Everest Re Group, Ltd. Q3 FY2025 earnings call

• Strategic Actions: Exited global retail insurance; established a $1.2 billion adverse development cover for North America insurance division covering reserves for accident years 2024 and prior.
• Quarterly Performance: Group gross written premium $4.4 billion, down 1% YOY. Combined ratio 103.4%. Reinsurance gross written premium $3.2 billion, down 2% YOY, combined ratio 87% (improved YOY). Insurance: 1-Renewal Strategy remediated North America casualty book, 45% of U.S. casualty did not renew.
• Reserves and Capital: Strengthened U.S. casualty reserves by $478 million; sold retail insurance renewal rights to AIG, releasing capital. Entered $1.2 billion adverse development cover for North America insurance subject reserves.

Reinsurance: Gross written premium was $3.2 billion, down 2% year-over-year. Combined ratio was 87%, improving year-over-year, driven by lower cat losses and favorable prior year development. Property and other short-tail lines in Reinsurance increased by almost 5% year-over-year, while casualty and financial lines decreased by over 10%. Insurance: Group gross written premium was $4.4 billion, down 1% from last year. The combined ratio for the quarter was 103.4%. The team's 1-Renewal Strategy remediated the North America casualty book, with 45% of U.S. casualty business not renewing. The retained Wholesale & Specialty insurance historically outperformed retail by approximately 10 combined ratio points.

• Expect improved returns on capital for Everest and value creation for shareholders.
• Capital relief from transactions expected to become more visible in the back half of 2026.
• Resuming share repurchases as an attractive capital deployment opportunity.

• Market conditions in Reinsurance, especially cat-exposed lines, could change. - Potential spillover of casualty reserve issues to reinsurance book if not managed properly. - Counterparty credit risk with non-rated reinsurers in the ADC transaction.

Q: In the past, you've spoken about increasing the international component of the primary insurance book. With all the moving pieces, particularly around the renewal rights and new focus on Wholesale & Specialty side, is there any change in that game plan?

A: Decision to divest retail business will blunt international growth in short term. Strategic reasons. Wholesale & Specialty business reorganized, organic growth opportunities with fewer investments in people and infrastructure.

Q: How are you thinking about pricing at the 1/1 renewals, just given what we know through hurricane season to date? And does the ADC and renewal rights sell increase your appetite for you to go and get new business now that you're done through the 1-Renewal Strategy and you're getting a bunch of capital alleviation over the next 12 months?

A: Market consensus prices are going to come off a bit. Business still well priced if that happens. Not a factor in determining how much cat to write, more about underlying dynamics of cat market.

Q: Clarification on your comment there was no loss corridor. I'm just curious how wide of a search did you conduct? This is not a knock on Longtail Re, but just doing a deal with a non-rated reinsurer piqued my interest given the capital discussion on this call.

A: Deal is split into 2 layers fronted by rated carriers. Ran comprehensive process, used Gallagher Re as broker. Enormous respect for Mike Sapnar and pre-existing relationship with Stoneridge Asset Management. Outcome is fantastic for Everest and Longtail.

Q: You said there were 2 fronting companies. It's like retrocession. Can you share a little bit more detail behind that?

A: The $1.2 billion gross limit is split into 2 layers. First layer fronted by State National, second by MS Transverse. Longtail sits behind with collateral arrangements. We face off against rated balance sheets.