As re/insurer Everest Re continues to reduce volatility in its portfolio by cutting its property catastrophe exposure, the firm’s P&C reinsurance book is now comprised of business split closer to 50/50 between property and casualty, according to Jim Williamson, Group Chief Operating Officer (COO).
Last week, the Bermuda-based carrier announced a strong start to 2022 with net income of $298 million and an improved combined ratio of 91.4%.
Across the Group, gross written premium (GWP) hit $3.2 billion and net written premium (NWP) reached $2.8 billion, representing year-on-year growth of 8.7% and 10.1%, respectively.
Within its reinsurance operation, GWP increased by 6% to $2.2 billion, as NWP improved by nearly 9% to over $2 billion. Everest Re said that the premium growth was a result of a highly successful January 1 renewal where it achieved growth in targeted classes, and the continued optimisation of its property portfolio to lower catastrophe volatility.
During the firm’s Q1 2022 earnings call, Chief Executive Officer (CEO), Juan Andrade, explained that growth “was strong in casualty and financial lines globally, particularly casualty pro rata, which continues to be supported by strong underlying rate and underwriting and increased Everest participation on treaties.”
“This is offset by deliberate and targeted reductions in our property/catastrophe exposed business as we further reduce the volatility in our portfolio. These actions resulted in significantly improved economics,” he added.
Expanding on the growth in casualty and good margin seen on the reinsurance side, COO Williamson highlighted some of the trends, including the consistent, strong margin improvement in the underlying primary casualty market.
“That’s rate, that’s limit, that’s terms & conditions, et cetera. And, we’ve been very prudent in how we’ve revealed that improvement in our loss picks,” said Williamson. “And, so, I think what you’re seeing this quarter is the result of that prudence. And it’s the result of that underlying improvement.”
Williamson went on to explain that on a year-over-year basis, Everest Re has seen an improvement in casualty pro rate in particular, as well as some other lines, that enabled it to settle on lower loss picks for those lines of business.
“We’re still being prudent. We’re still being disciplined. And we’re still not taking full credit for the trends we see. But we are starting to flow through some of that margin,” he said.
Providing some sense of the quantum, Williamson said that year-over-year, the company witnessed a roughly 140 basis point of margin improvement as a result of lower expected loss picks.
“And that was then partially offset by the change in mix, because if you look at Q1 2021 versus 2022, there is a dramatic change in our mix. We were about 60/40 property casualty this time last year. It’s closer to 50/50 now, and that’s certainly an offsetting factor as casualty carries a higher loss pick.
“But, I think all of this is a result of the market trends we’ve been discussing. And we see those trends continuing as we head into the year and we continue to see pricing in excess of even elevated loss trends,” said Williamson.