Q3 2024 Everest Group Ltd Earnings Call
Speaker Change: Good day and welcome to the Everskroup Limited 3rd Quarter 2024 earnings conference call. All participants will be on the Sonalimoid. Should you need assistance, please signal conference specialists or pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Matthew Rohrmann, Senior Vice President, Head of Investor Relations. Please go ahead.
Matthew Rohrmann: Good morning, everyone, and welcome to the Everest Group Limited third quarter of 2024 earnings conference call. The Everest executives leading today's call are Juan Andrade, President and CEO, and Marco 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 by noting that today's call will include forward-looking statements.
Matthew Rohrmann: Actual results may differ materially and we undertake no obligation to publicly update forthcoming statements. Management comments regarding estimates, projections, and similar are subject to the risk, uncertainties, and assumptions as noted in Evers SEC filings.
Matthew Rohrmann: Manager may also refer to certain non-GAAP financial measures. Available explanation and reconciliations to GAAP can be found in the earnings release and financial supplement on our website. With that, I will turn the call over to Juan.
Juan Andrade: Thank you, Matt. Good morning, everyone. Thank you for joining us.
Juan Andrade: We delivered another successful quarter with strong operating income driven by healthy underwriting results and investment income.
Juan Andrade: This resulted in an annualized total shareholder return of 19.4% and an annualized operating return on equity of 18.7% year-to-date.
Juan Andrade: These results reflect our underwriting discipline and prudent risk management.
Juan Andrade: which positioned the company to generate leading returns despite what has already been another year in which industry catastrophe losses were higher than normal.
Juan Andrade: Our thoughts are with all the people affected by these catastrophes across the globe.
Juan Andrade: from Hurricane Beryl's impact in the Caribbean.
Juan Andrade: to Storm Boris in Europe, and most recently in the U.S.
Juan Andrade: First, hit hard by Hurricane Helene in late September, and then by Hurricane Milton in early October.
Juan Andrade: It has been an active third quarter, and the impact of these natural catastrophes
Juan Andrade: Let's further strengthen our conviction that we have the right strategy.
Juan Andrade: Our reinsurance franchise is generating excellent results.
Juan Andrade: and it's differentiating itself as a lead market.
Juan Andrade: We are well positioned to benefit from attractive market conditions in a number of lines of business.
Juan Andrade: as we approach the January 1 renewals and beyond.
Juan Andrade: In our insurance segment, we made progress on a number of fronts.
Juan Andrade: including improving the portfolio mix by growing in lines of business with higher expected profit trajectories and pulling back in less attractive lines.
Juan Andrade: and continuing to gain traction internationally.
Juan Andrade: Our primary focus in insurance remains on building an increasingly profitable, resilient, and diversified portfolio.
Juan Andrade: Additionally, our investment portfolio continued to outperform, generating nearly $500 million of net investment income in the third quarter.
Juan Andrade: With that backdrop, I will now turn to our third quarter financial highlights, beginning at the group level.
Juan Andrade: We grew the company with a focus on property and specialty lines.
Juan Andrade: where we see the highest expected risk-adjusted returns.
Juan Andrade: Growth in these lines is well into the double digits for both segments.
Juan Andrade: Concurrently, we are pulling back in certain casualty lines and subclasses in North America that are less attractive and are more prone to social inflation pressures.
Juan Andrade: These disciplined cycle and portfolio management actions contributed to an improvement of 50 basis points in our attritional loss ratio.
Juan Andrade: The combined ratio included approximately 8 points of catastrophe losses from 3 hurricanes.
Juan Andrade: Canadian storms and wildfires and a major flood event in Europe.
Juan Andrade: Over the past few years,
Juan Andrade: We have proactively exited or reduced our exposure to the largest sedents in Florida.
Juan Andrade: We have lowered our share with Florida specialists.
Juan Andrade: and we have optimized our diversification throughout the state. And we have reduced our overall exposure to U.S. accounts that are heavily exposed to secondary perils, including flooding.
Juan Andrade: These actions have allowed us to grow our property catastrophe portfolio with higher levels of expected profitability and drive strong results even when events happen.
Juan Andrade: The success of these portfolio management efforts is illustrated by our Haleen loss of $78 million net of recoveries and reinstatement premiums.
Juan Andrade: based on our preliminary assessment to date.
Juan Andrade: We estimate...
