With no major catastrophe events hurting results this year, Bermuda-based Everest Re reported third-quarter net income of $245.7 million, reversing 2005′s loss for the period, and nine-month results in the black as well.
Third-quarter 2006 net was at $3.76 per share, compared with a net loss of $7.41 per share or $417.7 million, in last year's third quarter, making it the "best-ever" third-quarter result, according to Chief Financial Officer Steve Limauro.
A similar recovery for the full nine-month period resulted in another best-ever income figure of $634.5 million, $9.71 per share, and a year-to-date combined ratio of 88.6.
The company attributed good bottom-line results to strong fundamentals and a diversified portfolio of insurance and reinsurance business.
Everest executives also reported single-digit declines on the top line for quarter and nine-month periods, stressing, however, that full-year premium volume is expected to come in on par with last year.
Although a $70 million drop in gross premiums for Everest's largest segment–casualty reinsurance–was among declines that contributed a $420 million drop in third-quarter premiums overall, looking ahead to next year, Joseph Taranto, chairman and chief executive officer, said the company will remain a market leader in the segment.
"We are not shying away from casualty reinsurance business. We will still be a market leader and major writer of casualty reinsurance in 2007," he said, responding to an analyst who questioned whether casualty reinsurance market conditions would prompt Everest to reduce reinsurance premiums in favor of primary insurance.
Anticipating continuing excellent market conditions in property reinsurance, Mr. Taranto said Everest is preparing to write more on Jan. 1.
He added that concerns about market conditions on the casualty reinsurance side are not related to reinsurance industry competitors. Instead, he said that after three very profitable years, insurers are keeping more casualty business net, and are expecting to be rewarded with better terms from reinsurers for profitable business they cede away.
On the top line, the company's gross premiums fell 7 percent to $3.01 billion through nine months, and dipped 3 percent in the third quarter, falling to $1.05 billion from $1.08 billion last year.
In addition to the $70 million drop in casualty reinsurance premium, Mr. Taranto said a $30 million reduction in California workers' compensation insurance premiums, a $50 million drop in accident and health, the cancellation of a $45 million property reinsurance contract, and the absence of $50 million property reinstatement premiums contributed to the overall decline.
Offsetting these was growth in new programs in the insurance operation led by C.V. Starr, he said, noting that continued growth in such programs helped bring overall 2006 premiums about even with 2005 when the books are closed at year-end.
Contributing to Everest's best-ever bottom-line result for the third quarter was favorable reserve development of $29 million. Mr. Limauro noted, however, that $120 of reserve releases for core business were offset by $47 million of catastrophe loss development and $45 million of net asbestos development in the quarter.
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