The operator introduces the Second Quarter 2024 Earnings Conference Call for Everest Group Limited, with the company's executives Juan Andrade and Mark Kociancic leading the call. Matt Rohrmann, Senior Vice President and Head of Investor Relations, reminds listeners that the call will include forward-looking statements and may refer to non-GAAP financial measures. Juan Andrade, President and CEO, highlights the company's strong performance in the second quarter and first half of the year, with solid underwriting and net investment income and a 20% annualized total shareholder return and operating return on equity. The company's focus on disciplined risk selection and a well-diversified portfolio has resulted in strong results and attractive risk-adjusted returns in their reinsurance business. Their preferred lead market position is a differentiator for Everest.

The company saw strong demand for their participation on treaties and expanded their primary insurance franchise through investments in talent and capabilities. They also achieved significant financial returns and grew gross written premiums by 13%. The Group combined ratio was 90.3%, including pre-tax catastrophe losses. Overall, the company is executing their strategy with momentum and delivering on their primary objective of generating industry-leading financial returns.

In the second quarter, the company saw a good result with an improved attritional loss ratio and disciplined underwriting. The investment portfolio also performed well, generating significant income. The reinsurance business had excellent results, with underwriting profits of over $300 million and improved loss ratios. The company also had successful mid-year renewals, expanding their portfolio with top-tier cedents and securing shortfall covers at superior terms. They also achieved preferential signings and differentiated terms and conditions on property catastrophe deals.

In the second quarter, the business grew by 17% on a constant dollar basis, with significant growth in the property pro rata book due to favorable market conditions. The casualty book remains disciplined, with premiums growing primarily due to rate increases rather than exposure growth. The company has shed over $300 million in casualty renewal premiums this year, focusing on maintaining a high-quality book. The outlook for 2025 is positive. In the insurance segment, there was 6% growth in constant dollars, driven by increases in property short tail and specialty lines, with international business gaining traction. This was partially offset by caution in casualty and the exit of the Medical Stop Loss business. The company remains prudent in less attractive lines, such as directors and officers liability, workers compensation, and other casualty lines affected by social inflation.

The company has achieved rate acceleration and a decrease in loss trend in various casualty lines. They have set a goal of a 90-92% combined ratio for insurance and are confident in achieving it by 2025. To reach this goal, they must create a more balanced mix of business, increase scale in international markets, and navigate the underwriting environment. They have seen growth in short-tail and specialty lines and are ramping up operations in new international markets.

The progress made by Everest in the second quarter was partially offset by underwriting discipline, resulting in a decrease in earned premium. The company is focused on managing the complex risk environment and is achieving increased rates while reducing writings in certain areas. The reinsurance segment exceeded expectations while the insurance platform is being strengthened. Everest is well positioned for continued growth. The company had a strong second quarter, with significant growth in operating income, net income, and net investment income, resulting in an operating earnings per share of $16.85 and an operating ROE and annualized total shareholder return of approximately 20%.

The reinsurance division of Everest had a successful quarter with strong results in both top and bottom-line performance. The insurance division also showed progress in key international markets. The Group reported a 12.8% growth in gross written premiums, with a combined ratio of 90.3%. The attritional loss ratio improved by 70 basis points, driven by both segments. The reinsurance segment saw a 16.5% growth in gross written premiums, with strong growth in property and specialty lines. There was a shift towards property and short tail lines, which now make up 56% of written premiums.

The net earned premium mix for the quarter was 51% property and 49% casualty. The attritional combined ratio and loss ratio improved, driven by more favorable rates and terms in property and specialty lines. Gross written premiums for insurance grew by 6% in constant dollars, with a focus on scaling the primary franchise globally and targeting profitable lines of business in North America. The company is taking a conservative approach in casualty lines and is actively reducing certain lines such as Medical Stop Loss. While some casualty lines saw significant rate increases, the company is focused on risk selection and maintaining prudent cycle and portfolio management.

The company's actions to shift their mix have resulted in a 70 basis point improvement in the attritional loss ratio. They remain cautious with their loss picks due to the current risk environment. The commission ratio remained consistent, but the underwriting-related expense ratio increased due to investments in their global platform and delays in new geographies. They expect the expense ratio to decrease over time. The combined ratio for the segment increased due to the lag in expected earned premium. However, the company has a clear path to achieving their insurance combined ratio objective by 2025. They expect to have a 93-94% insurance combined ratio quarterly run rate for the rest of 2024. The reinsurance segment is performing well and market conditions are favorable. Net investment income also increased significantly due to higher assets under management, new money yields, and strong performance from alternative assets.

In the second quarter of 2024, alternative assets generated $124 million in net investment income, with an overall book yield of 4.8%. The company's investment portfolio has a short asset duration of 3.4 years and is positioned for strong returns. The operating income tax rate was 13%, and the company has ample capital for profitable growth and share repurchases. Net after-tax unrealized losses on available-for-sale fixed income portfolio increased by $60 million due to interest rate increases. Cash flow from operations was $1.3 billion. Book value per share increased by 8.9% from the end of 2023, and excluding net unrealized depreciation, it increased by 8.8%.