Juan Andrade: that losses from Hurricane Milton, which made landfall as a Category 3 in early October, will impact Everest's fourth quarter results in the range of $300 million to $400 million on a pre-tax basis.
Juan Andrade: net of recoveries and reinstatement premiums.
Juan Andrade: Our estimated range is based on information that is preliminarily available, which projects a total insurance industry loss of $25 to $35 billion.
Juan Andrade: This, again, reinforces the importance of our actions to manage natural catastrophe volatility and build a resilient portfolio.
Juan Andrade: Turning now to our re-insurance business.
Juan Andrade: where third quarter results were once again excellent.
Juan Andrade: We continue to execute in our portfolio and cycle management initiatives to maximize risk-adjusted returns.
Juan Andrade: This was evident in growth in the quarter, driven by property catastrophe excess of loss and property pro rata, which remained attractive and where we grew in the mid to high teens.
Juan Andrade: Conversely, that's a result of our prudence in casualty lines.
Juan Andrade: Casualty Pro Rata and Casualty Excess of Loss Premium
Juan Andrade: growth rates decreased to levels in the mid single-digit range.
Juan Andrade: This is a result of the actions we have discussed in prior calls all year.
Juan Andrade: So far, year-to-date, we have actively shed over $400 million of casualty renewal premiums.
Juan Andrade: as we see these lines as less attractive and in need of further correction in terms of underlying pricing and seating commissions.
Juan Andrade: We continue to see strong opportunities to expand the portfolio and those lines with the best expected returns, primarily property and specialty.
Juan Andrade: Both the attritional loss and attritional combined ratios improved, resulting in $245 million of underwriting profit.
Juan Andrade: The quarter included catastrophe losses of $239 million, net of recoveries and reinstatement premiums.
Juan Andrade: Again, reflecting the resilience we have built into this business.
Juan Andrade: Our strategy to focus on top-tier seedings further enables us to produce consistent returns throughout the cycle.
Juan Andrade: In the aftermath of Milton and other international events, we expect property catastrophe pricing in North America and Europe to firm heading into the January 1 renewals.
Juan Andrade: Demand for our capacity has also increased.
Juan Andrade: Following recent catastrophe events and high-quality students continue to expand their relationship with us.
Juan Andrade: In addition,
Juan Andrade: Everest's underwriting strategies have allowed us to build what we believe to be meaningful embedded margin in our reinsurance reserves.
Juan Andrade: Our reinsurance segment is well positioned to continue generating strong margins.
Juan Andrade: Now turning to insurance.
Juan Andrade: our increasingly diversified insurance platform.
Juan Andrade: positions us to be agile as evidenced by our discipline this quarter.
Juan Andrade: For example, we have favorable market conditions in well-priced short-tail and specialty lines, and strong capabilities in our expanding international business. So we leaned into this, and we grew by double digits.
Juan Andrade: Conversely, we are increasingly cautious in certain casualty lines in the U.S.
Juan Andrade: as the environment remains challenging.
Juan Andrade: This is the long-term value of the increasingly diversified platform that we have created.
Juan Andrade: We can play offense
Juan Andrade: and Defense to pursue the most economically attractive opportunities.
Juan Andrade: With regard to North America, we achieved an average rate increase of 11% across the portfolio, excluding workers' compensation and financial lines.
Juan Andrade: rate in the aggregate remains above expected loss trend.
Juan Andrade: In casualty lines, such as general liability, commercial auto liability, and exes liability,
Juan Andrade: rate accelerated well into the high teens.
Juan Andrade: These rate increases are necessary to respond to the elevated loss activity that we're experiencing as an industry and as a company.
Juan Andrade: Everest continues to closely monitor the persistent problem of social inflation and legal system abuse in the United States.
Juan Andrade: In U.S. casualty lines, we are focused on continuing to take action in classes exposed to this trend, for example, real estate, habitational, and leisure accounts.
Juan Andrade: And we are taking decisive underwriting actions.
Juan Andrade: Our teams are selective on new business.
Juan Andrade: achieving strong rate increases and non-renewing underperforming accounts.
Juan Andrade: As a disciplined underwriting company, our goal is to ensure we are writing business only where pricing is adequate to earn our target risk-adjusted return.
Juan Andrade: We expect the combination of these actions to result in a higher margin and more consistently profitable book.
