Everest (US:EG)2024-02-08 17:26Financial Data and Key Metrics Changes - Everest Group Ltd. achieved record annual results in 2023, with annual operating income and net income both exceeding $2.5 billion, representing a 21% growth in constant dollars, ending the year at nearly $17 billion in gross written premium [15][8][47] - Operating earnings per share reached $66.39, with an operating return on equity of 23.1% and a total shareholder return of 26.5% [8][15] - Book value per share improved by 44.3% from year-end 2022, ending the quarter at $304.29, and excluding net unrealized depreciation, it stood at $320.95, a 23.8% increase [25][15] Business Line Data and Key Metrics Changes - Reinsurance gross written premiums grew by 21.9% in constant dollars, driven by double-digit increases in various property lines, with a combined ratio of 78.8%, an improvement of 8 points from the prior year [9][15] - The attritional loss ratio improved to 62.6%, primarily due to a higher proportion of short tail lines within the portfolio [10][15] - The core portfolio achieved a broad-based 12% rate increase, with particularly strong pricing in marine, commercial auto, and general liability lines [6][15] Market Data and Key Metrics Changes - Market conditions remain strong, with no significant new capacity entering the market, leading to excellent conditions for upcoming renewals [4][15] - The company capitalized on the hard market to grow in attractive lines across its businesses, particularly in Property Cat globally [14][47] Company Strategy and Development Direction - The company is focused on disciplined international strategy, expanding its insurance platform across various regions, including Latin America, the UK, and Asia Pacific [18][15] - Everest aims to drive sustainable margin expansion while distinguishing itself as a preferred lead market platform [17][15] - The company has shifted to shorter tail lines with favorable pricing and a strong profit trajectory, enhancing its underwriting guidelines and risk selection parameters [7][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong overall reserve position and the ability to manage social inflation risks effectively [57][15] - The company anticipates continued excellent market conditions for upcoming renewals throughout 2024, supported by its capital strength and underwriting diversification [47][15] - Management highlighted the importance of maintaining a disciplined approach to underwriting and risk selection to ensure profitability [46][15] Other Important Information - The company recorded a net investment income increase of over $200 million year-over-year, totaling $411 million for the quarter, driven by higher assets under management and new money yields [23][15] - Everest successfully executed a strategy to sell lower yielding bonds, resulting in after-tax realized fixed income losses of approximately $210 million, while reinvesting in higher coupon bonds [51][15] Q&A Session Summary Question: Concerns about reserve strengthening in insurance - Management clarified that the reserve adjustments were primarily related to general liability and that they have been conservative in their loss picks since 2021, ensuring confidence in the current reserve levels [28][57] Question: Sustainability of pricing and terms in the reinsurance market - Management indicated that the market remains strong due to a persistent gap between supply and demand, with no significant new capital formation, which supports the sustainability of pricing [107][15] Question: Impact of social inflation on future objectives - Management expressed confidence in achieving their objectives despite potential social inflation pressures, citing a well-diversified portfolio and prudent risk management practices [116][15]