The company's net debt leverage has decreased slightly compared to previous quarters. The CEO believes that the company had an excellent first half of the year and has a strong financial position. The call was opened for questions and the first question was about the reported combined ratio target being pushed back to 2025. The CEO explains that this is due to a need to balance the portfolio and focus on writing more short-tailed lines. The company has made progress in this area, but needs to continue to do so.

The company's international business is contributing to a portfolio shift, and the company expects to continue growing in all areas. The company has invested in new offices, which will eventually lead to a lower expense ratio as earned premium catches up. The company expects to see a decrease in both the loss ratio and expense ratio due to these actions. There has also been a focus on liability reserves for future accident years.

Mark Kociancic, the speaker, is providing an update on the company's reserves for 2020 through 2023. He states that the company reviews its reserves quarterly and has set prudent loss picks, particularly for U.S. casualty. He mentions that the company expects a stable and elevated loss trend due to social inflation. However, the company has been able to build significant rate, limit reductions, and diversify its book since 2020. The company is also benefiting from its international expansion. Overall, the company's picks are holding, with no major changes in the first half of the year. The questioner, Yaron Kinar, thanks the speaker and moves on to the next question.

During a call, Juan Andrade discusses how the company is shifting their portfolio towards shorter term and cat property exposures. He emphasizes the company's culture of being nimble and opportunistic in order to identify high return opportunities. Despite a moderation in property pricing, the expected returns are still strong. The company's cat appetite remains unchanged and they continue to focus on the biggest margin opportunities globally. Jim Williamson adds that the company is well within their stated risk metrics, giving them flexibility to deploy more capacity where they see great opportunities.

In the second quarter, the company saw strong growth in reinsurance and insurance, with a focus on non-peak zones and careful selection of attachment points in large programs to avoid excessive cat losses. The net written premium growth has been lower due to a change in the portfolio and a focus on lines of business with lower net-to-gross retention. The company remains confident in its growth trajectory and does not anticipate any changes to its assumptions around cat load.

The company expects a slight drag on net written premiums for the next few quarters due to changes in their hedging strategy and their cautious approach to casualty lines. However, they are confident that they will reach their target of a 90-92% combined ratio through growth in first party and specialty lines, as well as expansion of their international business. For the remainder of the next two quarters, the combined ratio is expected to be 93-94%.

The speaker discusses the elevated expense ratio and the mix of business earned premium dynamic that is expected to persist for a few more quarters. They anticipate reaching a 90-92% range in the back-half of 2025. The loss trend is high single-digits and the rate is 10% excluding workers' comp and financial lines. Including those lines, the rate is stable at 6-7%. The speaker also mentions a target combined ratio for insurance.

In response to a question about the company's mix of business, Jim Williamson explains that their views on the loss ratios have not changed, but the speed at which the mix is shifting has affected their results. The delay in getting international offices approved for operation has also impacted the mix shift, but they expect to see improved results in the second half of the year. Juan Andrade adds that the international business is growing with attractive loss ratios in the 50s.

The speaker discusses the positive impact of business growth on insurance and the strategy for international expansion. They also mention the lower level of social inflation in other countries compared to the US, making it a favorable market for growth. The questioner asks about the expected cat load for the remainder of the year and the speaker confirms that it is an average estimate.

The speaker explains that although cat is a small part of the primary segment, they have effectively managed cat risk. The expansion into international markets is focused on upper middle market and large account business, where there is a competitive advantage based on service and risk expertise. This market is different from small commercial and consumer lines, and the risk managers value the underwriting acumen and expertise of the team. The speaker adds that there are two important factors to consider in this expansion.

The speaker discusses the reasons for the improved attritional loss ratio in insurance, including the company's ability to attract top talent in local markets and closely monitor performance. They also mention a shift in mix towards shorter-tail lines and international markets, which has contributed to the improvement.

The speaker discusses how the overall attritional loss ratio will be impacted by a change in mix and loss pick selection. They then shift to discussing the differences between casualty pro rata and excess of loss books, noting that the former is more competitive due to an abundance of capacity and the need for a reduction in ceding commissions. The latter is a smaller portion of their portfolio, and the main concern is managing social inflation.

The speaker is discussing Everest's growth in the reinsurance Property Cat XOL sector, which has seen a 30% growth year-over-year in the second quarter. They attribute this success to their lead market position and the opportunities presented by the current hard market. The speaker also mentions an accounting phenomenon that will normalize by the end of the year.

The market for reinsurers has been uncertain and there has been a lot of bad behavior. Everest has been praised for being constructive and putting capacity to work. This has earned them a good reputation and a lead market position. They are often the first choice for customers looking for new capacity. This has also led to benefits in terms of pricing and terms and conditions. They are also seeing strong returns on capital and their terms and conditions have remained strong.

The speaker discusses the company's attachment points, which are not moving and help to avoid attritional cat losses. They attribute their strong results to execution and a favorable market. In response to a question, they clarify that they have shed some casualty programs business due to unfavorable economics, but overall the book has still seen growth. They are being cautious in casualty and focusing on areas with better margins, such as specialty lines and short-tailed property lines.

Juan Andrade discusses the potential for new market entries in the insurance industry, specifically mentioning Italy as a near-term target. He also mentions a pause in new market entries after Italy to focus on existing markets. The conference call concludes with Juan Andrade thanking everyone for their questions and support of Everest.

This summary was generated with AI and may contain some inaccuracies.