Q1 2024 Everest Group Ltd Earnings Call
Operator: Good morning everyone, and welcome to the Everest Group Limited first quarter of 2024 earnings conference call. The Everest executives leading today's call are Juan Andrade, President and CEO, and Mark Kociancic, Executive Vice President and CFO. We are also joined by other members of the Everest management team. Before we begin, I'll preface the comments on today's call by noting that Everest's SEC filing includes extensive disclosures with respect to forward-looking statements. Management comments regarding estimates, projections, and the like are subject to the risks, uncertainties, and assumptions as noted in these filings. Management may also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement. With that, I'll turn the call over to Juan.
Good morning, everyone and welcome to the Everest Group Limited first quarter of 2024 earnings Conference call.
Edwards Executive today's call are <unk>, President and CEO and Mark <unk> Executive Vice President and CFO. We are also joined by other members of the management team.
Before we begin I'll preface the comments on today's call I know you had ever done SEC filings.
Include existing disclosures with respect to forward looking statements management comments regarding estimates projections and similar are subject to the risks uncertainties and assumptions as noted in our filings management may also refer certain non-GAAP financial measures are.
We have reconciled in our earnings release and financial supplement with that I'll turn the call over to Juan.
Juan C. Andrade: Thank you, Matt. Good morning, everyone.
Juan: Thank you Matt Good morning, everyone. Thank you for joining us.
Juan C. Andrade: Thank you for joining us. We had a strong start to 2024. Our first quarter results included record underwriting profit and significant increases in operating income, net income, and investment income. This resulted in a total shareholder return exceeding 18% and an operating return on equity of 20%. We drove margin expansion through rate increases that are meaningfully in excess of lost. Targeted Risk Selection. Portfolio Encycloman, Exposure, and with underwriting this. We accomplish this while consistently and purposefully maintaining conservatism in our law space.
Juan: We had a strong start to 2024.
Juan: Our first quarter results included record underwriting profit and significant increases in operating income net income and investment income.
Juan: This resulted in a total shareholder return exceeding 18% and an operating return on equity of 20%.
Juan: We drove margin expansion.
Juan: So the rate increases that are meaningfully in excess of loss trend.
Speaker Change: Alright, good risk selection.
Speaker Change: Folio in cycle management exposure growth and with underwriting discipline.
Speaker Change: We accomplished this while consistently and purposely maintaining conservatism in our loss picks.
Juan C. Andrade: We are confident in how we have shaped our portfolio, and Reinsurance; we built on our preferred lead market position at the January 1 renewals and continue to distinguish Everest in the accelerating flight to quality. Our reinsurance portfolio is well-positioned and driving strong risk-adjusted returns. In insurance, we advanced our discipline expansion in targeted markets while remaining focused on prudent risk selection and the bottom line. We are focused on our primary objective of delivering consistent, leading financial returns. With the three-year strategic plan we laid out during November 2023 Investor Day.
Speaker Change: We're confident in how we have shaped our portfolio.
Speaker Change: In reinsurance we built on our preferred lead market decision at the January one renewals and continued to distinguished Everest and the accelerating flight to quality.
Our reinsurance portfolio is well positioned and driving strong risk adjusted returns.
Speaker Change: In insurance, we advanced our disciplined expansion in targeted markets, while remaining focused on prudent risk selection and the bottom line.
Speaker Change: We are focused on our primary objective of delivering consistent leading financial returns.
Speaker Change: With the three year strategic plan, we laid out during November 2023 Investor day.
Juan C. Andrade: Everest has entered a new chapter of profitable growth and opportunity. We are well positioned for the future with a focused strategy and great talent. Now I'll turn to the first quarter financial highlights, beginning with our group results. We delivered $709 million in net operating income, a 60% increase from the prior year. Rose Ridden's premium increased by over 17% in constant dollars. Our growth in the quarter was broad-based and reflects Everest's diversification by segment and geography.
Speaker Change: <unk> has entered a new chapter of profitable growth and opportunity.
Speaker Change: And we are well positioned for the future with a focused strategy and Greg Cowan.
Speaker Change: Now I'll turn to the first quarter financial highlights beginning with our group results.
Speaker Change: We delivered $709 million and net operating income and.
Speaker Change: A 60% increase from the prior year.
Speaker Change: Gross written premium increased by over 17% in constant dollars.
Speaker Change: Our growth in the quarter was broad based and reflects the adverse diversification by segment geography business line.
Juan C. Andrade: Business Lines, and Distribution. Growth was supported by best-in-class execution and our ability to take advantage of market conditions in reinsurance and insurance, particularly in property and special risks. Our underwriting performance was strong in the first quarter. We delivered $409 million in underwriting profits. The group combined ratio was 88.8%.
Speaker Change: And distribution.
Speaker Change: Growth was supported by best in class execution, and our ability to take advantage of market conditions, and reinsurance and insurance, particularly in property and specialty lines.
Our underwriting performance was strong in the first quarter.
Speaker Change: We delivered $409 million an underwriting profit.
Speaker Change: The group combined ratio was 88, 8% a.
Juan C. Andrade: A significant improvement from last year. This is despite the industry incurring approximately $20 billion in catastrophe losses in the quarter. For Everest, pre-tax catastrophe losses, net of estimated recoveries, and reinstatement premiums were $85 million, or just 2.3 points, a year-over-year decrease directly resulting from our portfolio optimization efforts. Everest's catastrophe losses were primarily driven by the Francis Scott Key Bridge collapse in Baltimore.
A significant improvement from last year.
Speaker Change: This is despite the industry incurring approximately 20 billion and catastrophe losses in the quarter.
For Everest pre tax catastrophe losses net of estimated recoveries and reinstatement premiums were $85 million were just two three points a year over year decrease directly resulting from our portfolio optimization efforts.
Speaker Change: Average catastrophe losses were primarily driven by the Francis Scott Key bridge collapse in Baltimore.
Juan C. Andrade: With regard to investing, we generated net investment income of $457 million, a new quarterly record. Now, turning to our reinsurance business. Reinsurance delivered significant top and bottom line growth. Our success at the January 1 renewal gave us a flying start to the year, delivering a higher quality, higher margin portfolio. We grew the reinsurance business in the first quarter by over 20% on a constant dollar basis, with $3.2 billion in gross written premiums. We increased underwriting profit to $345 million, with an 87.3% combined ratio. The attritional loss ratio and the attritional combined ratio also... 57.2% and 84.4%, respectively. This quarter included pre-tax catastrophe losses of $80 million.
Speaker Change: With regards to investments, we generated net investment income of $457 million.
Speaker Change: New quarterly record.
Speaker Change: Now turning to our reinsurance business.
Speaker Change: Reinsurance delivered significant top and bottom line growth.
Speaker Change: Our success at the January one renewal gave us a running start to the year.
Speaker Change: Delivering a higher quality higher margin portfolio.
Speaker Change: We grew the reinsurance business in the first quarter over 20% on a constant dollar basis with $3 2 billion in gross written premiums.
Speaker Change: We increased underwriting profit to $345 million with.
Speaker Change: With an 87, 3% combined ratio.
Speaker Change: The attritional loss ratio and Attritional combined ratio also.
Speaker Change: And <unk> 57 to.
Speaker Change: And 84, 4% respect.
Speaker Change: This quarter included pre tax catastrophe losses of $80 million net of estimated recoveries and reinstatement premiums.
Juan C. Andrade: Native Estimated Recoveries and Reinstatement Previews. Both rate and terms and conditions remained at attractive levels, resulting in a portfolio that should continue to achieve excellent risk adjusted return. We grew our total property portfolio significantly. Building on Meaningful Increases in 2023. We expanded our portfolio in attractive specialty lines, particularly marine and aviation. We remain, and Surgical in our approach to certain casualty lines.
Speaker Change: Both rate and terms and conditions remained at attractive levels, resulting.
Speaker Change: Resulting in a portfolio that should continue to achieve excellent risk adjusted returns.
Speaker Change: We grew our total property portfolio significantly.
Speaker Change: Building on meaningful increases in 2023.
Speaker Change: We expanded our portfolio and attractive specialty lines of business.
Speaker Change: <unk> Marine and aviation.
Speaker Change: We remain disciplined and surgical in our approach to certain casualty lines.
Juan C. Andrade: Our responsiveness, creativity, and constructive approach to the market once again set Everest apart. We deepen relationships with top-tier clients globally, while capturing incremental demand and growing share on oversubscribed deals. We continue this positive momentum through the April renewals, resulting in high quality, broad-based growth, particularly in property lines, and an excellent overall risk-adjusted return. We capitalize on strong demand, expanding with core seeds while also growing with targeted new partners. Consistent with the January renewal, we maintain discipline in certain casual, non-renewing business that does not meet our threshold.
Speaker Change: Our responsiveness creativity and constructive approach to the market once again set adverse depart.
Speaker Change: We deepened relationships with top two clients globally, while capturing incremental demand and growing share an oversubscribed deals.
Speaker Change: We continued this positive momentum through the April renewals, resulting in high quality broad based growth, particularly in property lines and excellent overall risk adjusted returns.
Speaker Change: We capitalized on strong demand <unk>.
Speaker Change: Expanding with core seats, while also growing with targeted new partners.
Consistent with the January renewal, we maintain discipline in certain casualty lines non renewing business that did not meet our thresholds.
Juan C. Andrade: Overall, the market remains, and trading conditions continue to be, particularly in property and specialty lines. We continue to see incremental demand from seed, and we are leaning into these opportunities. We expect risk-adjusted returns to remain attractive through upcoming renewals and into 2025. Now turning to insurance.
Speaker Change: Overall, the market remains disciplined.
Speaker Change: And trading conditions continued to be favorable.
Speaker Change: Particularly in property and specialty lines.
Speaker Change: We continue to see incremental demand from seeds and.
Speaker Change: And we are leaning into these opportunities.
Speaker Change: We expect risk adjusted returns to remain attractive through upcoming renewables and into 2025.
Speaker Change: Now turning to insurance.
Juan C. Andrade: We continue to unlock value in our primary insurance, making solid strides and bringing our capabilities to new markets globally. We grew the insurance segment by 10% in constant dollars and generated over $1.2 billion in premiums for the quarter. Growth was diversified with 37% growth in profit and 36% in specialty lines, such as aviation, energy, surety, and marine. We see strong rates and terms and conditions in these lines.
Speaker Change: We continue to unlock value in our primary insurance business.
Speaker Change: Making solid strides in bringing our capabilities to new markets globally.
Speaker Change: We grew the insurance segment by 10% in constant dollars and generated over $1 2 billion in premiums for the quarter.
Speaker Change: Growth was diversified with 37% growth in property and.
Speaker Change: 36% in specialty lines, such as aviation energy surety and marine.
Speaker Change: We see strong rate and terms and conditions in these lines.