Juan Andrade: in addition to our standard quarterly reserve review process.
Juan Andrade: We will conclude our annual long-tailed deep dive research studies within the insurance segment in the back half of the fourth quarter.
Juan Andrade: And we will continue to take a conservative approach to the findings.
Juan Andrade: In conclusion, let me step back and summarize the status of our businesses.
Juan Andrade: Our reinsurance business is firing on all cylinders.
Juan Andrade: We are the lead treaty market for most of our global clients, and we have a nimble and profitable facultative business with a global footprint.
Juan Andrade: and insurance. Our short tail and specialty underwriting in the U.S. is strong.
Juan Andrade: and we are increasingly local and relevant to our key brokers and markets across the country.
Juan Andrade: We have upgraded important talent.
Juan Andrade: And we are investing in people and automation to keep driving that business.
Juan Andrade: Similarly, our international insurance expansion is exceeding expectations. We have hired the best leaders in the business to drive that initiative.
Juan Andrade: They've built an excellent book of business.
Juan Andrade: and all of our performance indicators are pointing in the right direction.
Juan Andrade: That leaves one area of the portfolio where we are taking ongoing and aggressive actions.
Juan Andrade: segments of our insurance casualty book in the U.S. that are exposed to the real issues of legal system abuse.
Juan Andrade: So, looking ahead, we will remain disciplined and opportunistic in our underwriting, while building franchise value through best-in-class execution for our clients.
Juan Andrade: are diversified businesses.
Juan Andrade: and our high-performing investment portfolio.
Juan Andrade: coupled with our very strong balance sheet and our significant capital strength.
Juan Andrade: Give us the flexibility and the optionality to position Everest for the long term, as we focus on delivering industry-leading returns through the site.
Speaker Change: With that, I'll turn it over to Mark to review the financials in more detail.
Mark: Thank you, Juan, and good morning, everyone. Everest had another strong quarter, delivering solid growth in operating income and net investment income.
Mark: This drove operating earnings per share of $14.62 and an annualized total shareholder return of over 19%. Our reinsurance division continues to differentiate itself in the market, delivering another strong underwriting quarter.
Mark: The insurance division continued to gain traction in key markets internationally while at the same time
Mark: growing materially in short-tail lines and remaining conservative in certain casualty lines as we continue to recalibrate the North American portfolio and focus on improving underwriting profitability.
Mark: Looking at the group results, Everest reported gross written premiums of $4.4 billion, representing approximately 1% growth in constant dollars and excluding reinstatement premiums.
Mark: The combined ratio was 93.1% for the quarter, driven by an improvement in the attritional loss ratio, offset by higher cat losses when compared to the prior year figures, relatively benign third quarter.
Mark: Cat losses of $279 million in the quarter, net of recoveries and reinstatement premiums were driven by several events globally, including Hurricanes Helene, Beryl, and Debbie, as well as weather events in Europe and Canada.
Mark: The group attritional loss ratio was 58.5%, a 50 basis point improvement over the prior year's quarter, and the group's commission ratio decreased to 21.1%.
Mark: The group expense ratio improved from the prior year to 6%, while at the same time we continue to invest in talent and systems within both franchises.
Mark: Moving to the segment results and starting with reinsurance.
Mark: Growth in the quarter was driven by property and specialty lines, while we continue to remain disciplined in casualty lines.
Mark: Property Pro Rata and Property Cat XOL grew 19% and 15% in the quarter, respectively.
Mark: And when normalizing growth in PropertyCat XOL on a 12-month basis, growth increases to 22%.
Speaker Change: As Juan mentioned, we expect pricing to firm heading into the January 1st renewals and are well positioned to capitalize on favorable market conditions, particularly in property and specialty lines.
Speaker Change: We continue to see the written premium mix shift towards property and short tail lines, which stands at 56% property and 44% casualty, a six-point shift from the prior year.
Speaker Change: The net earned premium mix stands at approximately 55% property and 45% casualty. Consistent with prior quarters, growth will continue to favor short tail line businesses, which will become more pronounced on an earned basis.
Speaker Change: The attritional loss ratio improved 60 basis points to 56.9% during the quarter. The attritional combined ratio improved 140 basis points to 83.5% as we continue to improve the scale and durability of the portfolio.
Speaker Change: in addition to the business mix benefits.
