Everest (US:EG)2022-02-10 19:57Financial Data and Key Metrics Changes - In Q4 2021, Everest reported a net income of $431 million, equating to $10.94 per diluted share, with an annualized return on equity of 17.7% [39] - For the full year 2021, net income reached $1.38 billion, or $34.62 per diluted share, with a return on equity of 14.6% [40] - The total gross written premiums for 2021 were $13 billion, with a 25% growth in Q4 compared to the same quarter the previous year [38][39] - The group combined ratio for 2021 was 97.8%, including $1.1 billion in catastrophe losses [14][45] Business Line Data and Key Metrics Changes - The reinsurance division achieved gross written premiums of $9 billion for the full year, a 25% increase over 2020, with a combined ratio of 98.1 [16][18] - The insurance division reported gross written premiums of $4 billion for the year, up 24% from 2020, with a quarterly combined ratio of 92.8 [27][30] - Underwriting profit for the reinsurance segment in Q4 was $176 million, while the insurance segment reported an underwriting profit of $52 million [17][30] Market Data and Key Metrics Changes - The company experienced strong growth in both reinsurance and insurance segments, driven by increased demand and favorable market conditions [8][27] - Rate increases were favorable across most property and casualty lines, particularly in financial lines and loss-effective property lines [20][22] Company Strategy and Development Direction - Everest aims to optimize its portfolio to drive margins and reduce volatility, focusing on disciplined underwriting and operational excellence [7][15] - The company is committed to becoming a digitally enabled organization, enhancing data analytics and technology to manage risk more effectively [10] - Everest emphasizes ESG as a core pillar of its long-term strategy, recently becoming a signatory to the UN principles for sustainable insurance [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's reserve position and expects a cat load of less than 6% for 2022, indicating reduced volatility [42][44] - The management team highlighted the importance of proactive cycle management and efficiency improvements to sustain profitability [31][33] - The company remains focused on achieving a total shareholder return of at least 13% over the strategic plan period [37][89] Other Important Information - The company ended 2021 with shareholders' equity of $10.1 billion and a financial leverage ratio of 20.2% [49][50] - Investment income for Q4 was $205 million, contributing to a total of $1.16 billion for the year [45][48] Q&A Session Summary Question: What is the ROI on incremental capital use for insurance versus reinsurance versus stock buybacks? - Management indicated that organic growth is prioritized, with ample capital available for both business expansions and share buybacks [55][56] Question: What is the outlook for ceding commissions and their impact on returns? - Management noted upward pressure on ceding commissions in the casualty market but emphasized that margins are improving overall [59][60] Question: What are the implications of recent activity in the Florida market for the industry? - Management highlighted that many companies are reassessing their exposure to volatility, which could lead to significant rate increases and opportunities for Everest [68][70] Question: How does the mix shift towards casualty impact underlying margins? - Management confirmed that the mix shift is expected to improve margins, with a focus on diversifying into non-catastrophe lines [73][75] Question: How does Everest view the revised capital model from S&P? - Management expressed confidence that the impact would be minimal, given Everest's U.S. domicile and diversified portfolio [77][79] Question: How should investors evaluate Everest's excess capital position? - Management stated that the company is in a strong position with excess capital, allowing for flexibility in growth and capital management actions [81][82] Question: What does the 13% TSR target contemplate regarding the interest rate environment? - Management indicated that the TSR target was set with forward interest rate curves in mind, and rising rates could provide additional tailwinds [85][86] Question: Is there potential for improvement in the loss ratio for reinsurance? - Management noted that while there is a prudent approach to reserving, there are indications of improvement in the underlying attritional loss ratio [92][96]