Everest Re Group reported that, despite previously unrevealed additional after-tax losses of $50 million from last year's hurricanes, it had first-quarter net income of $168.4 million, a slight boost over last year.

The first-quarter income figure for the Hamilton, Bermuda-based firm, equivalent to $2.57 per share, was a little less than 1 percent higher than last year's first-quarter income amount, $167.1 million, or $2.93 per share.

During a conference call yesterday, analysts expressed surprise that Everest management chose not to disclose the $50 million in hurricane losses development earlier. But executives said they had only recently made the decision to boost loss estimates, and characterized the addition as a typical outcome of assembling–and making high-level judgments about–vast amounts of underlying data in the months following storms.

Stephen Limauro, Everest's chief financial officer, said: “At the end of the day we look at our 15.7 percent annualized return-on-equity, and we had a very solid quarter….We would contrast that with the [late] quarters of last year and 2004, when we were talking about significant movement in [analysts'] expectations and really needing to get out information with respect to the implications” of the catastrophes.

Mr. Limauro said that loss additions were principally for Hurricanes Wilma and Rita, with Katrina. Some development came from marine and energy business, where Everest saw some losses begin to invade high layers of coverage. And there was some movement in losses emerging from Mexico, “where the loss adjustment process was…overwhelmed by Wilma,” he said.

Executives characterized the overall adjustment as minor, noting that it represented about 5 percent of last year's overall hurricane losses.

Although Everest reported a combined ratio more than 5 points less than break-even at 94.5 (with 6.9 points related to the hurricane development), analysts who zoned in on the top line, rather than underwriting profits, were also disappointed.

Asked whether a prediction for double-digit growth in 2006 made earlier this year when Everest reported fourth-quarter 2005 results would still hold, Everest's chief executive officer, Joseph Taranto, said, “Probably not.”

“Two items that affected us in the first quarter will impact the second quarter in our insurance operations,” he said, referring to declines in workers' compensation premiums and premiums related to a credit insurance program.

Declines in those two areas pushed gross written premiums for Everest U.S. insurance segment down 21 percent. Premiums grew 8 percent for worldwide reinsurance, helping to bring total gross premiums for the group up 1 percent to roughly $1.1 billion.

Although he put a damper on analysts' hopes for full-year premium growth above 10 percent, Mr. Taranto said, “I'm still bullish on the second half of the year,” pointing to several new programs that he said should “propel growth.”

In particular, he said that Everest will be the beneficiary of the rift between American International Group and a specialty agency of C.V. Starr (which is headed up by Maurice Greenberg, the former American International Group chairman), with Everest signing on to accept roughly $250 million in contractors liability and public entity liability business in California.

In addition, Mr. Taranto said, a separate program for contractors in New York will add $100 million in premiums. And, in June, Everest will start writing property insurance for small commercial risks on an excess and surplus lines basis, where “brokers have a crying need for someone to come into the vacuum that's been created.”

During the call, Mr. Limauro noted that Everest is remixing its business on the property side. If a replay of the 2005 loss events occurred in 2006, he said Everest's losses “would be down appreciably–on the order of half what they were” last year.

Special Reports /

Everest Re Income Flat For Quarter

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