Juan C. Andrade: Also, due to strong rate increases, we saw modest growth in some casualty lines, with a consistent emphasis on profitability. We focused on lines of business with favorable pricing and a strong profit trajectory. We achieved a 12% rate increase across the portfolio, excluding workers' compensation and financial lines. Lost Trents and Casualty remain elevated, but they're stable, and pricing continues to meaningfully outpace that trend. We continue to see rate acceleration across, excluding financial. This was most pronounced in commercial auto liability, general liability, and Access Casualties. The rate increases in these three lines average mid-teens overall.
Speaker Change: Also due to strong rate increases we saw modest growth in some casualty lines.
With a consistent emphasis on profitability, we focused on lines of business with favorable pricing and strong profit trajectories.
Speaker Change: We achieved a 12% rate increase across the portfolio, excluding workers' compensation and financial lines.
Speaker Change: Loss trends in casualty remain elevated but they are stable.
Speaker Change: And pricing continues to meaningfully outpace that trend.
Speaker Change: We continued to see rate acceleration across casualty lines, excluding financial lines. This was most pronounced in commercial auto liability general liability and excess casualty lines.
Speaker Change: The rate increases in these three lines average mid teens overall.
Juan C. Andrade: The combined ratio, at 93.1, resulted in an underwriting profit of $64 million. The attritional loss ratio was 64%, reflecting our discipline and continued lost pick conservatism in casualty lines of business. We also continued our proactive shift toward short-tail, which we expect will benefit underlying margins throughout the remainder of the year.
The combined ratio at 93, one resulted in an underwriting profit of $64 million.
Speaker Change: The attritional loss ratio was 64%.
Speaker Change: Reflecting our discipline and continued loss pick conservatism and casualty lines of business.
Speaker Change: We also continued our proactive shift or short tail lines, which we expect will benefit underlying margins throughout the remainder of the year.
Speaker Change: As I've said in the past, we will recognize bad news quickly and the good news from our positive portfolio rate actions will season over time.
Juan C. Andrade: We will recognize bad news quickly, and the good news from our positive portfolio rate actions will season over time. We are focused on profitably growing in geographies and lines of business we find attractive, while continuing to drive right in excess of lost. Our first quarter continued to demonstrate the strength of the Everest franchise and the results of our actions over the past four years. We see significant opportunities for underwriting businesses globally, and trading conditions remain favorable. I'm excited about the journey ahead for our business and our ability to continue delivering leading financial returns. With that, I'll turn it over to Mark to review the financials in more detail.
Speaker Change: We are focused on profitably growing in geographies and lines of business, we find attract.
Speaker Change: While continuing to drive rate in excess of loss trend.
Speaker Change: Our first quarter continued to demonstrate the strength of Everest franchise.
Speaker Change: And the results of our actions over the past four years.
We see significant opportunities for underwriting businesses globally and.
And trading conditions remained favorable.
I'm excited about the journey ahead for our business and our ability to continue delivering leading financial returns.
Speaker Change: With that I'll turn it over to Mark to review the financials in more detail.
Mark Kociancic: Thank you, Juan. And good morning, everyone. Everest is off to a strong start to 2024. We delivered significant growth and underwriting income, not investment income, operating income, and net income, for the first quarter. The Strove Operating EPS of $16.32, and an operating ROE of 20%. The annualized TSR, or total shareholder return, was strong at 18.1% despite modest foreign exchange headwinds. The company's strong performance in the first quarter was led by our team's high level of execution and ability to capitalize on attractive opportunities. We have significant momentum behind us across both of our franchises.
Mark: Thank you Juan and good morning, everyone refers to is off to a strong start to 2024, we delivered significant growth in underwriting income and investment income operating income and net income for the first quarter the.
Mark: This drove operating EPS of $16.32.
Mark: And an operating ROE of 20%.
Mark: Realized GSR or total shareholder return was strong at 18, 1% despite modest foreign exchange headwinds.
Mark: The company's strong performance in the first quarter was led by our team's high level of execution and ability to capitalize on attractive opportunities, we have significant momentum behind us across both of our franchises driven by excellent outcomes of recent renewals and our disciplined insurance expansion.
Mark Kociancic: Driven by excellent outcomes at recent renewals and our disciplined insurance expansion into target global markets, looking at the group results. Everest reported gross written premiums of $4.4 billion, representing 17.2% growth in constant dollars and excluding reinstatement premiums. The combined ratio was 88.8% for the quarter, driven by an improved underlying loss ratio and lower cat losses. The cat losses in the quarter were largely driven by the Baltimore bridge collapse, which contributed $70 million to cat losses.
Into targeted global markets.
Mark: Looking at the group results separately reported gross written premiums of $4 4 billion, representing 17, 2% growth in constant dollars and excluding reinstatement premiums.
The combined ratio was 88, 8% for the quarter driven by an improved underlying loss ratio and lower cat losses.
Mark: Cat losses in the quarter were largely driven by the Baltimore bridge collapse, which contributed $70 million to cat losses.
Mark Kociancic: The group's attritional loss ratio was 58.9%, a 90 basis point improvement over the prior year's quarter, with both segments contributing to the improvement. The group's commission ratio was 21.4%, consistent with the prior year. The Group Expense Ratio improved 30 basis points to 6.1% in the quarter, an excellent result as we continue to invest in talent and systems within both franchises. Moving to the segment results, and starting with reinsurance. Gross written premiums grew 20.4% in constant dollars when adjusting for reinstatement premiums during the quarter. Growth in the quarter was consistent with the trends seen throughout the prior year, with strong and broad-based growth in property and specialty lines. While we continue to remain disciplined in certain casualty lines,
Mark: The group Attritional loss ratio was 58, 9%, a 90 basis point improvement over the prior year's quarter with both segments contributing to the improvement.
Mark: The group's commission ratio was 21, 4% consistent with the prior year.
Mark: Group expense ratio improved 30 basis points to six 1% in the quarter. An excellent result, as we continue to invest in talent and systems within both franchises.
Moving to the segment results and starting with reinsurance.
Mark: Gross written premiums grew 24% in constant dollars when adjusting for reinstatement premiums during the quarter.
Growth in the quarter was consistent with the trends seen throughout the prior year with strong and broad based growth in property and specialty lines.
Mark: While we continue to remain disciplined in certain casualty lines.
Mark Kociancic: Property lines grew 31% in the quarter, while casualty lines grew 11% in the quarter. And we continue to see the written premium mix shift towards property and short tail lines, which now stands at 54% property and 46% casualty, versus 50% property and 50% casualty in the prior year. Growth will continue to favor short tail business as we progress throughout the year, which will be more pronounced on an earned basis. The combined ratio was 87.3%, an improvement of 350 basis points from the prior year.
Mark: Property lines grew 31% in the quarter, while casualty lines grew 11% quarter and we continue to see the written premium mix shifts towards property and short tail lines, which now stands at 54% property and 46% casualty.
Mark: Versus 50% property and 50% casualty in the prior year.
Mark: Growth will continue to favor short tail business as we trend through the year, which.
Mark: Which would be more pronounced on an earned basis.
Mark: Combined ratio was 87, 3% an improvement of 350 basis points from the prior year.
Mark Kociancic: The attritional loss ratio improved 80 basis points to 57.2%. As we continue to achieve more favorable terms in terms, particularly in property and specialty life, the attritional combined ratio improved 150 basis points to 84.4% during the quarter. Both the commission ratio and underwriting expense ratio improved modestly. The 24.6% and 2.6% in the quarter, respectively.
Mark: The Attritional loss ratio improved 80 basis points to 57, 2% as we continue to achieve more favorable rate and terms, particularly in property and specialty lines. The.
Mark: The Attritional combined ratio improved 150 basis points to 84, 4% during the quarter.
Mark: Both the commission ratio and underwriting expense ratio improved modestly to 24, 6% and two 6% in the quarter respectively.
Mark Kociancic: Moving to insurance, gross premiums written grew approximately 10% in constant dollars to $1.2 billion. We continue to methodically scale our primary franchise globally while proactively focusing our North American portfolio towards the most accretive lines of business, led by retail property and short-tail specialty. The growth in casualty and professional lines was driven by rate increases as a number of lines saw continued price acceleration in the quarter.
Mark: Moving to insurance gross premiums written grew approximately 10% in constant dollars to $1 2 billion.
Mark: We continue to methodically scale, our primary franchise globally, while proactively focusing our north American portfolio towards the most accretive lines of business led by retail property and short tail specialty lines.
Mark: The growth in casualty and professional lines was driven by rate increases as a number of lines saw continued price acceleration in the quarter.
Mark Kociancic: The attritional loss ratio stood at 64% this quarter, an improvement of 40 basis points from the prior year. The commission ratio was consistent with the prior year, while the underwriting-related expense ratio increased to 16.6%, driven by the continued investment in our global platform. Moving on to investments, net investment income increased nearly $200 million year over year to $457 million for the quarter, driven primarily by higher assets under management and higher new money yields versus maturing assets. Alternative assets generated 74 million of net investment, an improvement from the prior year as equity markets have continued to rebound.
Mark: The attritional loss ratio stood at 64% this quarter.
Mark: An improvement of 40 basis points from the prior year.
Mark: The commission ratio was consistent with the prior year, while the underwriting related expense ratio increased to 16, 6%.
Mark: Driven by the continued investment in our global platform moves.
Mark: Moving on to investments net investment income increased nearly $200 million year over year to $457 million for the quarter, driven primarily by higher assets under management and higher new money yields versus maturing assets alter.
Alternative assets generated $74 million of not investment income and.
Mark: An improvement from the prior year as equity markets have continued to rebound.
Mark Kociancic: Our overall book yield improved from 3.8% to 4.7% year over year, and our reinvestment rate remains north of 5%, which is in excess of maturing security yield. We continue to have a short asset duration of approximately 3.4 years, given the attractive level of short rates. The investment portfolio remains well positioned for the current environment and is supported by the compounding effect of strong underwriting income and cash flow. Our high-quality portfolio is built to generate strong returns on a consistent basis.
Mark: Our overall book yield improved from three 8% to four 7% year over year, and our reinvestment rate remains north of 5%, which is in excess of maturing security yields. We continue to have a short asset duration of approximately three four years.
Mark: Given the attractive level of short rates.
Mark: The investment portfolio remains well positioned for the current environment and is supported by the compounding effect of strong underwriting income and cash flow.
Our high quality portfolio was built to generate strong returns on a consistent basis.
Mark Kociancic: For the first quarter of 2024, the operating income tax rate was 12.2%, which was broadly in line with our working assumption for the year. Our capital strength gives us ample capacity for 2024 and positions us well for profitable organic growth. We opportunistically repurchased 90,000 shares in the quarter, amounting to $35 million, with an average of $387.64 per share. Shareholders' equity ended the quarter at $13.6 billion, or $14.5 billion when excluding net unrealized depreciation on available-for-sale fixed-income securities. At the end of the quarter, net after-tax unrealized losses on the available-for-sale fixed income portfolio equated to approximately $876 million, an increase of $153 million as compared to the end of the fourth quarter, resulting from interest rate increases
Mark: For the first quarter of 2020 for operating income tax rate was 12, 2%, which was broadly in line with our working assumption for the year our.
