Everest (US:EG)2022-10-27 21:42Financial Data and Key Metrics Changes - In Q3 2022, Everest reported gross written premiums of $3.7 billion, representing a 6% growth in constant dollars [36] - The combined ratio for the group was 112%, which includes 27.4 points of losses from natural catastrophes, primarily Hurricane Ian [36] - The group attritional loss ratio improved to 60.2%, a 70 basis point improvement year-over-year [39] - Operating loss was reported at $5.28 per diluted share for Q3, while year-to-date operating income stood at $14.91 per diluted share [33] Business Line Data and Key Metrics Changes - Reinsurance gross written premiums increased by 3.4% to $2.6 billion in constant dollars, with a combined ratio of 115% [40] - The attritional loss ratio for Reinsurance improved by 1.1 points to 59.1% [40] - Insurance gross written premiums grew by 13.1% to $1.1 billion, with a combined ratio of 103.5% [42] - The attritional combined ratio for the Insurance division reached 89.8%, marking a historic low [30] Market Data and Key Metrics Changes - The company experienced a flight to quality, growing with core clients and expanding opportunities across their portfolios [18] - The global casualty and professional lines book in Reinsurance saw a 16% growth, while the property book was down 8% due to strategic reductions [17] - The company expects the property market to be dislocated, particularly in property cat, due to recent losses and economic inflation [21] Company Strategy and Development Direction - Everest's strategy focuses on hardening the portfolio and achieving better risk-adjusted returns while managing volatility [6][57] - The company aims to continue diversifying its portfolio and expanding internationally, with new operations in France and Germany [31] - The management emphasizes the importance of underwriting discipline and risk selection to sustain and increase margins [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities in 2023, particularly in the property cat market post-Ian [55] - The company is well-positioned to capitalize on favorable pricing trends and improving terms and conditions in the casualty reinsurance market [92] - Management highlighted the importance of maintaining a strong balance sheet and client relationships to navigate the current market environment [56] Other Important Information - The company reported net investment income of $151 million for the quarter, driven by stronger fixed income returns [15] - Operating cash flow for the quarter was strong at $1.1 billion, with year-to-date cash flow at $2.7 billion [47] - Book value per share ended the quarter at $195.27, with unrealized losses in the fixed income portfolio amounting to approximately $2.2 billion [48][49] Q&A Session Summary Question: How does Everest plan to participate in the dislocated property cat market? - Management indicated a willingness to grow in the property cat market, contingent on favorable rate movements and maintaining risk management practices [52][56] Question: What are the potential recoveries from Hurricane Ian? - Management discussed the potential for significant downside protection through cat bonds, with recovery starting at a $48 billion industry loss threshold [68][70] Question: How does Everest view the casualty reinsurance market? - Management expressed confidence in the casualty reinsurance market, expecting stable to improving terms and conditions, which will allow for additional capacity deployment [92] Question: What is the impact of the ILS market on Everest's reinsurance purchasing? - Management clarified that Everest is not reliant on the ILS market for capacity deployment, allowing for strategic flexibility [97][99] Question: What is the outlook for the investment portfolio? - Management noted opportunities to recognize investment losses to redeploy into higher yield investments, while also considering the strength of operating cash flow [101][102]