Everest (EG) - 2019 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2019, and 2018, detailing financial position, operations, and cash flows Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | $26,387,791 | $24,793,999 | | Total Liabilities | $17,503,631 | $16,890,195 | | Total Shareholders' Equity | $8,884,160 | $7,903,804 | Consolidated Statement of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Premiums Earned | $1,817,299 | $1,729,818 | $3,549,996 | $3,349,245 | | Total Revenues | $2,018,975 | $1,892,939 | $3,979,058 | $3,638,096 | | Net Income | $342,855 | $69,895 | $691,755 | $280,213 | | Diluted EPS | $8.39 | $1.70 | $16.93 | $6.81 | - Net cash provided by operating activities for the six months ended June 30, 2019, was $853.5 million, a significant increase from $132.6 million in the same period of 2018[13] - The company adopted new lease accounting guidance (ASU 2016-02) on January 1, 2019, resulting in the recognition of a right-of-use asset of $69.9 million and a lease liability of $77.3 million on the consolidated balance sheet[33] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation Management discusses the competitive insurance market, strategic expansion, and strong financial results, including increased premiums, improved combined ratio, and robust capital position - The worldwide insurance and reinsurance market remains highly competitive with ample capacity, but recent catastrophe losses in 2017 and 2018 have led to some firming in impacted markets and improvements in casualty and property lines[147][149][150] Financial Highlights (in millions) | Metric | Q2 2019 | Q2 2018 | H1 2019 | H1 2018 | | :--- | :--- | :--- | :--- | :--- | | Gross Written Premiums | $2,166.7 | $2,066.5 | $4,293.8 | $3,998.1 | | Net Income | $342.9 | $69.9 | $691.8 | $280.2 | | Combined Ratio | 89.2% | 105.1% | 88.9% | 99.4% | - Incurred losses and LAE for Q2 2019 decreased by 18.4% YoY, primarily due to a $402.2 million reduction in unfavorable development on prior years' catastrophe losses compared to 2018[166] - Shareholders' equity increased by $980.4 million to $8.9 billion at June 30, 2019, from $7.9 billion at year-end 2018, driven by net income and unrealized appreciation on investments[176][253] - The company's projected net economic loss from its largest 1-in-100-year catastrophe event was reduced to approximately 6% of shareholders' equity as of June 30, 2019, down from 10% at year-end 2018, reflecting reduced exposure and increased equity[259] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, including interest rate, equity, and foreign currency, and outlines its mitigation strategies Interest Rate Risk Sensitivity Analysis (at June 30, 2019) | Interest Rate Shift | Market/Fair Value Change (%) | After-tax Change in Unrealized Appreciation ($M) | | :--- | :--- | :--- | | -200 bps | +6.3% | +$921.5 | | -100 bps | +3.2% | +$462.0 | | +100 bps | -3.3% | -$481.4 | | +200 bps | -6.6% | -$967.8 | Equity Price Risk Sensitivity Analysis (at June 30, 2019) | Equity Price Change | After-tax Change in Fair/Market Value ($M) | | :--- | :--- | | -20% | -$150.8 | | -10% | -$75.4 | | +10% | +$75.4 | | +20% | +$150.8 | - The company mitigates foreign currency risk by generally matching the currency and duration of its assets to its corresponding operating liabilities, with primary exposures to the Canadian Dollar, Singapore Dollar, British Pound Sterling, and the Euro[286] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective[291] - There were no changes during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[291] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings and arbitrations as part of its normal business, with no other material litigation - The company is involved in routine legal proceedings and arbitrations as part of its normal business operations[292] - There is no other material litigation or arbitration involving the company[293] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's most recent Form 10-K filing have occurred - No material changes to the risk factors disclosed in the company's most recent 10-K filing have occurred[294] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's equity security repurchases during Q2 2019 and the remaining authorization under its share repurchase program Issuer Purchases of Equity Securities (Q2 2019) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - 30, 2019 | 39,440 | $214.2710 | | May 1 - 31, 2019 | 665 | $248.8245 | | June 1 - 30, 2019 | 0 | $- | - The company's share repurchase program authorizes the purchase of up to 30,000,000 shares, with 1,328,695 shares remaining available for purchase as of quarter-end[296] Item 3. Defaults Upon Senior Securities The company reports no defaults upon its senior securities during the reporting period - None[297] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[299] Item 5. Other Information The company reports no other information for this period - None[300] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including Section 302 and 906 certifications - The exhibits filed with this report include Section 302 and 906 certifications by CEO Dominic J. Addesso and CFO Craig Howie[299]