Mark: Our capital strength gives us ample capacity for 2024 and positions us well for profitable organic growth.
We opportunistically repurchased 90000 shares in the quarter amounting to $35 million with an average of $387 64 per share.
Mark: Shareholders equity ended the quarter at $13 6 billion or $14 5 billion when excluding net unrealized depreciation on available for sale fixed income securities.
Mark: At the end of the quarter net after tax unrealized losses on the available for sale fixed income portfolio equates to approximately $876 million, an increase of 153 million as compared to the end of the fourth quarter, resulting from interest rate.
Mark: Increases.
Mark Kociancic: Cash flow from operations was $1.1 billion during the quarter, and book value per share ended the quarter at $313.55, an improvement of 3.6% from year end 2023 when adjusted for dividends of $1.75 per share year to date. Book value per share, excluding net unrealized depreciation on available for sale fixed income securities stood at $333.70 versus $320.95 per share year-end 2023, representing an increase of approximately 4%; net debt leverage at quarter end stood at 15.8%, modestly lower on a sequential and year over year basis. In conclusion, Everest had an excellent start to the year. Market fundamentals remain attractive, and we have strong momentum across both underwriting franchises. And with that, I'll turn the call back over to Matt.
Mark: Cash flow from operations was $1 1 billion during the quarter.
Mark: Book value per share ended the quarter at $313 55.
Mark: An improvement of three 6% from year end 2023, when adjusted for dividends of $1 75 per share year to date.
Mark: Book value per share, excluding net unrealized depreciation on available for sale fixed income securities stood at $333 70 versus $320 95 per share a year end 2023.
Mark: Representing an increase of approximately 4%.
Mark: Net debt leverage at quarter end stood at 15, 8% modestly lower on a sequential and year over year basis.
Mark: In conclusion Everest had an excellent start to the year market fundamentals remain attractive and we have strong momentum across both underwriting franchises.
Mark: And with that I'll turn the call back over to Matt.
Operator: Thanks, Mark. Operator, we are now ready to open the line for questions. We ask that you please limit your questions to one question plus one follow-up and rejoin the queue if you have additional questions.
Matt: Thanks, Mark operator, we are now ready to open the line for questions. We ask that you. Please limit your questions to one question plus one follow up and rejoin the queue. If you have additional questions.
Speaker Change: Uh huh.
Operator: Thank you very much. And to ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. Again, it is star one for questions. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble our roster. Our first question comes from David Motemaden from Evercore ISI. David, please go ahead.
Matt: Thank you very much and to ask a question you May Press Star then one on Earth that stone salt.
Matt: Using a speakerphone please pick up your handset before pressing the keys.
Matt: Again, it is star one for questions you.
Matt: You said anytime Youre question has been addressed and you would like to withdraw your question. Please press star two.
Matt: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question.
Speaker Change: From David Mott Madden from Evercore ISI David.
Speaker Change: Please go ahead.
David Motemaden: Hi, thanks. Good morning.
Hi, Thanks, good morning.
David Motemaden: I just had a question on the premium growth in PropertyCat. I was a little surprised at the 4% growth. I thought it would have been more than that, just given how attractive market conditions are. Could you elaborate on what you're seeing?
Speaker Change: I just had a question on.
Speaker Change: The premium growth in property Cat I was a little surprised.
Speaker Change: At the 4% growth I thought it would have been.
Speaker Change: More than that just given how attractive.
Speaker Change: The market conditions or did.
Speaker Change: Could you elaborate on.
Speaker Change: What youre seeing in and you.
James Allan Williamson: And, you know, it looks like you may have shifted a little bit more towards property pro rata. Maybe just talk about why you chose to grow that instead of property cat. Sure.
Speaker Change: It looks like you may have shifted a little bit more towards property pro rata.
Speaker Change: Maybe just talk about why you chose to grow that and set out a property cat.
James Allan Williamson: Sure, David, this is Jim Williamson. Thanks for the question. First of all, just on the PropertyCat XOL growth that you're seeing printed in the quarter, that's really a premium recognition timing phenomenon. And so if you look back at the June 2023 PropertyCat renewal, which was the Florida renewal, that was really the only renewal last year that we did not grow. And so you're seeing that roll through the numbers in this quarter.
Speaker Change: Sure David This is Jim Williams and thanks for the question.
James Allan Williamson: First of all just on the property cat ex ol growth that youre seeing printed in the quarter, that's really a premium recognition timing.
James Allan Williamson: Phenomenon and so if you look back at the June 2023.
James Allan Williamson: Pretty cat renewal, which was the Florida renewal that was really the only renewal last year that we did not grow and so youre seeing that roll through the numbers in this quarter all of the other renewal dates that we've experienced recently has shown strong growth and just to give you some of that perspective at the January.
James Allan Williamson: All of the other renewal dates that we've experienced recently have shown strong growth. And just to give you some of that perspective, at the January 1st renewal this year, we grew our PropertyCat business by 24%, which was just excellent. And we did that with outstanding risk-adjusted returns.
James Allan Williamson: First renewal of this year, we grew our property cat business by 24%, which was just excellent we did that at outstanding risk adjusted returns and then we were able to continue that growth at the April 1st renewal where.
James Allan Williamson: And then we were able to continue that growth at the April 1st renewal, where we grew, you know, globally, just about 10%. And in our North America property business, we grew property cap by 76%, again, at outstanding risk-adjusted economics. So, it's a little bit of a blip in that way.
James Allan Williamson: Where we grew over you know globally.
James Allan Williamson: Just about 10% and in our North America property business weaker in property cat by 76% again at outstanding risk adjusted economic so.
James Allan Williamson: So it's a little bit of a blip that way and my expectation, obviously is it'll work itself out as.
James Allan Williamson: And my expectation, obviously, is it'll work itself out as we go forward. In terms of the property pro rata part of your question, it's really not a matter of saying, okay, we now like property pro rata better than property CADXOL for the reasons I just described. What it is, is that starting really in the back half of last year, we saw just terrific economics in the primary property market, particularly in the E&S space in North America.
James Allan Williamson: As we go forward.
In terms of the property pro rata part of your question, it's really not a matter of saying, Okay. We know like property pro rata better than property cat ex a lot for the reasons I. Just described what it is is starting really in the back half of last year, we saw just terrific.
James Allan Williamson: Economics in the primary property market, particularly in the E&S space in North America.
James Allan Williamson: We lean into that with our core clients and wrote bigger lines with some of the best underwriters in the market. And that's now flowing into our financials, and we're picking it up with meaningful growth this quarter. And then the other major contributor to pro rata property growth is the expansion of our business in Asia, where we've traditionally been underweight. We're growing very nicely again with the best in class underwriters in that market. And that market does tend to be more of a pro rata market and very much a property market. And so you're seeing the effects of selecting some really outstanding deals in the Asian market.
James Allan Williamson: We leaned into that with our core clients and wrote bigger lines.
James Allan Williamson: With some of the best underwriters in the market.
James Allan Williamson: And that is now flowing into our financials and we're picking it up and meaningful growth this quarter.
James Allan Williamson: And then the other major contributor to pro rata property growth is the expansion of our business in Asia, where we've traditionally been underweight.
James Allan Williamson: We're growing very nicely again with best in class underwriters in that market and that market does tend to be more of a pro rata market and very much a property market and so youre seeing the effects of <unk> of.
James Allan Williamson: Selecting some really outstanding deals in the Asia market.
David Motemaden: Got it understood. Thanks for that. Thanks for that clarification on the property CAC growth. I appreciate it. And then maybe, Juan, just on the attritional loss ratio in the insurance business, so I caught that you're expecting that to come down over the course of the rest of the year as you shift to more short tail lines, or that should benefit underlying margins throughout the remainder of the year. Could you just elaborate on that a little bit and maybe talk about what drove the 64% this quarter?
Speaker Change: Got it understood. Thanks for that thanks for that.
Clarification on the property cat growth I appreciate it.
Speaker Change: And then maybe one just on the the Attritional loss ratio in the insurance business. So I caught that you're expecting that to come down over.
Over the course of the rest of the year as you shift to more short tail lines are that should benefit underlying margins throughout the remainder of the year.
Speaker Change: Could you just elaborate on that a little bit and just maybe talk about what drove the 64%. This quarter. I think you mentioned conservatism, but I was just wondering if you could just talk about that.
David Motemaden: I think you mentioned conservatism, but I was just wondering if you could just talk about that and maybe also what sort of impact that has on your view of the 2020 through 2023 accident years, if at all.
Speaker Change: And maybe also what sort of impact that has on your view of the 'twenty 'twenty through 2020 three accident year if at all.
Juan C. Andrade: Yeah, thanks, Dave. This is Juan.
Speaker Change: Yeah. Thanks, Dave This is Juan let me start and then I'll ask mark because he answered to add some color as well.
Juan C. Andrade: Let me start, and then I'll ask Mark Kociancic to add some color as well. I think the most important thing is to really start with sort of the framework, right? So we have been essentially running between a 63 and a 64 attritional loss ratio in insurance over the past two years. And so there are a couple of things. One, in every quarter, you're going to have some timing and mixed noise, but the fundamentals to our approach have remained consistent.
Juan: The most important thing is really start with sort of the framework right. So we have been essentially running between 63 and a 64 attritional loss ratio in insurance.
Juan: Over the past two years.
Mark: So the couple of things one in every quarter youre going to have some timing and mix noise, but the fundamentals to our approach have remained consistent.
Juan C. Andrade: And that's really the fact that we have been very disciplined underwriters, and we continue to remain conservative with our loss picks for casualty lines in both divisions, not only in insurance. And this is something that we have talked about in previous venues. So we're holding our loss picks longer across all lines of business, even if we see favorable loss experiences in any given quarter. And we're going to continue to do that in a very disciplined and systematic manner.
Mark: And that's really the fact that we have been very disciplined underwriters and we continue to remain conservative with our loss picks for casualty lines in both divisions not only up in insurance and this is something that we have talked about in prior venues. So we're holding our loss fix longer across all lines of business, even if we see favorable.
Mark: Loss experience in any given quarter and we're going to continue to do that in a very disciplined and systematic manner and so that's basically what you're seeing as far as the 64% here in the quarter, but let me ask mark to add a little bit more on that thanks.
Juan C. Andrade: And so that's basically what you're seeing as far as the 64% here in the quarter, but let me ask Mark to add a little bit more. Yeah, thanks, Juan. Just a couple of things to add to
Mark Kociancic: Yeah, thanks, Juan. Just a couple of things, Dave, to add to the equation. So, in addition to the conservatism and the prudence and the loss fix, you know, we feel very good about the margin that we're building in the lines that we're writing. We're obviously tracking loss trends. I'll give you a couple of high-level points on that.