Speaker Change: The combined ratio was 91.8% and includes 9.1 points of cat losses driven by the storm activity previously mentioned, while the prior year third quarter included 6.4 points of catastrophe losses.
Speaker Change: Moving to insurance.
Speaker Change: Gross written premiums decreased approximately 2% in constant dollars to $1.2 billion.
Speaker Change: As stated in prior calls,
Speaker Change: We are proactively shaping the portfolio mix towards the most accretive lines of business, and we made further progress in the quarter. We also continued to scale our primary franchise globally.
Speaker Change: While the North America business was down overall, we continued to generate strong growth in retail property and specialty lines.
Speaker Change: Each increasing in the double digits, this growth was offset by reductions in certain casualty lines in North America, which were down in aggregate by almost 20 percent, driven by our intentional portfolio actions as Juan described earlier.
Speaker Change: Our international business continues to grow well into the double digits.
Speaker Change: And we also continue to be conservative in Monoline Workers' Comp, Medical Stop Loss, and Public Company D&O. As we stated previously, we expect the drag associated with the runoff of our A&H medical stop loss business to be completed by the end of the year.
Speaker Change: We will continue to focus on prudent risk selection, rate adequacy, and holding the line on terms and conditions.
Speaker Change: Following the third quarter we announced an agreement for Ryan Specialty to acquire our Eversports and Entertainment insurance business.
Speaker Change: The deal is a win for all parties and is well aligned with the strategic objectives of both organizations.
Speaker Change: And this transaction will be accounted for in the fourth quarter.
Speaker Change: The attritional loss ratio was 63.3% in the quarter, and this is consistent with the prior year and reflects our actions to shape the portfolio while remaining disciplined, particularly in casualty lines.
Speaker Change: The commission ratio increased by 40 basis points to 12.2% in the quarter.
Speaker Change: The underwriting-related expense ratio increased by 80 basis points as we continue to make investments in our global platform, drive underwriting discipline in North America, and scale our international operations.
Speaker Change: The segment combined ratio increased to 97.1% in the quarter, which includes 4.2 percentage points of catastrophe losses.
Speaker Change: The prior year, third quarter, benefited from a relatively benign level of cat losses.
Speaker Change: And moving on to investments, SNET investment income was $496 million in the quarter, an increase of $90 million versus the prior year, third quarter.
Speaker Change: The increase was driven primarily by higher assets under management and higher new money yields versus maturing assets.
Speaker Change: Alternative assets generated 72 million of net investment income, a slight decrease from the prior year. Overall, our book yield improved from 4.2 percent to 4.8 percent year over year.
Speaker Change: For the third quarter of 2024, our operating income tax rate was 10.7%, modestly lower than the second quarter and driven by the mix of jurisdictional profits in the quarter.
Speaker Change: Our capital strength continues to provide us the ability to pursue profitable growth and opportunistically repurchase shares.
Speaker Change: And we repurchased 272,000 shares in the quarter, amounting to $100 million, or an average of $367.03 per share.
Speaker Change: Year-to-date, we've repurchased 536,000 shares, amounting to $200 million.
Speaker Change: We will look to continue to opportunistically repurchase shares.
Speaker Change: Shareholders' equity ended the quarter at $15.3 billion or $15.6 billion excluding net unrealized depreciation on available-for-sale fixed income securities.
Speaker Change: At the end of the quarter, net after-tax unrealized losses on the available-for-sale fixed-income portfolio equaled approximately $220 million, a decrease of $716 million as compared to the end of the second quarter.
Speaker Change: resulting from interest rate decreases.
Speaker Change: an improvement of 19.1% from year-end 2023.
Speaker Change: when adjusted for dividends of $5.75 per share year-to-date.
Speaker Change: Book value per share excluding net unrealized depreciation on available-for-sale fixed-income securities stood at $361.87 versus $320.95 per share at year-end 2023.
Speaker Change: representing an increase of approximately 12.7 percent.
Speaker Change: Net debt leverage at quarter end stood at 14.3 percent, modestly lower on a sequential and year-over-year basis.
Speaker Change: In conclusion, Everest had another strong quarter, generating a total shareholder return in excess of our target.
Speaker Change: Our diversified franchises, well-positioned investment portfolio, and our meaningful excess capital positions us well going forward. And with that, I'll turn the call over back to Matt.
