Everest (US:EG)2021-05-09 16:00PART I FINANCIAL INFORMATION Item 1. Financial Statements The unaudited consolidated financial statements for Q1 2021 show net income surged to $341.9 million, total assets grew to $33.6 billion, and shareholders' equity slightly decreased Consolidated Balance Sheets As of March 31, 2021, total assets increased to $33.6 billion, total liabilities rose to $23.9 billion, and shareholders' equity slightly decreased to $9.68 billion Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $33,595,352 | $32,788,357 | | Total investments and cash | $25,940,804 | $25,461,591 | | Total Liabilities | $23,912,470 | $23,062,181 | | Reserve for losses and loss adjustment expenses | $17,090,644 | $16,398,997 | | Total Shareholders' Equity | $9,682,882 | $9,726,176 | Consolidated Statements of Operations For Q1 2021, net income significantly increased to $341.9 million, driven by a 38% rise in total revenues to $2.74 billion and a shift to net realized capital gains Statement of Operations Summary (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Total Revenues | $2,743,773 | $1,982,016 | | Premiums earned | $2,387,865 | $2,036,814 | | Net investment income | $260,413 | $147,800 | | Net realized capital gains (losses) | $38,902 | $(210,588) | | Total Claims and Expenses | $2,370,678 | $2,025,638 | | Income (Loss) Before Taxes | $373,095 | $(43,622) | | Net Income (Loss) | $341,862 | $16,612 | | Diluted Earnings Per Share | $8.52 | $0.41 | Consolidated Statements of Cash Flows For Q1 2021, operating cash flow was strong at $904.4 million, investing activities used $455.5 million, and financing activities used $108.9 million, increasing cash by $331.0 million Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $904,366 | $505,989 | | Net cash used in investing activities | $(455,521) | $(258,181) | | Net cash used in financing activities | $(108,864) | $(241,050) | | Net increase (decrease) in cash | $331,009 | $9,590 | | Cash, end of period | $1,132,660 | $817,626 | Notes to Consolidated Interim Financial Statements The notes detail accounting policies, showing a $20.4 billion fixed maturity portfolio, $17.1 billion in loss reserves, over $1 billion in credit facilities, and significant reinsurance agreements - The investment portfolio of available-for-sale fixed maturity securities increased to a market value of $20.4 billion as of March 31, 2021, up from $20.0 billion at year-end 202035 - Gross reserves for losses and loss adjustment expenses (LAE) increased to $17.1 billion at the end of Q1 2021 from $16.4 billion at the end of 2020. The increase was primarily due to a $240 million increase in catastrophe losses and growth in premiums earned54 - The company utilizes several collateralized reinsurance agreements with Kilimanjaro, financed by catastrophe bonds, to cover named storm and earthquake events. New agreements were entered into in April 2021 for multi-year coverage101102106 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation Management attributes strong Q1 2021 results to growth in both segments, with gross written premiums up 14.0%, net income surging to $341.9 million, and a combined ratio of 98.1% Financial Highlights Q1 2021 vs Q1 2020 (in millions) | Metric | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Gross Written Premiums | $2,931.4 | $2,570.9 | 14.0% | | Premiums Earned | $2,387.9 | $2,036.8 | 17.2% | | Net Investment Income | $260.4 | $147.8 | 76.2% | | Net Income (Loss) | $341.9 | $16.6 | NM | | Combined Ratio | 98.1% | 98.6% | (0.5) pts | - Gross written premiums increased by 14.0% YoY, driven by a 15.8% increase in the reinsurance business and a 10.0% increase in the insurance business145 - The company recorded $270.0 million in current year catastrophe losses for Q1 2021, primarily from the Texas winter storms ($260.0 million) and Australia floods ($10.0 million). This is a significant increase from the $30.0 million in catastrophe losses in Q1 2020152 Segment Results Both segments showed strong premium growth, with Reinsurance gross written premiums up 15.8% to $2.1 billion and Insurance up 10.0% to $872.4 million, improving its combined ratio Reinsurance Segment Underwriting Results (in millions) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Gross Written Premiums | $2,059.0 | $1,777.8 | | Premiums Earned | $1,777.5 | $1,485.2 | | Underwriting Gain | $44.8 | $50.1 | | Combined Ratio | 97.5% | 96.6% | Insurance Segment Underwriting Results (in millions) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Gross Written Premiums | $872.4 | $793.1 | | Premiums Earned | $610.4 | $551.6 | | Underwriting Gain (Loss) | $0.4 | $(21.5) | | Combined Ratio | 99.9% | 103.9% | Financial Condition and Liquidity The company maintains a robust financial condition with $25.9 billion in cash and invested assets, strong liquidity from $904.4 million operating cash flow, and capital levels above regulatory requirements - Shareholders' equity decreased slightly from $9,726.2 million at year-end 2020 to $9,682.9 million at March 31, 2021. The decrease was driven by $292.3 million of unrealized investment depreciation and $62.2 million in dividends, which offset the $341.9 million of net income214 - The company's capital management strategy included repurchasing 97,462 shares for $23.5 million and paying $62.2 million in dividends during Q1 2021221 - The company maintains strong liquidity with $1.96 billion in cash and short-term investments, positive operating cash flow of $904.4 million for the quarter, and access to multiple credit facilities225227229 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate, equity price, and foreign currency risks, with a $21.2 billion fixed maturity portfolio sensitive to rate changes and a $1.4 billion equity portfolio exposed to price fluctuations Interest Rate Sensitivity on Fixed Maturity Portfolio (in millions) | Interest Rate Change | Market/Fair Value Change from Base (%) | Change in After-tax Unrealized Appreciation ($) | | :--- | :--- | :--- | | -100 bps | +3.4% | +$640.2 | | +100 bps | -3.4% | -$640.2 | Equity Price Risk Sensitivity (in millions) | Equity Price Change | Fair/Market Value of Equity Portfolio | After-tax Change in Fair/Market Value | | :--- | :--- | :--- | | -10% | $1,260.6 | $(113.8) | | +10% | $1,540.7 | $113.8 | Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective253 PART II OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine lawsuits and arbitrations related to its insurance and reinsurance business, with no other material litigation - The company is involved in routine litigation and arbitration related to its insurance and reinsurance agreements but is not a party to any other material litigation254255 Item 1A. Risk Factors No material changes to the company's previously disclosed risk factors were reported for the period - No material changes to risk factors were reported for the period256 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2021, the company repurchased 97,462 of its own shares as part of its publicly announced share repurchase program Issuer Purchases of Equity Securities (Q1 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - 31, 2021 | - | - | | Feb 1 - 28, 2021 | 4,100 | $241.4919 | | Mar 1 - 31, 2021 | 93,362 | $241.7088 | | Total | 97,462 | N/A |