Mark: Thanks Juan.
A couple of things.
The equation. So in addition to the conservatism and the Prudence and the loss fix and we feel very good about the margin.
Mark: We're building in the lines that where we're writing a we're obviously tracking loss trend.
Mark: Give you a couple of high level points on that.
Mark Kociancic: Essentially, it's been elevated for a while, for several quarters, but stable, broadly stable, and the rate has been meaningfully in excess of trends, and we feel good. No issue on our side to have the extra, what we would call, level of prudence in those loss picks given the loss environment that Juan spoke about and I spoke about during Investor Day. I do think the mix of business will eventually push the loss ratio mechanically lower as we add a bit more short tail, you know, lines to the mix overall, and that should happen, you know, throughout the year and a little bit more over time, over the three-year plan.
Mark: Essentially it's been elevated for.
Mark: For a while for several quarters, but stable broadly stable and rate has been meaningfully in excess of trend. So we feel good.
Mark: No issue on our side to have extra what we would call level of prudence and those loss picks given the loss environment that.
Mark: One spoke about and I spoke about during the Investor Day, I do think mix of business will eventually.
Mark: Push the loss ratio mechanically lower as we are a bit more short tail.
Hum lines to the to the mix overall.
That should happen throughout the year and a little bit more.
Mark: Over time over the three year plan.
Speaker Change: Great. Thank you.
Thanks, Dave.
Brian Meredith: And our next question comes from Brian Meredith from UBS. Brian, you may proceed.
Speaker Change: And our next question comes from Brian Meredith from UBS.
Brian Meredith: Ma'am you May proceed.
Brian Meredith: Yeah, thanks. Juan, I was hoping you could talk a little bit more about your expectations for mid-year renewals or hearing some signs from brokers that, you know, there's ample capacity and maybe we're seeing property reinsurance pricing kind of peaking out. Is that your perspective?
Brian Meredith: Yeah. Thanks.
Brian Meredith: One I was hoping you could talk a little bit more about your expectations for mid year renewals or hearing some signs from brokers that you know there's ample capacity and maybe we're seeing property reinsurance pricing kind of picking out is that is that your perspective on things.
Brian Meredith: So sure Brian Let me, let me get started and Alaska, Jim to give you a little bit of extra color on all of this look I think as we've said both in my prepared remarks and in Jim's question answered to David a few minutes ago.
Juan C. Andrade: So, Brian, let me get started, and I'll ask Jim to give you a little bit of extra color on all of this. Look, I think, as we've said both in my prepared remarks and in Jim's answer to David a few minutes ago, we had a terrific 1-1 renewal, and we had an excellent 4-1 renewal. So at this point in time, you've got close to 70% of our book that's been renewed.
Speaker Change: We had a terrific one one renewal.
Speaker Change: And we had an excellent four one renewal so at this point in time, you've got close to 70% of our book that's been renewed.
Speaker Change: What we believe are excellent excellent risk adjusted returns.
Juan C. Andrade: What we believe are excellent risk-adjusted returns. The market, for us, continues to be pretty good. If you think about it from a pricing perspective, you would expect some of the pricing to moderate given that we've had rate on rate on rate, particularly in some of these geographies over time. But I think more importantly is the fact that attachment points and terms and conditions have continued to hold. I think that is a critical point to keep in mind going forward into the future.
The market for us continues to be pretty good.
Speaker Change: If you think about it from a pricing perspective, you would expect some of the pricing to moderate given that we've got right on right on right, particularly in some of these geographies over time, but I think more importantly is the fact that attachment points and terms and conditions have continued to hold and I think that is a critical point to keep in mind going forward for the.
Speaker Change: Future. The only thing is what I said in my prepared remarks, which is our competitors remain disciplined so the trading conditions from that perspective continue to be favorable, but let me ask Jim to give a little bit more color on how he views on Florida at six one and then some of the seven one renewals as well.
Juan C. Andrade: The other thing is what I said in my prepared remarks, which is that our competitors remain disciplined. So the trading conditions, from that perspective, continue to be favorable. But let me ask Jim to give a little bit more color on how he views Florida at 6-1 and then some of the 7-1 renewals as well. Sure, Brian. Thanks for the...
James Allan Williamson: Sure, Brian. Thanks for the question. You know, just to maybe reinforce some of the points Juan made, which I think are spot on, you know, we have seen really terrific results from the most recent renewals, including April. And you would certainly have expected, given how much rate the market took last year, that more underwriters are going to be interested in writing the business. And while that's true, we've also seen just a floor under the discipline that people are applying to this market, which is what's sustaining terms and conditions, keeping risk adjusted rates on the upward trajectory, which is resulting in the economics that we find so attractive.
James Allan Williamson: Ryan Thanks for the thanks for the question just to.
James Allan Williamson: Maybe reinforce some of the points Onemain, which I think are spot on we have seen a really terrific results from the most recent renewals including April and.
James Allan Williamson: You would certainly have expected given how much rate the market took.
Last year that that more underwriters are going to be interested in writing the business.
James Allan Williamson: And while that's true we have also seen just a floor under the discipline that people are applying to this market, which is what sustaining terms and conditions keeping risk adjusted.
James Allan Williamson: Right on the upward trajectory, which is resulting in the economics.
James Allan Williamson: That we find so attractive the other thing to keep in mind is that we're still experiencing elevated losses around the world and while we had a terrific Q.
James Allan Williamson: The other thing to keep in mind is that we're still experiencing elevated losses around the world. And while we had a terrific Q1 result, the fact is, losses remain elevated, whether it's weather, quake, you know, manmade disasters, etc. Those things are happening.
Q1 Cat result, the fact as cats remain elevated.
Whether its weather quake.
James Allan Williamson: Manmade disasters et cetera, those things are happening and I think thats, keeping a focus on the discipline that the market is.
James Allan Williamson: And I think that's keeping a focus on the discipline that the market is pursuing. And then the other factor to keep an eye on is that we see some really strong increasing demand from some of our best clients. And given Everest's position as a preferred and lead market, we have opportunities to deploy incremental capacity at really attractive rates. And I think that's happening both at the major renewals but also between those.
James Allan Williamson: Is pursuing.
And then the other factor to keep an eye on is we see some really strong increasing demand from some of our best clients and given at risk position as a preferred and lead market, we have opportunities to deploy incremental capacity at a really attractive.
James Allan Williamson: <unk> rates and I think that's that's happening both at the major renewals, but also between those renewals and there is a lot more in that pipeline that I think will help to sustain the market and so our perspective is as we roll into the rest of <unk>.
James Allan Williamson: And there's a lot more in that pipeline that I think will help to sustain the market. And so, as we roll into the rest of 2024 with the Florida renewal in June and then the 7-1 renewal primarily driven by Australia, we expect discipline to be maintained.
James Allan Williamson: 24, with the Florida renewal in June and then the seven one renewal primarily driven by Australia, we expect discipline to be maintained.
Brian Meredith: Risk-adjusted economics should be terrific, and I would further say that our expectation remains that this will continue into 2025. That's really helpful. Thank you.
James Allan Williamson: The risk adjusted economic should be terrific and then I would further say that our expectation remains that that will continue into 2025.
Speaker Change: That's really helpful. Thank you and then.
Brian Meredith: And then I just want to pivot back to the insurance underlying called Lush. I know that last year you had some MedStop losses went off, so, you know, year over year. Looks like about a hundred. But I'm just curious, how much of maybe that conservatism you're building? Due to perhaps financial lines and workers comp. I know you gave us a rate of 12x financial lines and comp.
Speaker Change: I just wanted to get back to the insurance underlying call. It loss ratio just quickly here I know last year you had some bad stop loss went off so you know year over year, you know it looks like about 150 basis points up year over year, but I'm just curious how much of maybe that conservatism built in is due to perhaps.
Speaker Change: Until lines and Workers' comp I know you gave US a rate of 12 X financial lines in comp I'm curious with that you're you've kind of put everything all in and if that is one of the contributing factors to the year over year increase.
Mark Kociancic: Yeah, Brian, it's Mark. I don't think it is. I think workers comp is broadly stable, you know, the last few years. So that's not driving it.
Mark: Yeah, Brian it's Mark.
Mark: I don't think it is I think workers' comp is broadly stable.
Mark: Last few years, so that's not.
Mark: Driving it.
Mark Kociancic: You're right, we had 100, roughly 150 basis points of Delta last year because of A&H. There is a bit of mix, you know, that drove the Delta from last year down to something that was sub 63% attritional loss ratio, but I'd say our run rates are more in the 63 to 64 range. And I think what you're seeing here is just a mix of business that is skewed a bit more to the longer tail. Casualty, and we're keeping those last picks, you know, at a healthy level, a prudent level on our side.
Mark: We had 100, roughly 150 basis points of Delta last year, because of Pennsylvania and age.
Mark: There is a bit of a mix.
Mark: This drove the.
Mark: Delta from last year down to something that was.
Mark: 63% Attritional loss ratio, but I would say our run rates more in the 63 to 64.
Mark: Range and I think what you're seeing here is just the mix of business that is skewed a bit more of a longer tail.
Casualty and we're keeping those loss picks.
Mark: At a healthy level, a prudent level on our side.
Mark Kociancic: Do you have the all-in number for kind of what the rate looked like in the first quarter when you include financial income?
Speaker Change: Do you have the all in number for kind of what rate looked like in the first quarter. When you include financial income.
Brian Meredith: Yeah, that would be about a little bit over 7%. Thank you so much.
Yeah that would be about a little bit over 7%.
Brian Meredith: Great. Thank you so much. I appreciate the answers. Sure.
Speaker Change: Thank you so much appreciate the answers.
Speaker Change: Sure.
Michael Zaremski: And our next question is coming from Michael Zaremski from BMO. Michael, please go ahead.
Speaker Change: And our next question is coming from Michael Zaremski from E. M O. Michael Please go ahead.
Michael Zaremski: Hey, good morning. Thanks. Follow up on the primary insurance pricing. I think you might have answered part of this, but so the rates accelerated in and, you know, social inflation, I guess, associated lines, and the default rate is in property, I think is is is how you know what kept the kind of the the math flat at 12 on the on the social inflationary lines, do you feel that there's still kind of momentum in the marketplace potentially as the year progresses or is kind of the jump up into the low to mid teens is that a very healthy level to kind of protect against what looks like to be an inching higher of social inflationary trends?
Michael Zaremski: Hey, good morning, Thanks, a follow up on the primary insurance pricing I think he might have answered part of this but so the.
Michael Zaremski: Rates accelerated in.
And you know social inflation I guess associated lines.
Michael Zaremski: And they decide right isn't property I think is is.
How do you know what what kept the kind of the.
Michael Zaremski: The math flat at 12 on the.
Michael Zaremski: Lie on the on the social inflationary lines, you know do you feel that there's still kind of momentum in the marketplace potentially as the year progresses or is kind of that the jump up into the low to mid teens is that a kind of that is at a very healthy level to kind of protect against.
