Everest Re sees only upsides, will lean into pending renewals

Everest Re can lean into the hard property market and an attractive casualty market for heady top line and margin growth through pending treaty renewals that won’t require adding notable loads of new risk, officials have declared.

“We are on offence,” CEO Juan Andrade (pictured) told his company’s Q1 earnings call. “The momentum is strong and our ambition is high.”

Major treaty renewal deadlines are moving from strength to greater strength and Everest Re expects no let up at least through the January 1, 2024 renewals.

“We think the market will continue to dislocate,” group COO and head of Everest Reinsurance Jim Williamson added. He expects “increased opportunities to grow” while deploying capital for “superior returns … at or above what we saw at 1/1.”

April renewals lacked nothing is-a-vis the dramatic headlines that had defined the 1/1 treaty renewals, Williamson said, pointing to 40% rate gain in North American property and 20% internationally, ahead of “terrific opportunities” in casualty.

“We lean into that,” Williamson said.

Property market gains, however, dramatic, remain in their “early stages” and the June 1 treaty renewal deadline could dethrone H1 treaty renewal results, Williamson said.

Andrade sees those market conditions in familiar terms of reduced capacity from the rated reinsurers and a lack of ILS moneys all incapable of balancing a demand-side of the scale weighted by inflation and the unknown volatility kicks of social inflation. “We expect to see that through 1/1 2024 and maybe beyond,” the CEO added to the mantra.

Premium growth can feed through rather unimpeded to margin growth, officials claim, with little being added to Everest’s risk burden as the group can steer away from loss-makers.

“I don’t expect a wild move in PML by any stretch of the imagination,” Williamson said. “If 6.1 meets our expectations, I expect total capacity deployed to be consistent with last year: a meaningful increase in premium .. a very modest or no change in PML.”

Gains in rate on line and terms and conditions are more than enough to balance the lower premium per dollar of risk, officials indicated. “Our modelled profit is growing much faster than our premium,” Williamson said. “We expect that scissoring to continue.”

That equals margin upside. “Our combined ratio should continue to improve on the strength of rate, improved terms, the mix of business,” CEO Andrade said. Andrade looks at the 90.8% reinsurance combined ratio from Q1 or the 85.9% adjusted combined ratio and says “I think that is a starting point.”

Not everything shows up on day one. Everest Re’s recent preference for pro rata reinsurance over excess of loss will pad margins over a longer period as the group earns in premium, officials indicated. Rate and premium seen in Q1 is chiefly a function of late 2022 underwriting.

Everest Re claimed $3.7 billion in gross written premium for the group in Q1, up 19.5% in constant dollars, including 23.2% growth (constant FX and ex-reinstatements) for Reinsurance versus 11.5% for Insurance.

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