Everest Re 2003 Net Up 84 Percent

For the year 2003, Everest Re's net income was $426 million, or $7.74 per share, an increase of 84.2 percent compared to $231.3 million, or $4.52 per share, in 2002.

After-tax operating income, which excludes realized capital gains and losses, was $456 million, or $8.29 per share, increasing 73.6 percent over 2002.

Gross premiums written soared nearly 61 percent in 2003, jumping to $4.6 billion from $2.9 billion in 2002. At the same time, the group's combined ratio (computed on the basis of generally accepted accounting principles) improved to 95.2 from 99 a year earlier.

During a conference call this morning, the company reaffirmed its estimate of 2004 operating earnings at $10 to $11 per share, absent any unusual losses or market developments.

Although the earnings projection translates into a 31 percent increase in operating income, and an expected return-on-equity of 19 percent, one analyst queried Mr. Taranto on why he wasn't more optimistic, suggesting that a $12 earnings-per-share estimate might be appropriate.

"When we look back at 2003 in terms of losses, we look at it as a particularly benign year. There really were no major losses" in the property, marine or aviation segments, he said, noting that the company would necessarily expect a higher level of losses in 2004.

Reviewing market conditions for just-completed January reinsurance renewals, Mr. Taranto noted that the marketplace did see some rate declines in some pockets?mostly the short-tailed sectors like property and aviation. On the other hand, he said there was some rate improvement to report in longer-tailed casualty areas.

"When you look at the starting point and rate changes that took place, what really settled out was a market [where] overall, the business was well-rated," he said.

Mr. Taranto reported that U.S. property catastrophe reinsurance rates were down 5-10 percent. On individual large property accounts, he said, rates "were off" their peaks, falling an average of 15 percent. He added that, as a result, Everest's property facultative operation and Bermuda-based individual risk operations would be more cautious in underwriting this business.

Turning to casualty, he said rates continued to improve in 2004, more so in tougher areas like directors and officers and medical malpractice. "The rate increases were less than what we've seen in the last two or three years, but [are] still ahead of claim cost trends," coming on top of increases achieved in the last three years, he said.

He also reported that marine, aviation and accident and health reinsurance rates were off the peaks of 2003.

On the insurance side, where roughly one-half of Everest's book in 2003 was California workers' compensation, Everest started see less small-account agency business?10 percent less–in the middle of 2003, as rate hikes took the company to the position of having the highest rates in the market, Mr. Taranto reported.

Even though the company continues to get 10 percent less workers' comp business into January 2004, "we're unwilling to lower rates," he said, noting that his company has some of the best security in California. "So we'll have people pay for getting the better security," he said, adding that a growing large-account California operation may offset some of the decline.

Mr. Taranto identified casualty, international and Bermuda operations as segments where the company will look to grow in 2004 while being more cautious on medical stop loss, aviation and property. "We don't want to be caught up in looking to grow where rates are declining," he said.