24 July 2020News

Everest Re anticipates positive Q2 despite $160m of COVID losses

Everest Re Group has said it anticipates reporting another profitable quarter in Q2, 2020, with positive underwriting income and growth despite the challenges of the ongoing COVID-19 crisis. But it also stressed that the pandemic could have a meaningful impact on revenue in the future.

The Bermuda company provided details in advance of its full quarterly earnings to be released on August 5, 2020.

It stressed there remain “significant uncertainties surrounding the ultimate number of claims and scope of loss resulting from the Pandemic” and said its estimates are based on best available information obtained to date from a review of relevant in-force contracts with potential exposure and estimates of reinsurance recoverables, and also from the company’s clients and brokers.

“Given the uncertain and evolving nature of the Pandemic, actual ultimate losses from these events may vary materially from these current estimates. Everest anticipates this Pandemic could have a meaningful impact on revenue, as well as net and operating income in future quarters as a result of reinsurance and insurance claims due to the Pandemic and resulting macro-economic market conditions.”

Its estimates for the second quarter, however, are positive. It said it expects to report net investment income of $38 million pre-tax. Since Everest reports most limited partnership income on a one quarter lag, the global equity market downturn in the first quarter of 2020 is reflected in its second quarter results. In turn, the improvement in global equity markets during the second quarter will be reflected in increased limited partnership investment income in its third quarter results.

It said it anticipates pre-tax net catastrophe losses in the amount of $15 million arising from claims related to civil unrest in the US, all within its insurance segment.

And it estimates that pre-tax net pandemic losses will be in the amount of $160 million. Of this, $130 million is allocated to the company’s reinsurance segment and $30 million to the insurance segment.

“Due to the ongoing nature of this unprecedented event, these losses are substantially classified as incurred but not reported (IBNR) and primarily arise from policies covering event cancellation and postponement, business interruption and workers’ compensation, and include a provision for loss adjustment expenses,” the company said.

“The second quarter estimate follows an updated and thorough review of existing and potential exposures. Everest continues to evaluate all aspects of our global portfolio. The Pandemic estimate does not account for legal, regulatory or legislative intervention that could retroactively mandate or expand coverage provisions. This amount is in addition to the $150 million of IBNR reported in the first quarter of 2020.”