Everest Re hit by cat losses & Ukraine; claims big step to low-cat book

Everest Re suffered a slight uptick in its second quarter combined ratio on a surge in cat losses and the group’s initial reserves for the Ukraine war, but lauded “excellent progress” towards its goals of reducing reliance on catastrophe lines while holding a 15% operating return on equity.

Gross written premium of $3.45 billion was up 8.1% year on year, (or 10.3% in constant dollars), with 19.6% annual growth in primary insurance (20.5%) far outclassing the mild 2.5% (5.2%) growth in reinsurance. “Rate increases remain solid and above loss trend,” management said.

The surge in primary insurance was driven by “balanced and diversified growth across most lines of business and geographies, partially offset by our continued focus to reduce exposure in property CAT,” management said.

In reinsurance, gross written premiums in property fell to 48.6% of the total from 51% just one quarter prior. Quota share is rising vis-à-vis XOL. Everest Re “capitalized on strategic market opportunities that improved the diversity and economics of our book, while reducing volatility,” CEO Juan Andrade said in his statement.

The group combined ratio rose 2.5 percentage points (pps) to 91.8%, chiefly from the 2.3 pps increase in the loss ratio.

Cat losses took $85 million from the Q2 P&L pre-tax, almost twice the prior-year period tally.  Of the sum, reinsurance accounted for a full $80 million, more than double the prior-year sum.

Catastrophe events were said to have focused on South African floods, Canadian and European storms, and unspecified Q2 events in the United States.

The Russian invasion of Ukraine and its fallout forced $45 million in pre-tax reserve bookings, the group's first accounting of the event. “We have limited direct exposure to the Russia/Ukraine war but significant uncertainty regarding market and industry losses remains.”

Those exceptional losses proved more than the full measure of the year-on-year deterioration in the combined ratio. A combined ratio built solely on attritional losses would have been down 0.4 pps to 87.2%, management bragged.

By the bottom line, net profits had fallen to $123 million from $680 million in Q2 2021, in part as market turbulence led to a $236 million total investment loss.

Of the mid-year renewals, Everest Re claimed its approach proved “successful, as we continue to write a stronger, less volatile, more diversified, and more profitable book of business”.

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