Juan Andrade, President and CEO of Everest Re, described the company’s Q1 2023 results as excellent. The company had significant top-line growth. It saw an underwriting profit, operating income and net income that are all up meaningfully in the quarter, while generating a 17% operating ROE.
The company has seen success in the reinsurance segment of the business which has provided it with meaningful margin expansion. It is expected to grow rapidly in 2023 due to the reinsurance franchise being scalable. Everest Re’s combined ratio is hoped to continue to improve on the strength of the rate and improved terms and conditions and mix of business.
Andrade also said the earned premium that the company saw coming through in Q1 2023 was mostly from the fourth quarter of 2022, as this earns into the second quarter, third quarter and fourth quarter, the earnings are going to be at a much higher rate levels than that experienced on January, and of the April renewals.
Over the next few quarters, the company expects this to be very accretive and to have a positive impact on the portfolio.
Speaking during the firm’s Q1 2023 earnings call, Jim Williamson, the Chief Operating Officer and Head of Reinsurance at Everest Re, commented, “We had excellent operating performance in Q1, the Jan renewal and really in the lead up to the January renewal which really translated into us having a broad set of opportunities. And when I say broad, I really mean just about every class of business starting clearly with property cat, but also including casualty, specialty lines, financial lines really in every market around the world. And our growth was very broad-based that way, including our North American treaty business, our international treaty business as well as facultative.”
At the January renewals the company saw rate rises in North America by 50%, while there was a 40% rise in international property cat. This trend continued into the April renewals where the company saw a 40% increase in North America, mid to upper 20s internationally, which included markets that started taking rates in 2022.
Williamson also mentioned that Everest Re saw great opportunities in both casualty and property pro rata. He gave credit to the ability of the company to constructively engage clients, giving the firm preferred positioning around those opportunities. On the casualty side, Everest Re is also seeing rate that continues to stay ahead of trend.
Williamson commented that ceding commissions are also starting to come down. On the property side, the company is at the very beginning stages of a major correction in the primary property market, where it will get an opportunity to participate with its clients on a pro-rata basis.
Everest Re’s April renewals have been outstanding, the execs noted, while the May renewals were a little bit smaller but also had excellent results. The company is seeing a very consistent theme with property as it goes through the renewal periods, and is achieving or exceeding the expected return levels that it saw with the January renewals.
Williamson mentioned that they view June renewals to be consistent with that, “We think the market will continue to dislocate, we will have incredible opportunities to grow with our best-in-class clients and really allocate our capacity to superior returns. And again, I would expect that to be at or above what we saw on January 1.”
Even though Everest Re has been seeing a tremendous amount of really high-quality opportunities, it is going to take time for that to earn into the company portfolio. They have started to see the effects a little bit in the Q1 results of 2023.
“Obviously, the effect of Jan 1 begins to earn in. An important point I would make on that earning is that, at the same time that we’re attacking this incredible opportunity, we’re also being very prudent on our loss picks. Remember that cat XOL does not get booked at least at Everest with a 0% attritional loss ratio. We are booking a very prudent attritional loss ratio. And our hope, obviously, is that we don’t need those dollars, but we want them to be there in the event that there are attritional cat losses that don’t meet our cat threshold. And so, over the next quarter, two quarters, three quarters, you will start to see that become a bigger and bigger part of our portfolio, and that will exert downward pressure on our loss ratio and our combined ratio.”