Michael Zaremski: But what it looks like you'd be inching higher ups of social inflationary trends.
Juan C. Andrade: Yeah, Mike, this is Juan. So, let me give you a little bit of perspective. And I think you can break it down sort of into different lines. If I look at, for example, commercial auto liability, we have seen a rate trend up over, frankly, the last five quarters or so on a pretty consistent basis. General liability has done the same for about the last four quarters, while umbrella in excess for about the last three quarters. Right, so that gives you a sense that this is, it's a trend, right? It's not a flu per se, just one quarter over the other.
Yeah, Mike. This is Juan so let me give you a little bit of perspective, and I think you can break it down sort of in two different lines. If I look at for example, commercial auto liability, we have seen essentially rate trend up over frankly, the last five quarters or so.
Michael Zaremski: With a pretty consistent basis.
Michael Zaremski: General liability has done the same for about the last four quarters.
Birla in excess for about the last three quarters right. So that gives you a sense that this is it.
Speaker Change: A trend right that's not a not a flute per sale, just one quarter of them over the other.
Juan C. Andrade: And look, I think the issues in the industry are well known, something that, obviously, we have discussed with all of you, and competitors have discussed with all of you. So I would expect that that to continue through the rest of 2024. Again, it's four to five quarters, depending on the line of business, that you continue to see that momentum. You know, when I look at property, there's certainly been a bit more capacity that's come in, particularly in the ENS market.
Speaker Change: Look I think the issues in the industry are well known.
Speaker Change: It's something that obviously, we have discussed with all of your competitors have discussed with all of you. So I would expect that that continues through the rest of 2024 again, it's a four to five quarters, depending on the line of business that you continue to see that momentum.
Speaker Change: When I look at property.
Speaker Change: There's certainly been a bit more capacity thats come in particularly into the E&S market.
Juan C. Andrade: And we saw that in the first quarter. But the pricing is still good, and it's still significantly adequate in an excess of lost trend. So we still feel very good about the property business on the primary side of things as well.
And we saw that in the first quarter, but the pricing is still good and it is still significantly adequate and in excess of loss trends. So we still feel very good about the property business on the primary side of things as well.
Michael Zaremski: Okay, got it. It's an encouraging trend on the liability side, given what we're seeing. I believe my follow-up in the prepared remarks. I think Jim Williamson said that property CAT grew by 20, 24%, I believe. Is that, or do we see a much lower number for CAT XOL when we're looking at the disclosure and the earnings release? Am I thinking about something incorrectly?
Speaker Change: Okay got it an encouraging trend on the liability side, given what were seeing the.
Speaker Change: Sure.
Speaker Change: I believe I have my follow up in the prepared remarks.
Speaker Change: Tim Williamson said that property cat grew by 20, 24% I believe.
Speaker Change: Is that I feel like when we were looking at the disclosure in the earnings release, we see a much lower number for cat ex ol.
Speaker Change: Am I thinking about something incorrectly.
James Allan Williamson: Yeah, Mike, this is Jim. Yeah, the earlier question was about the fact that we had printed a lower cat growth number you would have seen, about a 4% growth number on CAT XOL. And what I had indicated is that's really the impact of the recognition of written premium flowing through the first quarter financials, which included a renewal last year, the June 23 renewal, where we actually chose to step back a bit on Florida because of our own stringent financial underwriting approach.
Speaker Change: Yeah, Mike This is Jim.
James Allan Williamson: An earlier question was.
James Allan Williamson: Was about the fact that we had printed a lower cat growth number you would have seen about a 4% growth number on cat ex ol.
James Allan Williamson: And what I had indicated is that's really the impact of the recognition of written premium flowing through the first quarter financials.
James Allan Williamson: Included a renewal last year the June 23 renewal.
Where we actually chose to step back a bit on Florida because of the strength in our own stringent financial underwriting approach.
James Allan Williamson: And so now that's kind of flowing into the financials. What I further commented on is that at the January 1 renewal, we grew our property CADEXO well business by 24% for the renewal, at really terrific risk-adjusted economics. And further said, we did also very well at the April renewal, growing about 11% overall. We grew our North America property business at 4.1 by 76%. And so, you know, just outstanding growth rates. And you'll see that show up in future quarters. Okay, thank you for the explanation.
James Allan Williamson: And so now that that's kind of flowing into the financials, what I what I. Further commented on is that at the January 1st renewal.
James Allan Williamson: We grew our property cat ex ol business by 24% for the renewal.
James Allan Williamson: It really terrific risk adjusted Economics, and then further said we did also very well at the April renewal.
James Allan Williamson: Growing about 11% overall, we grew our north American property business at a four one by 76%.
Speaker Change: So just outstanding.
Speaker Change: Growth rates and you'll see that show up in future quarters.
Speaker Change: Okay. Thanks for the clarification.
Michael Zaremski: Okay, thank you for the clarification.
Speaker Change: Thanks, Mike.
Speaker Change: Gotcha.
Josh Shanker: And the next question comes from Josh Shanker from Bank of America. Josh, please go ahead.
Speaker Change: And the next question comes from Josh Shanker from Bank of America, Josh. Please go ahead.
Josh Shanker: Unknown Speaker Yeah, thank you. A lot of property questions. So on the big pro rata growth, can you talk about what that means for your exposures and how that affects your capital utilization?
Josh Shanker: Yes. Thank you a lot of property question.
Josh Shanker: So I'm a big pro rata growth can you talk about what that means for your exposures and how that affects your capital utilization.
Yeah.
James Allan Williamson: Sure, Josh, this is this is Jim. So a couple things. One, you know, if you look at our gross PML and then further our net PMLs, as they've projected over the last several renewals, you know, they're up modestly. I would say that's being driven more by taking advantage of the property cat XOL market. We've been pretty cautious on how much cat exposure we're taking in the property pro rata book, but obviously, it exists.
Josh Shanker: Sure. Josh. This is a this is Jim so a couple of things one if you look at.
James Allan Williamson: Our gross P&L and then further our net P&L as a trajectory over the last several renewals.
They were up modestly I would say that's being driven more by taking advantage of the property cat XL market, we've been pretty cautious on how much cat exposure, we're taking in the property pro rata book, obviously it exists.
James Allan Williamson: But we're being thoughtful about that balance. I would further say, you know, there's no constraint. Given our available capacity, where we are relative to our risk appetite, as you would have seen in the investor presentation, we still have plenty of room to maneuver. And so there's not going to be a point where the fact that we've taken advantage of some really exciting opportunities in the property pro rata space where we then can't go and grow where we want to with key clients on the property cat XOL, that is definitely not a trade-off we And we would not disadvantage the cat book for any other opportunity.
But we're being thoughtful about that balance.
James Allan Williamson: I would further say there's no constraint.
James Allan Williamson: Given our available capacity.
James Allan Williamson: We are relative to our risk appetite as you as you would've seen in the Investor presentation, we still have plenty of room to maneuver and so there's not going to be a point where the.
James Allan Williamson: The fact that we've taken advantage of some really exciting opportunities in the property pro rata space, where we then can't go and grow where we want to with key clients on the property cat ex ol that that is definitely not a tradeoff, we're making and we would not disadvantage the the.
James Allan Williamson: The Cat book.
James Allan Williamson: FERC for any other opportunity.
James Allan Williamson: and Capital Utilization
James Allan Williamson: And in capital utilization.
Josh Shanker: Are you referring in terms of how we put the capital to work? Yeah, as you grow, as you've grown that book, does that, I mean, obviously, more efficiently gets you the capital, but does that, is there a binding constraint on how much of this property pro rata you can write?
Speaker Change: Are you referring in terms of in terms of how we put the capital to work as you grow as you grown that book.
Speaker Change: Does that I mean, obviously.
Speaker Change: Obviously more efficient use of capital, but does that is there a binding constraint on how much of this property pro rata you can right.
Mark Kociancic: No, Josh, it's Mark. The answer is no. Despite the large level of growth, very manageable full degrees of freedom to underwrite, you know, as we will see in the market going forward. No, no issue on that side.
Speaker Change: No Josh it's Mark Yeah. The answer is no.
Despite the large level of growth very manageable full degrees of freedom to underwrite.
Speaker Change: We.
Speaker Change: As we see in the market going forward no no issue on that side.
Josh Shanker: And then switching gears to casualty reinsurance, can you talk about what you're seeing in terms of incurred loss activity versus claims as disclosed by your customers on the reinsurance side for the older accident years as they deal with social inflation? Have they taken their picks up enough, or do you think that they're playing a game of sort of catch up based on picks that you've set in the space? Yeah, Josh, it
Speaker Change: And then switching gears to casualty reinsurance can you talk about what youre seeing in terms of incurred loss activity versus claims.
As disclosed by your customers on the reinsurance side for the older accident years as they deal with social inflation.
Speaker Change: They've taken their picks up enough or you look or do you think that they're playing a.
Speaker Change: Game of a sort of catch up based on picks that you've got in the in the space.
James Allan Williamson: Yeah, Josh, it's Jim again. Look, I'm not going to comment on the approach that other companies are taking to loss-pick selection. What I would say is, and this is true of older accident years and more recent accident years, we take a very prudent approach to ultimate loss-ratio selection. We certainly have done that over the last few years as we've strengthened reserves in reinsurance casualty. You saw us do that.
Speaker Change: Yes, Josh it's a it's Jim again, I look I'm not going to comment on the approach that other companies are taking two loss pick selection, what I would say.
James Allan Williamson: And this is true of older accident years and more recent accident years, we take a very prudent approach to ultimate loss ratio selection. We certainly did that over the last few years as we've strengthened reserves and reinsurance casualty is you saw us do that.
James Allan Williamson: We took a very conservative approach to how we set those ultimate loss ratios and put ourselves in a position to ensure that that's in the rear-view mirror. And then we do the same thing for more recent accident years, which in some cases means that we have a different view of the ultimate loss ratio than our clients do. And you would have heard us described in the last earnings call that we stepped back from some casualties. At the January 1 renewal, we reduced our expiring book by about 15% due to portfolio management actions.
James Allan Williamson: We took a very conservative approach to how we set those ultimate loss ratios and put ourselves in a position to ensure that that's in the rearview mirror and then we do the same thing on more recent accident years.
Which in some cases means that we have a different view of the ultimate loss ratio.
James Allan Williamson: Our clients have and you would have hurt us.
James Allan Williamson: Describing in the last earnings call that we stepped back from some casualty.
James Allan Williamson: In the at the January one renewal, we reduced our expiring book by about 15%.
James Allan Williamson: Due to portfolio management actions and in many cases that was due to the fact that we had our own independent view of the expected loss pick and that may have been higher than what our clients expect it. So we're absolutely applying our own disciplines and analytics to what others are reporting whether they're reporting it in their financials or reporting into us in there.
