 6% 16% Bermuda Bermuda Insurance 12% 11% Insurance 26% By Line of Business Reins Property Reins Property 18% 23% 3% Reins Casualty Reins Casualty 1% 43% 57% Ins Property Ins
Slide 14: Geographical Diversity in Reinsurance Book
Geographical Diversity in Reinsurance Book Europe/UK 20% USA 46% Middle East/Africa 6% Worldwide 2% Latin America 14% Asia/Australia 7% Canada 5% 14
Slide 15: Insurance Business by Line
Insurance Business by Line E&S Casualty 6% Property 4% Nonstandard Prof Liability 9% Auto 3% MultiLine 13% Workers Comp 33% Other Liability 32% 15
Slide 16: Operating Highlights for Second Quarter
Operating Highlights for Second Quarter As of % 09/30/10 09/30/09 Change Gross Written Premiums $ 3,198.1 $ 3,100.4 3.2% Net Written Premiums 3,003.4 2,954.7 1.6% Net Investment Income 468.6 401.4 16.8% After-tax Operating Income (Loss)* 260.3 571.8 -54.5% per diluted share/(per basic share) $ 4.50
Slide 17: Balance Sheet Highlights
Balance Sheet Highlights As of % 9/30/10 12/31/09 Change Total Investments and Cash $15,487 $14,919 3.8% Total Assets 18,550 18,001 3.0% Gross Loss and LAE Reserves 9,332 8,938 4.4% Debt Senior Notes 250 450 -44.5% Long Term Notes 238 238 0.0% Junior Subordinated Debt 330 330 0.0% Shareholders’ Equi
Slide 18: Balance Sheet Strength
Balance Sheet Strength High quality/short duration investment portfolio Limited credit risk from reinsurance recoverables No goodwill or other intangible assets Catastrophe loss exposures well controlled 18
Slide 19: Investment Allocation Focused on Diversification
Investment Allocation Focused on Diversification Average Credit Quality Aa2 As of 9/30/10 Portfolio Duration 3.7 years Investments by Class Credit Quality 4% 1% 4% 2% 2% 1% 3% 9% 45% 20% 88% Fixed Equity Short-Term 21% Other Inv Cash AAA AA A BBB BB B Other 19
Slide 20: Investment Risk Balanced with Return
Investment Risk Balanced with Return Values as of 9/30/10 Impact of Interest Rate Shift in Basis Points -200 -100 0 100 200 Total Market/Fair Value $15252.6 $14785.6 $14276.4 $13697.1 $13105.9 Market/Fair Value 6.8% 3.6% 0.0% -4.1% -8.2% Change from Base (%) After-tax from Base ($) $773.2 $402.0 $ -
Slide 21: Calendar Year Reserve Development
Calendar Year Reserve Development (In Millions) Prior Year Development % of PY (10K) Calendar Beg Year Development/ Year Reserves Beg Year Asbestos Catastrophes Core Sub-Total* Translation Total per 10K Reserves 2005 6,766.9 81.4 118.6 (226.4) (26.4) (106.9) (133.3) -1.97% 2006 8,175.4 106.6 272.3 (
Slide 22: Accident Year Reserve Development
Accident Year Reserve Development Net AY Loss 10K AY Loss Catastrophe Loss Asbestos Loss Development Accident Year Development Development Development* (excl Cats/Asb) 2000 786.7 - 482.2 304.5 2001 426.3 (22.8) 449.1 2002 45.3 (6.3) 51.6 2003 (402.7) (4.1) (398.6) 2004 (361.1) 166.2 (527.4) 2005 (20
Slide 23: Capital Management Objectives
Capital Management Objectives Maintain capital at levels in excess of those required to retain ratings Target mid-teens ROE over the cycle Optimize capital structure; conservatively leverage the balance sheet Manage capital flows to/from shareholders to maintain capital efficiency/maximize v
Slide 24: Conservative Leverage and Liquidity
Conservative Leverage and Liquidity As of 9/30/10 Capitalization Liquidity Investable Assets of $15.5 Billion Cash & U.S. Govt Short Term Junior Sub- 100% Debt Mortgage/ Asset Long-Term 80% Sub-Notes Backed Senior Debt Non U.S. 60% Common 40% Equity 20% Municipal Corporate 0% Equity Debt/Total Cap
Slide 25: Efficient Capital Structure
Efficient Capital Structure (in millions) 3Q10 2009 2008 8.75% Sr. Notes due 3/15/10 - 200.0 199.8 5.4% Sr. Notes due 10/15/14 249.8 249.8 249.7 Total Senior Debt 249.8 449.7 449.5 6.6% Long Term Notes due 5/01/67 238.4 238.3 399.6 Junior Subordinated Debt Securities 329.9 329.9 329.9 Total Debt 818
Slide 26: In Summary …
In Summary … Recognized balance sheet strength – flight to quality Global franchise – expansive distribution platform Experienced management team – seasoned & opportunistic Diversified risk profile – prudent risk management Disciplined underwriting approach – profitability before growth
Slide 27: Non-GAAP Disclosure
Non-GAAP Disclosure Nine Months Ended September 30, (Dollars in thousands, except per share amounts) 2010 2009 (unaudited) Per Diluted Per Diluted Common Common Amount Share Amount Share Net income $ 308,221 $ 5.33 $ 609,762 $ 9.94 After-tax net realized capital gains/(losses) 47,930 0.83 (12,866) (
Slide 28: Everest Re Group, Ltd.
EVEREST RE GROUP, LTD. Wessex House, 45 Reid Street, 2nd Floor, P. O. Box 845, Hamilton, HM DX, Bermuda