Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Everest Group Ltd (EG, Financial) reported a strong second quarter with an annualized total shareholder return and operating return on equity of 20%.
- The company achieved a 13% growth in gross written premiums in constant dollars, excluding reinstatement premiums.
- The reinsurance business delivered excellent results with underwriting profits exceeding $300 million and a 17% growth in business on a constant dollar basis.
- The investment portfolio performed well, generating over $0.5 billion in net investment income for the quarter.
- The international insurance business is gaining traction with strong growth and attractive loss ratios, contributing positively to the overall portfolio mix.
Negative Points
- The insurance division's target combined ratio of 90% to 92% has been pushed to 2025, indicating slower-than-expected progress.
- The company faced $135 million in pre-tax catastrophe losses, impacting the combined ratio.
- Casualty premiums were slightly down due to cautious underwriting in lines not meeting standards.
- The expense ratio in the insurance segment increased due to investments in global expansion and regulatory delays.
- The company shed over $300 million in casualty renewal premiums due to unfavorable market conditions.
Q & A Highlights
Q: What factors are driving the pushback of the reported combined ratio target in insurance to 2025?
A: James Williamson, Group Chief Operating Officer, explained that the delay is due to two main factors: the need to balance the portfolio by writing more short-tailed lines and achieving scale, particularly in international markets. The company is making progress in these areas, but it will take time for the earned premium to catch up and for the international business to mature.
Q: How is Everest Group managing liability reserves for the 2020 to 2023 accident years?
A: Mark Kociancic, Group CFO, stated that the company reviews reserves quarterly and maintains prudent loss picks, especially for US casualty, due to social inflation. The company has built significant rate and underwriting actions since 2020, and the international expansion further diversifies the risk profile.
Q: How does the shift towards short-tailed businesses affect Everest's catastrophe assumptions?
A: Juan Andrade, CEO, noted that while the company is focusing on short-tailed lines, it remains within its stated risk appetite for catastrophe exposure. The shift is driven by market opportunities and expected returns, and the company continues to manage its cat risk effectively.
Q: What is the outlook for the insurance segment's top-line growth as the portfolio is reshaped?
A: James Williamson highlighted that while there is a temporary drag on net written premium due to portfolio reshaping, the company expects growth in short-tail and specialty lines, along with international expansion, to drive future growth. The focus remains on achieving a balanced mix and scale.
Q: What are the current market conditions for casualty reinsurance, particularly for pro rata and excess of loss books?
A: James Williamson explained that the casualty pro rata market is competitive with abundant capacity, leading to cautious participation. In contrast, the casualty excess of loss market is smaller, with a focus on ensuring cedents manage social inflation effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