James Allan Williamson: And in many cases, we were able to do that. That was due to the fact that we had our own independent view of the expected loss pick, and that may have been higher than what our clients expected. So we're absolutely applying our own disciplines and analytics to what others are reporting, whether they're reporting it in their financials or reporting it to us in their submissions, and we think that puts us in good stead.
James Allan Williamson: Submissions and we think that puts us in good stead.
Josh Shanker: Okay, thank you for all the answers, and good luck with the rest of the year.
Speaker Change: Okay. Thank you for all the answers and.
Speaker Change: Good luck with the rest of the year.
Josh Shanker: Thanks, Josh. Thanks, Josh.
Speaker Change: Thanks, Josh Thanks, Josh.
Speaker Change: Yes.
Speaker Change: Thank you and now we have a question from Elyse Greenspan from Wells Fargo. Please go ahead.
Elyse Greenspan: Thank you. And now we have a question from Elyse Greenspan from Wells Fargo. Elyse, please go ahead.
Elyse Greenspan: Thanks, good morning. Sorry to follow up again on the PropertyCat question, but I'm just going back to the, you know, 4% reported growth, and Jim, I know you said that the PropertyCat XOL book grew by 24%, sorry, at 1.1. I understand that net premium earnings lag as you write business. I just didn't, I guess, appreciate that there's a lag on a growth or net premiums written basis on business that you would have written in the middle of last year. Can you just, I guess, just kind of explain that, just that concept to me, just like the lag on the written word that would, I guess, flow through six months later?
Elyse Greenspan: Thanks, Good morning.
Elyse Greenspan: Sorry to follow up again on the property Cat question, but I'm, just going back to the 4% reported growth and Jim I know you said that the property cat ex ol Baku.
Elyse Greenspan: 24%, sorry at one one I understand that that premium earned lags as you write business I just didnt I guess I appreciate that there is a lag on a gross or net premiums written basis on business that you would've read it in the middle of last year can you just I guess just kind of explain that just.
Elyse Greenspan: Just that concept to me just like the lab.
Elyse Greenspan: On the right and that would I guess flow to a six months later.
James Allan Williamson: Yeah, sure, Elyse, it's Jim. Yeah, we recognize written, we don't recognize written premium, and you don't recognize all the premium in a straight line, particularly for Casualty Pro Rata. And you may recall earlier in the year and last year, we talked a lot about this relative to the recognition of growth from the Jan 1, 2023 renewal relative to Casualty. And so there are going to be these effects.
Elyse Greenspan: Yeah sure at least it's Jim.
James Allan Williamson: We recognize written we don't recognize written premium.
James Allan Williamson: On a on a reinsurance contract away you might on a primary insurance contract, where you you would recognize all of the written premium in the period that you originally intercepted the deal in.
James Allan Williamson: Instead, the written recognition of premium.
James Allan Williamson: Is spread out in the case of property cat it would typically be over over a four quarter period, whereas something like casualty pro rata.
James Allan Williamson: Typically recognize over an eight quarter period, and you don't recognize all of the premium.
James Allan Williamson: Straight line, particularly for casualty pro rata and you may recall and you know.
James Allan Williamson: But as I indicated earlier, you know, we've seen strong growth pretty much at every renewal. Since January of 2023 and actually going back into June of 2022, as the market started to correct, the only renewal that we've had in that entire time that showed a reduction was the June 2023 renewal because we stepped back a bit in Florida because a lot of smaller clients weren't able to meet our quite stringent financial underwriting approach.
James Allan Williamson: Earlier in the year and last year, we talked a lot about this relative to the recognition of.
James Allan Williamson: Growth from the Jan one 2023 renewal relative to casualty.
James Allan Williamson: And so there are going to be these effects.
James Allan Williamson: But as I indicated earlier, we're seeing we've seen strong growth pretty much at every renewal.
James Allan Williamson: Since January of 2023, and actually going back into June of 'twenty, two as the market started to correct the only renewal.
James Allan Williamson: That we've had in that entire time that showed a reduction.
Was the June 2023 renewal because we stepped back.
James Allan Williamson: A bit in Florida, because a lot of a.
James Allan Williamson: A lot of smaller clients weren't able to meet are quite stringent financial underwriting approach.
James Allan Williamson: So to give you some statistics, we talked about January 24, July 23, almost 25% growth, April 23, 30% growth, Jan 23, almost 50% growth, and it was only June 23 where we actually reduced the book by about 2.3%. So it just gives you a sense of the fact that we are delivering strong growth at terrific economics on all of these renewals. We got a little bit of a blip in this quarter, and we expect that to correct.
James Allan Williamson: So to give you some statistics, we talked about.
James Allan Williamson: January 24 July 23, almost 25% growth April 23, 30% growth.
James Allan Williamson: Jan twenty-three almost 50% growth and it was only June 23, where we we actually reduced the book by about two 3%. So it just gives you a sense of the fact that we are delivering strong growth at terrific economics at all of these renewals.
James Allan Williamson: Got a little bit of a blip.
James Allan Williamson: In this quarter and we expect that to correct now the other thing I would indicate of course as youll see in the financials.
James Allan Williamson: Now, the other thing I would indicate, of course, as you'll see in the financials, the earned premium for CATEXOL was up almost 20%, which is, you know, is much more consistent with what you might expect.
James Allan Williamson: Is earned premium for cat ex ol was up almost 20%, which as you know is a much more consistent with what you might expect.
Mark Kociancic: Okay, and then on the capital side, you guys started to buy back a little bit of your stock this quarter. I think you used the word opportunistic around that. So can you just give us a sense of just kind of capital return thoughts from here, you know, just balancing growth? And I guess, you know, obviously, as we get closer to Wednesday. Yeah. Hi, Elyse. It's Mark.
Speaker Change: Okay and then on the.
Speaker Change: Hum on the on the capital side.
Speaker Change: You guys started to buy back a little bit of your stock.
Speaker Change: This quarter.
Speaker Change: Thank you used the word opportunistic around that so.
Can you just give us a sense of just kind of capital.
Speaker Change: Return thoughts.
Speaker Change: From here, just balancing growth and I guess, you know obviously as we get closer.
Mark Kociancic: You know, hi, Elyse, it's Mark. So you're right, we did start some modest share buybacks in the first quarter. Really, really no change from what we've been saying all along. We're focusing on organic growth; there's no reason we can't do Capital Management Actions like share buybacks at the same time. We demonstrated that in March, and there's no reason it won't continue going forward. It's an attractive level.
Speaker Change: To win season.
Speaker Change: Yeah, Hi, Elyse, it's mark.
Mark: So you're right we did start some modest share buybacks in the first quarter.
Mark: Really really no change for from what we've been saying all along and privileging the organic growth No reason, we can't do.
Mark: Capital management actions like share buybacks at the same time, we've demonstrated that in March and no reason it won't continue.
Mark: Going forward.
Mark: Attractive levels.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Gregory Peters: And our next question comes from Gregory Peters from Raymond James. Gregory, go ahead, please.
Speaker Change: And our next question comes from Gregory Peters from Raymond James Gregory Go ahead. Please.
Gregory Peters: Good morning, everyone. So for the first question, I'm going to pivot back to the TSR target that you guys have rolled out. And I'm just curious, you know, if there's been an updated view on the risk of hitting your TSA target, TSR target, excuse me. And in that regard, I was looking at your slide deck, and I noticed you disclosed your one to 100 PML. So I'm wondering how that might look when we get to 7-1-24.
Gregory Peters: Good morning, everyone.
Gregory Peters: For the first question I'm going to pivot back to the CSR target that you guys have rolled out.
Gregory Peters: And I'm.
Gregory Peters: Curious if there's been an updated view on the risks to hitting your TSA target CSR targets excuse me.
Gregory Peters: And then in that in that regard I was looking at your slide deck and I noticed your you disclose your one on 100 P. M. L. So I'm wondering how that might look when we get to seven 124.
Gregory Peters: Yeah.
Speaker Change: So it's.
Speaker Change: It's it's Greg it's it's Mark talking let me kind of split this into two pieces.
Mark Kociancic: So it's Greg and Mark talking. Let me kind of split this into two pieces.
Mark Kociancic: PMLs and DSR are ways of getting there. So, back on investor day, one of the points that I made during the presentation was that we had lots of different avenues to achieving leading financial returns as measured by total shareholder return. So it doesn't matter, really, from our standpoint if there are pluses and minuses coming from different underwriting markets, pricing, and rates. We have a very well-developed and diversified set of franchises to manage cycle management, portfolio management, and really drive growth of the franchise combined with strong investment income. That's unchanged in terms of achieving the target that we set out. DMLs, I'll hand it over to Jim, and maybe I'll add a little bit of color at the end.
Speaker Change: Emails and CSR ways of getting there so.
Speaker Change: Back in the Investor Day, I mean, one of the points that I made during the presentation was that we had lots of different avenues to achieving leading financial returns as measured by total shareholder return.
Speaker Change: So it doesn't matter really from our standpoint, if theres plusses and minuses coming from.
Speaker Change: Different underwriting markets are pricing it right, we have a very well developed and diversified set of franchises to manage cycle management portfolio management and really drive.
Speaker Change: Our growth of the franchise combined with strong investment income.
Speaker Change: That's unchanged in terms of achieving the target that we set out.
Speaker Change: <unk>.
Then over to Jim and maybe I'll add a little bit of color. It beyond yes, Greg It's Jim.
James Allan Williamson: Yeah Greg, it's Jim. Referencing your question and the PMLs that you would have seen in the investor presentation, so, a couple things. One, you know, look at the peak zones that are represented there. We certainly have seen a little bit of growth in our net PMLs from July of last year to 1.1 this year. That's a couple of factors.
James Allan Williamson: So referencing your question and the P&L that you would've seen in the Investor presentation.
James Allan Williamson: So a couple of things one.
James Allan Williamson: Look the peak zones that are represented there we certainly have seen a little bit of growth in our net p&l's from July of last year to one one this year. That's a couple of factors. One we've taken advantage of the market is as I've talked about on this call and we've grown our portfolio.
James Allan Williamson: One, we've taken advantage of the market, as I've talked about on this call, and we've grown our portfolio at great economics, which is fantastic. We've also optimized our hedging, and we're taking more of our cat, Wind, through the June renewal, assuming that Florida pricing terms and conditions hold, which we expect. CalQuake is pretty much in the bag for the year, where you will see us continue to lean into the market, as the 7-1 renewal is outside of our peak zones.
James Allan Williamson: At Great Economics, which is fantastic.
James Allan Williamson: We've also optimized our hedging and we're taking more of our cat risk on a net basis and that's contributed to the growth in the net P&l's now those particular peak zones that are featured in the investor presentation.
James Allan Williamson: We'll see a little bit more growth I would expect in south east.
James Allan Williamson: Wind through the June renewal, assuming that Florida pricing terms and conditions hold which we expect.
James Allan Williamson: Quake is pretty much in the bag for the year, where you will see us continue to lean into the market.