Matthew Rohrmann: Thanks, Mark. Operator, we're now ready to open the line for questions. We do 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: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw it, please press star then 2.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Speaker Change: And the first question comes from Yaron Kanar with Jefferies.
Yaron Kanar: Thank you. Good morning, everybody. So first, I realize that liability lines are not monolithic, but I think that the cut in premiums in the face of high teen insurance rates and embedded margins and reinsurance may cause some confusion. So I guess, what would you say to investors who may be concerned that the cuts in casualty premiums are a sign of a higher accident or loss fix to come and or for the need for reserve strengthening?
Yaron Kanar: Hi, Aaron. It's Juan Andrade. Thanks for the question. Let me start, and then I'll ask some of my colleagues to jump in as well. One of the things to keep in mind about our strategy is that diversification is one of the cornerstones.
Yaron Kanar: We're very nimble and we're very opportunistic. You see that in that 6% operating expense ratio for the quarter and that we consistently deliver. So we're able to move when we see the opportunities.
Yaron Kanar: So, for us, cycle management and portfolio management, it's what we do.
Yaron Kanar: and is what we do to ensure that we get the best possible returns. You've seen us do this before. We've done it in workers' compensation. We've done it in public DNO. We've done it with our medical stop-loss book, and we certainly did it in our property book back in 2022 before rates firmed up prior to Hurricane Ian.
Yaron Kanar: So we see the best opportunities today, as I just said in my remarks, in property and specialty lines.
Yaron Kanar: And while there's still some casualty lines out there that we like, there's also others that we don't, given the environment. The environment remains elevated.
Yaron Kanar: We've stated our intentions previously to achieve a more optional balance in our portfolio, particularly in North American insurance. We've also talked about before the fact that in our reinsurance portfolio, we're starting to skew the mix more towards property catastrophe and property in general because of the rate and the terms and conditions that we like.
Yaron Kanar: Lost trend is also elevated, right? And it has been elevated for quite some time. And we do expect social inflation to remain an issue. That's why we're being cautious in these lines of business.
Yaron Kanar: and this is one of the reasons why we've stated in the past that we're changing the mix of our portfolio to be more focused on those lines of business that we find more accretive. So really, none of this is new news. I mean, it's information that we've talked about publicly in the past.
Yaron Kanar: And it's really about constantly examining the portfolio to create the highest quality book.
Speaker Change: Got it. And then maybe shifting a little bit here, do you still expect to achieve the updated 93 to 94 reported combined ratio guide for insurance that you offered in the last quarter and then the second half of this year?
Speaker Change: Well, Jaron, it's Mark. Good morning. So I think the 93 to 94, it really depends on where we are with the CAT. I think the fundamentals underneath that are still there. Probably more importantly where we were
Speaker Change: guiding towards was the 92 in the back half of 2025 and I think we we still feel confident about getting to that target.
Speaker Change: Ultimately, you're going to see several pieces, you know, move us towards that direction. So starting with increasing the scaling of the premium in the insurance franchise, the mix of business, I think will provide us with
Speaker Change: A favorable combined split and then obviously a focus on expense leverage.
Speaker Change: Thank you.
Speaker Change: Thanks, Eric.
Speaker Change: Thank you. And the next question comes from Gregory Peters with Raymond James.
Gregory Peters: Can you frame for us how we should think about the expense ratio of both commission and other underwriting expenses in the insurance segment when we model out in 2025 and 2026?
Speaker Change: Yeah, so, Greg, I think on the commission ratio, you're going to see something that is...
Speaker Change: broadly stable with what you're seeing in the third quarter,
Speaker Change: as we complete our shutting of A&H business in 2024. But the mix of business, I think, will keep it relatively stable towards that 12%-ish.
Speaker Change: type level. The general expense it's really two pieces. There's we continue to invest in our franchises both
Speaker Change: North America and internationally and so those dollars get spent up front
Speaker Change: in terms of people, systems, and so on when we're setting up.
Speaker Change: Our locations for further development and the earned premium that we expect thereafter is really what's going to drive that ratio down. So we're still in somewhat of a growth or investment phase in certain areas of insurance.
Speaker Change: So I could see the expense ratio being somewhat elevated now, but fundamentally moving down.
Speaker Change: as we get that premium scaling.
Speaker Change: And we've seen the benefits of some of the additions we made a couple of years ago.
