Everest (EG) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Everest reported gross written premiums of $4.7 billion, representing a 7.2% growth in constant dollars, excluding reinstatement premiums [30] - The combined ratio was 135.5% for the quarter, including unfavorable development of prior year loss reserves of$ 1.5 billion, contributing 37.6 percentage points to the combined ratio [30][31] - Operating income for the year was $1.3 billion, achieving a 9% operating return on equity [11] Business Line Data and Key Metrics Changes - In the reinsurance segment, gross premiums grew by 12.6% in constant dollars, driven by strong increases in property pro rata and property cat XOL [33] - The combined ratio for the reinsurance segment was 90.4% in the fourth quarter, compared to 78.9% in the prior year [34] - The insurance segment saw gross premiums written decrease by 1.6% in constant dollars to$ 1.4 billion, primarily due to actions taken to shed underperforming U.S. casualty business [37] Market Data and Key Metrics Changes - The global property cat reinsurance market remains attractive for Everest, with customers preferring to do more business with the company [20] - The average modeled loss costs for European cat exposure increased by about 10%, leading to a significant reduction in the number of deals [18] Company Strategy and Development Direction - The company is focused on maintaining underwriting discipline and cedent selection, having walked away from nearly $750 million in North American casualty quota share business [15] - Everest aims to increase scale in the 12 markets it operates in, without entering additional markets this year, to achieve greater premium leverage against expenses [23] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business despite the impact of reserve strengthening, highlighting strong income streams in reinsurance and investments [11] - The company anticipates that the California wildfires will serve as a reminder for property reinsurance underwriters to maintain pricing discipline [20] Other Important Information - The company strengthened current accident year losses by$ 229 million, with total strengthening of $1.7 billion for the full year [31] - Cash flow from operations was$ 780 million during the quarter and approximately $5 billion for the full year [45] Q&A Session Summary Question: How does the company plan to manage volatility in the insurance segment? - Management emphasized diligent P&L management and strategic use of outbound reinsurance to manage risk and volatility [51][52] Question: What is the framework for capital management activities? - The company highlighted a strong financial position and a focus on achieving mid-teens total shareholder return over the cycle, with plans for share repurchases [55][56] Question: What can be expected regarding the insurance segment loss ratio progress? - Management indicated that mix improvements and prudent reserve actions will positively impact the loss ratio in 2025 [60][61] Question: Why is the medical stop-loss business being exited? - The company non-renewed a major block in the medical stop-loss business due to difficulties, and the full impact will be seen over the year [71][72] Question: How does the company view the impact of wildfires on reinsurance pricing? - Management expects the wildfires to positively impact pricing, with increased demand for coverage from clients [82] Question: What is the expected effective tax rate for 2025? - The estimated effective tax rate for the group is projected to be in the range of 17% to 18% [109] Question: How is the company managing its engagement with cedents? - The company has been consistently ensuring high-quality data from cedents and engaging in direct discussions to understand trends affecting their portfolios [102][103]