James Allan Williamson: And so we have plenty of capacity, both in our PMLs and our capital and really any other way you want to think about risk to continue to grow. And I think that's best illustrated by the other exhibit on that page, which shows our earnings and capital at risk and our current position. And you see that we have plenty of room to maneuver within our stated risk appetite to take advantage of rate market conditions and grow where we need to.
James Allan Williamson: At the seven one renewal is outside of our peak zones, and so we have plenty of capacity.
James Allan Williamson: Both in our P&L and our capital and really any other way you want to think about risk to continue to grow and I think that's best illustrated.
By the other exhibit on that page, which shows our earnings and capital at risk and our current position and you see there that.
James Allan Williamson:
We have plenty of room to maneuver within our stated risk appetite to take advantage of great market conditions and grow where we need to.
James Allan Williamson: Craig, this is Juan and
Juan C. Andrade: Greg, this is Juan, and I would just essentially reinforce two points that Mark and Jim have made. So, number one, we absolutely see no change to the 17% target, and you can see where we started the year at 18.1%. But I think the second point is probably the more critical one, which is the one Jim just made, that we are well within our cat underwriting appetite, and so that gives us confidence.
Speaker Change: Greg This is one and I would just essentially reinforced two points did mark and Jim have made so number one we absolutely see no change to the 17% target I mean, you'll see where we started the year at 18, 1%, but I think the second point is probably the more critical one which is the one Jim just made.
Speaker Change: We are well within our cat underwriting appetite.
Speaker Change: And so that gives us confidence to be able to maneuver and frankly keep growing the property cat book given the frankly, the excellent risk adjusted returns that we're seeing in that book right now.
Gregory Peters: Thank you for the detailed answer. I guess my follow-up question is just more specific. Can you talk a little bit about how the facultative market is evolving? Because it's hard hearing mixed messages from the market and value your perspective on that.
Speaker Change: Thank you for the detailed answer.
Speaker Change: Mike My follow up question, just more more specific.
Speaker Change: Can you talk a little bit about how the facultative market is evolving because certainly hearing mixed messages out of the market and.
Speaker Change: Value your perspective on that.
James Allan Williamson: Sure, Greg, it's Jim again. Yeah, so in terms of facultative, we had a terrific quarter in our facultative business. We were able to grow that business very nicely, about 14% over the prior year, and that's really on the back of significant demand from our seats, and in particular in short tail lines where they had to increase their CADXOL attachment points last year to manage the market cycle. That means that in some cases they're feeling exposed to larger risks; their per risk limits might be uncomfortable. And so they're coming to Everest to try to manage that exposure.
Speaker Change: Sure Greg It's Jim again.
James Allan Williamson: Yeah. So in terms of facultative, we we had a terrific quarter and our facultative business, we were able to grow that business very nicely.
James Allan Williamson: About 14% over prior year, and that's really on the back of significant demand by our seats and in particular in short tail lines, where they had to increase their cat ex ol attachment points last year to manage the market cycle.
James Allan Williamson: That means that in some cases, they are feeling expose on larger risks there per risk limits might be uncomfortable and so they're coming to everest to try to manage that exposure and so we're getting really great results that are.
James Allan Williamson: And so we're getting really great results that we're excited about, and I expect we'll continue to lean into. That said, like all parts of this business, we need to be very thoughtful in our risk management approach. And so there are parts of the portfolio, none of this would surprise you, where we're being very cautious and very prudent. And certainly, commercial auto would be an area where we're being prudent. We've pretty much exited or significantly reduced any exposure to professional or financial lines.
James Allan Williamson: We're excited about and I expect we'll continue to lean into that.
James Allan Williamson: That said like all parts of this business, we need to be very thoughtful in our risk management approach and so there are parts of the portfolio. None of this would surprise you, where we're being very cautious and very prudent.
James Allan Williamson: Certainly commercial auto would be an area.
James Allan Williamson: Where we're being prudent we've we've pretty much exited or significantly reduced any exposure to professional or financial lines.
James Allan Williamson: We're being very, very careful about limit deployment in excess casualty, so we are writing some terrific deals there, but we're being careful about limits, obviously ensuring we're getting paid adequately. So like any business, whether it's reinsurance or primary insurance, we need to manage the cycle carefully, but we continue to see really strong opportunities.
James Allan Williamson: We're being very very careful about limit deployment in excess casualty. So we are writing some terrific deals there, but we're being careful about limits, obviously, ensuring we're getting paid adequately so like any business, whether it's reinsurance or primary insurance need to manage the cycle carefully, but we continue to see really strong <unk>.
James Allan Williamson: Opportunities in Fac.
Gregory Peters: Got it. Thanks for the answers. Got it. Thanks, Greg.
Got it thanks for the answers.
Speaker Change: Got it thanks, Thanks Fred.
Jian Huang: And our next question is coming from Bob Jiang Huang from Morgan Stanley. Bob, you may proceed.
And our next question is coming from Bob Young Hwang from Morgan Stanley Bob You May proceed.
Jian Huang: Good morning. So the first question is on reservations. So looking at the last year's reserve charges, a large portion of that came from the accident years 2016 to 2019 cohort. I understand that you will probably do more reserve studies later on in the year, but just curious if there are any new developments or updates at this particular point regarding the current reserving positions as well as that 2016 to 2019 cohort as well?
Speaker Change: Good morning. So first question is on our reserving so looking at the last year's reserve charges for a large portion of that came from the accident year 2016 to 2019 cohort I understand that Youll will probably do more reserve studies later on in the year, but just curious if there are any new developments.
Speaker Change: Our update at this particular point regarding the current reserving position than at the outset that 26% to 2019 cohort as well.
Mark Kociancic: Bob, it's Mark. So we did do our Q1 quarterly review process. It's quite comprehensive. You're right, there are no real reserve studies to go through in the first quarter, but plenty of anecdotal data that we're looking at, all kinds of information. And so after we did a review of not only those years but really across the board, we don't see anything that's altered our view of our reserve portfolio. So, study as she goes.
Speaker Change: Yeah.
Speaker Change: Bob It's Marc So we did do our Q1 quarterly review process, it's quite comprehensive.
Bob: Right No real reserve studies to go through in the first quarter, but plenty of them.
Marc: Total data that we're looking at.
Marc: All kinds of information and so after we did a review of not only those years, but really across the board.
Marc: Don't see anything that's altered our view of our reserve portfolio. So steady as she goes.
Jian Huang: That's very helpful. Thank you.
Marc: Okay.
Speaker Change: Got it that's very helpful. Thank you.
Jian Huang: Second one is more of a modeling question. So understand that your expense ratio for the insurance segment was elevated a little bit due to the international bailout. How should we think about maybe a near-term run rate on this? Is this something that will persist for the next few quarters, next few years? Is there a good way to think about the expense element in the insurance segment?
Speaker Change: Second one is more of a modeling question. So understanding that your expense ratio for the insurance segment was elevated a little bit due to international Buildout.
Speaker Change: How should we think about maybe a near term run rate on those is this something that will persist for next few quarters next few years is.
Speaker Change: Is there a good way to think about the expense element on the insurance segment.
Mark Kociancic: Bob, it's Mark again. So I think it will be elevated for several quarters. So we're adding talent and technology. The premium, as you can see, is growing meaningfully. The earned revenue is trailing and obviously earns money in over time. And so we're still in a process of scaling. And you can see just in the Q1 comparatives, we're coming in for the insurance division at 16. Six Expense Ratio versus something closer to 15 a year ago. So our North American operations are fairly stable in the expense ratio. The international is what's got this trailing effect.
Speaker Change: Bob its Marc again, so I think it will be elevated for for several quarters. So we're we're adding talent.
Marc: Talent technology the premium as you can see is growing meaningfully the earned is trailing and obviously earns in over time and so we're still in a process of scaling.
Marc: And you can see just in the Q1 comparative were coming in.
Marc: For the insurance Division of 16, 6% expense ratio versus something closer to 15, a year ago. So our north American operations are fairly stable in the expense ratio. The international is whats got this trailing effect.
Juan C. Andrade: The good thing on our side is that I think the growth is quite accretive. We're seeing very nice, Technical ratios from the business that we're writing there that diversifies well, and good margins that are embedded. So, and we like the pace that we're going at. So I can see that being elevated for several quarters but eventually trending down as the scale starts to catch up with the size of the foundation we're building. Bob
Marc: The good thing on our side is the I think the growth is quite accretive we're seeing very nice technical ratios from the business that we're writing there diversify as well a good margins that are embedded.
Marc: And we like the pace that were going up so I can see that being elevated for several quarters, but eventually trending down as the scale.
Marc: If it starts to catch up with the size of the foundation we're building.
Jian Huang: Bob, this is Juan. Let me add a couple of comments as well to what Mark just said. I think one important thing to keep in mind is really the hallmark expense discipline of Everest. And if you look at the group expense ratio, really at that low 6% range, 6.1, 6.2, we've been able to maintain that throughout the entire build-out of that international component because of our expense discipline and our ability to prioritize things that matter and say no to things that don't.
Marc: Bob This is Juan let me add a couple of comments as well to what Mark just said.
Juan: One important thing to keep in mind is really the hallmark expense discipline of Everest and if you look at the group expense ratio really at that low 6% range 6162, we've been able to maintain that throughout the entire buildout built that international.
Juan: Ponant because of our expense discipline, and our ability to prioritize things that matter and say no to things that don't so I think that is something you can expect for the company going forward is that we continue to have one of the most competitive expense ratios in the industry and that frankly is not going to change as we invest and build and grow the international.
Jian Huang: So I think that is something you can expect for the company going forward, that we continue to have one of the most competitive expense ratios in the industry. And that, frankly, is not going to change as we invest in and build and grow the international component.
Juan: One component.
Speaker Change: Got it. Thank you very much really appreciate the answer.
Yaron Kinar: Got it. Thank you very much. I really appreciate it. Thanks, Bob. And next in question is Yaron Kinar from Jeffreys.
Speaker Change: Thanks, Bob.
Speaker Change: Okay.
Speaker Change: And next in question is you are on Qunar from Jefferies.
Speaker Change: Please go ahead.
Speaker Change: Hey, Good morning. This is Andrew on for your own within insurance it sounds like there could be some benefit on the underlying loss ratio for the remainder of the year, but does the guide of 90 to 92 for reported combined for full year 'twenty four still stand considering the reported 93 this quarter.
Yaron Kinar: And next in question is Yaron Kinar from Jeffreys. Yaron, please go ahead. Hey, good morning. This is Andrew on for your own.
Mark Kociancic: Andrew, it's Mark. The short answer is yes. I think there are several factors that are going towards that. You heard me speak to some of the scaling benefits that we expect to get, particularly from the insurance franchise. So there are several factors, tailwinds that we have that I think will help us achieve that range. I would start with, we've got a mix that's going to trend a little bit more short tail in terms of its proportion to the overall book.
