Everest continues to expand in property lines, sees cat pricing up over 45%

Bermuda-based Everest Group’s Q4 2023 results show that the re/insurer continued to expand in property catastrophe risks in the hard market environment, with the firm highlighting a successful January 1 renewals in which it was able to fully deploy remaining capital raised in the second quarter.

Everest raised $1.5 billion in May 2023 to take advantage of favourable reinsurance market conditions and expand its book into existing lines of business.

Reporting its end of year results, the company reveals that with the completion of the 1/1 reinsurance renewals, it was able to fully deploy the remaining capital raised, as well as optimise its hedging strategy.

“Everest has entered 2024 stronger and better positioned to take advantage of market opportunities in both franchises. This is evidenced by another well-executed and outstanding January 1 reinsurance renewal and improved primary pricing, generating excellent outcomes for our global portfolio,” said Juan Andrade, President and CEO.

Group-wide, gross written premiums (GWP) increased 18.8% in Q4 2023 to more than $4.3 billion, as net written premiums (NWP) rose more than 20% to $3.9 billion when compared with the prior year quarter, driven by growth in both its insurance and reinsurance segments.

Within the reinsurance arm, Q4 GWP grew 22.6% year-on-year to $2.9 billion, with Everest reporting strong growth in property.

In fact, quarterly reinsurance premium growth was driven by 39.2% growth in property pro-rata, 23.3% growth in property catastrophe excess of loss (XoL), and 45.2% growth in property non-catastrophe XoL, when adjusting for reinstatement premiums, with the firm highlighting pricing increases and a continued flight to quality.

The robust pricing momentum persisted in the fourth quarter of 2023, says Everest, with catastrophe pricing up over 45% with improved terms and conditions.

This all suggests that the Bermuda-based insurer and reinsurer continues to expand in property cat risks and other areas that its Mt. Logan Re vehicle participates, which with further improvements to pricing and portfolio quality suggests the structure should be well positioned as 2024 begins.

Everest’s reinsurance business produced a combined ratio of 78.8% for Q4 2023, as pre-tax net catastrophe losses fell to $135 million (net of estimated recoveries and reinstatement premiums) from $430 million a year earlier, and the result also benefited from $397 million of pre-tax net favourable prior year reserve development.

In the firm’s insurance segment, GWP rose almost 12% to $1.4 billion, driven by a diversified mix of property and specialty lines, partially offset by lower written premiums in monoline workers’ comp and financial lines.

Catastrophe losses in the insurance segment were lower than in reinsurance at $8 million for the quarter, but during the period, Everest recorded net reserve strengthening of $392 million related to casualty lines, which are impacted by social inflation factors, focused on accident years 2016 to 2019.

As a result of the reserve strengthening, the insurance segment combined ratio deteriorated from 103% in Q4 2022 to 132.4% in Q4 2023.

Group-wide, the combined ratio moved from 87.8% in Q4 2022 to 93.2% in Q4 2023, with pre-tax net catastrophe loss of $143 million and unfavourable prior year reserve development of $5 million.

Net income increased from $496 million in the prior year fourth quarter to $804 million in Q4 2023, as operating income increased to $1.1 billion from $478 million.

“Looking ahead, we remain focused on achieving our strategic plan goals, with significant momentum across both businesses, and an exceptional team driving even greater value for our shareholders,” said Andrade.