Speaker Change: especially internationally in terms of getting those teams to develop their premiums in their markets. And so we know that can be done, we feel good about it, it's really more of a timing issue than anything else.
Speaker Change: Maybe the recent hurricane Milton may stabilize it a little bit, but you know we're approaching year-end and I know the reinsurance market always talks up price and I know the seedings always talk down price.
Speaker Change: go through the next two months.
Speaker Change: I know you said in your comments, Juan, that you expect pricing to hold and maybe it's stable, but it feels like the pricing trend is down. So maybe you could give us some updated perspectives on pricing and reinsurance as we go into the January 1st renewals.
Juan Andrade: No, for sure, Greg. Thanks for the question. I hope everything was fine with your home down in Florida given the impact of the hurricanes. Look, what I said in my remarks is that we expect firming
Juan Andrade: to take place at the 1-1 renewals and we see that and I think you're right that when we were all in Monte Carlo not too long ago the talk was probably that pricing could come down somewhere around minus 5 minus 10 for US property CAD etc
Juan Andrade: But I think there's a few things that have changed since Monte Carlo similar to what happened in 2022 post Ian You know, we had two major storms hit the United States right in Milton and Helene within essentially a week of each other
Juan Andrade: And I think that certainly sets the perspective on what's happening out there, right? I mean, we're seeing rapid intensification, we're seeing very powerful storms, etc.
Juan Andrade: So that's the U.S. component.
Juan Andrade: You know, probably down to minus 5, etc. But you have the floods that took place this year, last year. Now you have Storm Boris in the third quarter, etc. So our thinking is that pricing is likely to go up plus 5, plus 10.
Juan Andrade: both in the U.S. as well as in Europe. And, you know, ultimately we'll see at the end of the day when the dust has settled, but I know our teams are actively quoting right now, and we're actively engaged in that renewal process.
Gregory Peters: Got it. Thanks for the answers. Sure. Thanks, Greg.
Speaker Change: Thank you. And the next question comes from Josh Shanker with Bank of America.
Josh Shanker: I definitely want to follow up on that comment. So is this a negotiation going on right now? Is there a tough sort of argument? If you talk to brokers, I think everyone says pricing should be down, you know.
Josh Shanker: 5% now, I think it used to be down 5%, maybe down 5% now. This is confident you're saying plus 5%, plus 10% here. Is this a December 31st sort of negotiation that's going to bear out, or are there firm orders that are telling you...
Speaker Change: Positive pricing is in the offing.
Speaker Change: Sure, Josh, this is Jim Williamson.
Jim Williamson: I mean we're not at firm order terms yet, it's very early in the process. I do expect this to be fairly down to the wire in terms of the negotiation, but if you step back for a minute and think about some of the fundamentals, some of the things Juan touched on. First of all,
Jim Williamson: It's been a very active CAC quarter. Now, it has been a little less active if you're a reinsurer than if you're a primary, but the fact is the losses are in the system. It's over $100 billion a year again.
Jim Williamson: We've had several major hurricanes, and the most recent one, while I think not as bad as people had feared, I don't think it takes a lot of imagination to recall that if it shifted to the north and...
Jim Williamson: hit Tampa, it would have been a much larger, maybe 2x or more type of event. So that's in everyone's mind.
Jim Williamson: The other factors that I think are critical, and it is against the backdrop of elevated loss and climate change and capital management, is our clients are looking to buy more capacity, demand.
Jim Williamson: is rising quite substantially, and we've already had...
Jim Williamson: A number of conversations with core clients who are looking to buy more.
Jim Williamson: So that is certainly a factor, and then lastly, I would say...
Jim Williamson: Our clients in particular are looking to buy more from Everest. I mean, the quality of our capacity is second to none.
Jim Williamson: And I think that just peaks that demand for our...
Jim Williamson: for our paper and, you know, I mean it's something north of a third of our North America cat deals have non-concurrent terms, which I think will be very favorable for us as well. So I think all of that ladders up to a situation where
Jim Williamson: We think rates will be firming and we think expected returns will be very strong.
Speaker Change: And just quickly, you mentioned this potential loss that Milton could have done. That's really about 6-1 more than it's about 1-1, or do you think it has a 1-1 impact?