Speaker Change: Yeah, Andrew it's Mark the short answer is yes, I think there are several factors that are going towards that you heard me in the previous question speak to some of the scaling.
Mark: Benefits that we expect to get particularly from the insurance franchise. So theres. Several factors tailwind that we have that I think will help us achieve that.
Mark: That range I would start with we've got a mix that's going to trend a little bit more short tail in terms of its proportion to the overall book that will come with a lower combined ratios you are still seeing very strong margin that's being added to the portfolio.
Mark Kociancic: That'll come with lower combined ratios. You're still seeing very strong margin that's being added to the portfolio across the board as we cycle manage through the different opportunities that we have. The expense ratio, really the two points, so the earned is going to grow more quickly on the international side as it trails the gross written. So that's going to help mechanically when you do the math. And then the expenses as a whole, I think given the fact we've spent over a year, well over a year building the foundation, those benefits are going to start to pay off, and expenses will start to level out as a overall ratio. So those factors overall are what's going to drive us back into that 92-90 range.
Mark: So across the board as we cycle manage.
Mark: Through the different opportunities that we have the expense.
Mark: Ratio.
Mark: Really the two points. So the earned is going to grow.
Mark: More quickly on the international side as it trails for gross written so thats going to help.
Mark: Candidly when you do the math and then the expenses as a whole I think given the fact that we've spent.
Mark: Over a year well over a year of building the foundation those those benefits are going to start to pay off in expenses will start to level out.
Mark: As our overall ratio. So those factors overall are what's going to drive us back into that 90 290 range.
Juan C. Andrade: Yes, so let me start and then I'll turn it over to Jim. This is Juan and Andrew.
Speaker Change: Thank you and maybe on reinsurance some strong growth within casualty pro rata casualty extra well can you talk about some of the opportunities there this quarter.
Juan C. Andrade: So I think two things drove that casualty for Rata. Again, some of it is the timing of the business that was written at 1-1-23 last year. And I think Jim has talked a little bit about how the earnings pattern of that business works. So I think that's an important part of that. And we felt good about the pricing for that business as well. The second part of it is that we saw some attractive opportunities in both Canada and Europe outside of the United States where you don't have the social inflation issues that you have in the US. But Jim, maybe you can provide a little bit of additional color.
Speaker Change: Yeah. So let me let me start and then I'll turn it over to Jim. This is one Andrew So I think two things drove particularly that casualty pro rata.
Andrew: Again some of it is the timing of the business that was written at one 123 last year and I think Jim has talked a little bit about how the earnings pattern on that business work. So I think that's an important part of that.
James Allan Williamson: And we felt good about the pricing.
James Allan Williamson: For that business as well the second part of it is we saw some attractive opportunities in both Canada and Europe outside of the United States, where you don't have the social inflation issue that you have in the U S. But Jim maybe you can provide a little bit of additional color. Yeah. I think that's right. It is on the pro rata side. It is largely a timing of recognition.
James Allan Williamson: Yeah, I think that's right. It is on the pro rata side, it is largely timing of recognition, as we had indicated after the January 1 23 renewal, you know, we earn casualty pro rata, or I should say recognized written premium over eight quarters. And it's really in the middle of that period that you see the largest Recognition of Premium. And so we're in that period.
James Allan Williamson: Michigan is as we had indicated after the January one 'twenty three renewal.
James Allan Williamson: <unk> casualty pro rata or I should say recognize written premium.
James Allan Williamson: Over eight quarters, and it's really in the middle of that period that you see the largest <unk>.
James Allan Williamson: Recognition of premium and so we're in that period, we had really strong.
James Allan Williamson: We had really strong printed numbers last quarter on Cazparada, same this quarter, et cetera. And there have been incremental opportunities, as Juan indicated. And in particular, when those are taking place outside the U.S. and in a very balanced way, we're more than happy to lean in to those opportunities. On the Exowell side, not an entirely different story. I mean, we have chosen to grow in a targeted way with some of our top seed...
James Allan Williamson: Hinton numbers last quarter on cash pro rata same this quarter.
James Allan Williamson: Et cetera.
James Allan Williamson: And there have been incremental opportunities as Juan indicated and in particular with when those are taking place outside the U S and in a very balanced way.
James Allan Williamson: We're more than happy to lean in.
James Allan Williamson: To those opportunities.
James Allan Williamson: On the extra well side.
James Allan Williamson: Not an entirely different story I mean, we have chosen to grow in a targeted way with some of our top seasons.
James Allan Williamson: But the other thing that you'll see in that line in particular, which is a relatively small part of our portfolio, is that the amount of rates that will be flowing through that line is going to be elevated. That's our expectation, and that certainly helps to support the growth numbers that you're seeing in the quarter.
James Allan Williamson: But the other thing that Youll see in that line in particular, which is a relatively small part of our portfolio is that the amount of rate.
James Allan Williamson: That will be flowing through in that line is going to be elevated thats, our expectation and that certainly helps to support.
James Allan Williamson: The growth numbers that youre seeing in the quarter.
Speaker Change: Got it thank you.
Meyer Shields: And next, we have a question from Mayor Shields from KBW. Mayor, please go ahead.
James Allan Williamson: Okay.
Meyer Shields: And next we have a question from mayor Shields from K B W.
Meyer Shields: Please go ahead.
Meyer Shields: Hi, it's Jing for me. Thank you for taking my question. I have a question on the professional line growth, which kind of accelerated from 9.9 in 4Q to stand at 11.7. You mentioned race acceleration; are you guys expecting any more if the race continues? Can you please add more color on that?
Meyer Shields: Hi also on yeah. Thank you for taking my question.
Meyer Shields: A question on the professional lines.
Meyer Shields: Kind of a Saturday there that's 199 for Q.
Mayor Shields: I never.
Mayor Shields: Kevin said, there you mentioned Nathan.
Speaker Change: Thank you.
Mayor Shields: Great.
Mayor Shields: Can't be that will come on that.
James Allan Williamson: It's Jim Williamson. Thanks for the question. Actually, for the most part, the acceleration you would have seen some of the growth in professionalized order in our insurance business was really related to one large fronting arrangement in our Canadian operation. So it's not really a general trend that you can apply to the rest of our business.
Mayor Shields: Yeah.
Mayor Shields: But yes, it's Jim Williams and thanks for the question.
Mayor Shields: Actually for the most part the acceleration you would've seen some of the growth in professional lines for the quarter and our insurance business was really related to one large fronting arrangement in our Canadian operation. So it's not really a general trend.
Mayor Shields: That you can apply to the rest of our business.
Juan C. Andrade: Yeah, the only other comment I would make, and this is Juan, is that the rate also had some implications for that as well, but the growth that you're seeing is really what Jim has described as a fronting deal in Canada.
Speaker Change: Yes, the only other upcoming I would make and this one is.
Speaker Change: <unk> also had some applications into that as well, but the growth that youre seeing is really the what Jim has described as the fronting deal in Canada.
Meyer Shields: Gotcha. But I won't expect that to continue for the rest of the year.
Speaker Change: Gotcha, Okay only think that's okay.
Meyer Shields: No, I don't think we would expect that to continue for the rest of the year.
Speaker Change: Yeah.
Speaker Change: No I don't think we would expect that to continue for the rest of the year again that was due to just one specific deal in Canada.
Meyer Shields: Okay, got it. Thank you. Um, um, just one more question on just a broad question on reinsurance. I'm just curious, can you share any plans for buying reinsurance for the insurance segment?
Speaker Change: Okay got it okay.
Speaker Change: Just one more question on <unk>.
Speaker Change: Just the blood pressure on rates so I'm.
Speaker Change: I'm just curious can you share.
Speaker Change: Any plans for binary guidance I'm trying to think of that.
James Allan Williamson: Yes, sure. It's Jim Williamson again. Yeah, we've been a pretty consistent buyer of reinsurance for our insurance business. You know, there are a lot of good reasons to procure reinsurance. Obviously, it helps us to manage volatility within that line. In a number of cases, particularly, our pro rata treaties in North America are quite accretive from a seating commission perspective. So I think that strategy of using reinsurance strategically to manage our exposure and our economics will continue.
Speaker Change: Oh, yes, sure it's such an Williamson again, yeah, we've been a pretty consistent buyer of reinsurance for our insurance business.
Speaker Change: You know there there are a lot of good reasons to.
Williamson: To procure reinsurance obviously it helps us to manage volatility within that line in a number of cases, particularly our pro rata treaties in North America are quite accretive from a ceding Commission.
Speaker Change: Perspective.
Speaker Change: So I think that strategy of using reinsurance strategically to manage our exposure and our economics will continue.
James Allan Williamson: I would expect as the business matures, both in North America and, then of course, over time, in our international business, you could expect our net to grow and our ratio to increase as we retain more of our business. But I think those changes will be modest and will occur gradually over time. So I wouldn't expect any near-term changes in our approach.
Speaker Change: I would expect as the business.
Speaker Change: Sure.
Speaker Change: Both in North America, and then of course over time in our international business you could expect our net to gross rate.
Speaker Change: Our ratio to increase as we retain more of our business, but I think those changes will be modest and will occur gradually over time.
Speaker Change: So I wouldn't expect any near term changes in our approach that way.
Juan C. Andrade: And this concludes our question and answer session. I would like to turn the conference back over to Juan Andrade for some closing remarks. Please go ahead.
Speaker Change: Thank you so much.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: And this concludes our question and answer session.
Speaker Change: I would like to turn the conference back over to Juan <unk> for some closing remarks. Please go ahead.
Juan C. Andrade: Where I started, which is we're off to a very good start in 2024, with an 88% combined ratio for the quarter and a 20% ROE. And from the prepared remarks and the commentary that we found over the past hour, you see that we are still in a market with strong trading conditions, generating that 17% growth that you saw overall for the first quarter. And you certainly heard about the opportunities we see in both reinsurance and insurance for the remaining part of the year.
Juan: Great. Thank you for for all the questions and excellent discussion and I will then really where I started which is we're off to a very good start in 2024 with an 88 combined ratio for the quarter and a 20% Roe.
Speaker Change: And from the prepared remarks, and the commentary that we found over the past hour or you see that.
Speaker Change: We are still in a market with strong trading conditions generating that 17% growth that you saw overall for the first quarter and then you certainly heard about the opportunities we see in both reinsurance and insurance for the remaining part of the year.
Juan C. Andrade: And lastly, you know, we're very focused on delivering our three-year plan. And I think you've heard from Mark and from us pretty clearly that we still see that ability to generate an excess of 17% TSR on an ongoing basis. So with that, thank you very much, and we'll talk about the next quarter.
Speaker Change: And lastly, we're very focused on delivering our three year plan and I think you've heard from Marc from us pretty clearly that we still see that ability to generate excess of about 17% GSR on an ongoing basis. So with that thank you very much and we'll talk to the next quarter.
Operator: And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Have a great day.
Speaker Change: Yeah.
Speaker Change: And the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Great ball.