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Everest Re profit down on natural catastrophe losses

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Everest Re Group Ltd. reported second-quarter net income of $209.1 million, a 27.9% decrease from the same period last year, due to weather-related losses and “challenging” market conditions.

Gross written premiums totaled $1.26 billion for the quarter, down 11.3%, while the Hamilton, Bermuda-based reinsurer’s combined ratio deteriorated to 86.3% from 84.7% in the prior-year quarter, the company said Monday in a statement.

Overall, Everest Re’s results were driven by “solid underwriting” and “sizable foreign exchange gains,” Craig W. Howie, the company’s executive vice president and chief financial officer, said Tuesday during a conference call discussing the second-quarter results.

Net investment income for the quarter was $125.0 million, down 4.7% from the year-ago period.

In addition to challenging market conditions, the “tax rate jumped to 16.6%, causing some distortion relative to our first-quarter numbers,” Everest Re President and CEO Dominic J. Addesso said during the call.

Other factors contributing to the company’s results include foreign currency adjustments, catastrophes, weather-related losses that weren’t recorded as catastrophes and a marine loss, Mr. Addesso said.

For the reinsurance sector, “the reality is there’s not much margin for even the small events, let alone larger, inevitable catastrophes,” he said.

Additionally, Mr. Howie said the winter storms in the Northeast, none of which rose to the $10 million catastrophe threshold, came through in the second quarter. “We’ve totaled those numbers to be almost $90 (million) to $100 million of losses,” he noted.

“Essentially, our operating income is up on a year-to-date basis,” Mr. Addesso said. However, with first-quarter winter losses coming “to us in the second quarter … quarter results can be a little misleading.”

Everest Re also reported a year-to-date net income of $532.0 million, down 8.9% from the same period in 2014. Gross written premiums for the first half of the year totaled $2.67 billion, a 0.37% dip compared to last year.

During the question and answer portion of the call, an analyst asked Mr. Addesso how mergers and acquisitions impact the company.

“We don’t necessarily see any major impacts from the M&A activity occurring today on the reinsurance side,” he said, adding that “we feel we’re of a sufficient scale and size to maintain relevance in the market.”

When asked whether Everest Re has M&A plans of its own, Mr. Addesso replied that the company’s “natural preference is to build our own operation that matches our risk appetite, avoiding any cultural or legacy issues that could arise from an acquisition … We don’t see the value in an acquisition at this point. That doesn’t mean it won’t arise in the future, it’s just not our focus.”

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