Speaker Change: No, I think it has, it absolutely has a one-one impact. Now clearly it's going to have more of a one-one impact on diversified U.S. CAT programs than it would on, you know, a program in Europe. Europe's got its own problems, obviously. So there is going to be some
Speaker Change: Some differentiation based on where in the world the program is, but I think for all U.S. programs, they all have a variety of southeast exposures. And I think the fact that there is this intensified hurricane activity in the near-miss, I absolutely think it will weigh on pricing.
Speaker Change: Thank you. And then, you know, Mark's comments, he talked about the changes in the mix.
Speaker Change: in the re-insurance business and how that's going to affect the loss ratios. Just to clarify, should we expect that as the...
Speaker Change: A larger portion of short-tail business works its way in. We should see the loss ratio decline year over year with a modestly higher cat load to it.
Speaker Change: Josh, it's Mark. I just want to clarify, are you you're talking about insurance or reinsurance? I'm talking about reinsurance, the pullback from longer tailed lines and short tailed lines.
Speaker Change: Thank you so much.
Speaker Change: Got it thank you.
Speaker Change: Thanks, Alex.
Speaker Change: Thank you and our next question comes from Meyer Shields, with Keefe, Bruyette and woods.
Speaker Change: Yeah.
Meyer Shields: Great. Thank you good morning all.
Meyer Shields: I guess going back to the reserve.
Meyer Shields: If I'm interpreting your comments correctly I think there is much more confidence in the reinsurance segment reserve.
Meyer Shields: And then in insurance I was hoping you could walk us through the differences there that that lead to that differentiation.
Meyer Shields: Yes, Mike it's Mark again, so maybe just.
Meyer Shields: The commentary.
Meyer Shields: Set the stage with where we are industry at large here. So I think we're clearly seeing north American casualty lines with.
Meyer Shields: Elevated loss activity.
Meyer Shields: Been persistent for several quarters for quite some time and so that gives a generally higher risk environment for for U S. Casualty. So you don't know what the outcomes are going to be and you don't know.
Meyer Shields: The ultimate length of time, so it creates higher risk when you look at our reinsurance portfolio, you've got a very well diversified portfolio of short tail financial lines casualty International business.
Meyer Shields: Is that you still have a little bit of a J curve effect and the investment in the international business, but we see that earned premium starting to come online and frankly, the arent premiums coming in a bit better than what we had anticipated in our own plants. So I think that's something to keep in mind. The other thing for us.
Meyer Shields: We've opened up the countries to what I answered just to Myer.
Meyer Shields: We wanted to open at this point in time, so what you're going to see us doing particularly in 2025 is really dig in deeper into these countries that we've already made investment and so that should help certainly helped the growth rate the earned premium come in from that perspective.
Speaker Change: Gotcha, and then assuming international is largely it's largely property.
Speaker Change: It's mostly short tail. So it's the majority of the property. We write also a lot of specialty type business think about marine.
Speaker Change: Those kinds of things, but there is a component of international casualty and a component of our financial lines, but youre right depending on the region in the country that is going to be the minority. So that's one of the points I've made in prior calls that.
Speaker Change: Part of the strategic reason for doing this is we do get a mix benefit on the loss ratios from this business.
Speaker Change: Tend to run significantly better because it is more property.
Speaker Change: Presentations, there and that's why you don't see that much of our improvement.
Speaker Change: In the combined ratio versus the comparative despite a shift in the mix of business.
Speaker Change: Okay.
Speaker Change: Understood. Thank you.
Speaker Change: Thanks, Dave.
Speaker Change: Thank you next question comes from Rich and gets off with Wells Fargo Securities.
Speaker Change: Hi, good morning. Thanks.
Rich Wells: How long do you think it will take for casualty. This is reinsurance specific it's a firm enough in terms of just given its long tail in nature for you to become more constructive I know, it's not going to be like a huge pricing shifts like we saw in property, but I guess, what do you need to see there for you to kind of return to growth in those segments.
Rich Wells: Yes Christian this is Jim Williamson from one thing to keep in mind, most reinsurance casualty is on a quota share basis, and so what's really going to drive our view of any individual account is a couple of things. It's how much rate. Obviously is our client achieving what is the composition of their portfolio.
Rich Wells: And then and then what ceding Commission does.
Rich Wells: Because that deal demand to close and so what we've seen is obviously not all portfolios are created equal we price each and every deal ground up there.
Rich Wells: There are many deals we like we leaned into some of those deals in 2024 and actually expanded share with core clients and then other deals.