Everest Group, Ltd. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. Everest is a Bermuda-based global insurer and reinsurer, operating through Reinsurance and Insurance segments. Amounts are in U.S. dollars.
Financial performance
| Metric | Q1 2024 | Q1 2023 / prior period |
|---|---|---|
| Gross written premiums | $4.411bn | $3.743bn, +17.9% |
| Net written premiums | $3.900bn | $3.329bn, +17.1% |
| Earned premiums | $3.652bn | $3.100bn, +17.8% |
| Total revenues | $4.133bn | $3.286bn, +25.8% |
| Net investment income | $457m | $260m, +76.0% |
| Pre-tax income | $832m | $408m |
| Net income / diluted EPS | $733m / $16.87 | $365m / $9.31 |
| Combined ratio | 88.8% | 91.2% |
| Operating cash flow | $1.102bn | $1.064bn |
Revenue and earnings growth reflected higher earned premiums and investment income, as well as a $110m year-over-year improvement in other income, primarily from foreign-exchange movements. Net investment income benefited from fixed-maturity income and limited-partnership results; management cautions that partnership valuations can be volatile.
The consolidated loss ratio was 61.3% versus 63.4%; commission and brokerage ratio was 21.4% versus 21.3%; and other underwriting expense ratio was 6.1% versus 6.4%. There was no prior-year reserve development reported in either comparison period.
Segments and material period changes
- Reinsurance: Earned premiums were $2.728bn (+22.6%) and underwriting gain was $345m, compared with $205m. Combined ratio improved to 87.3% from 90.8%. Growth was attributed mainly to property and casualty pro rata business.
- Insurance: Earned premiums were $923m (+5.6%) and underwriting gain was $64m, compared with $67m. Combined ratio rose to 93.1% from 92.3%, with higher other underwriting expenses, including costs of expanding international operations.
- Current-year catastrophe losses were $85m, versus $115m. Q1 2024 losses included approximately $70m from the Baltimore bridge collapse and $15m from U.S. East Coast convective storms; Q1 2023 losses primarily reflected Turkey earthquakes and New Zealand storms.
- Management refined the gross-written-premium estimation pattern for certain risk-attaching reinsurance treaties. It increased Q1 gross written premium but did not change total premium over treaty terms, net earned premium, or income.
Financial position and liquidity
- At March 31, 2024, total assets were $50.937bn and shareholders’ equity was $13.628bn, up 3.2% from year-end 2023. Book value per share was $313.55, up 3.0%.
- Total investments and cash were $38.148bn, including $1.544bn cash and $2.397bn short-term investments. Cash plus short-term investments totaled about $3.9bn. Management said operating cash flow and liquid investments provide ample near-term claims-paying liquidity.
- Total debt was $3.386bn: $2.349bn senior notes, $218m subordinated notes, and $819m FHLB borrowings. The FHLB borrowings mature in 2024; $1.067bn of collateral was pledged.
- Gross loss and LAE reserves were $25.211bn, up from $24.604bn at year-end. Gross reserves include $16.660bn of IBNR. Management emphasizes that reserve estimates may vary materially.
- Operating cash flow was $1.102bn; investing cash outflow was $849m and financing cash outflow was $153m. Cash ended the quarter at $1.544bn, up $107m from year-end.
- Available-for-sale fixed maturities had $1.0bn net pre-tax unrealized depreciation at quarter-end. Management attributed unrealized losses primarily to interest rates and non-issuer-specific credit spreads, and said projected cash flows supported recovery of book value.
Outlook, risks and notable items
- The filing provides no specific earnings or premium guidance. Management described recent property catastrophe reinsurance market conditions as favorable to rates and terms overall, while noting variation by line and geography; some casualty markets remain softer.
- Management expects annual positive operating cash flow generally, but warned catastrophe claim payments could reduce cash flow or make it negative in the near term. It does not anticipate significant security sales to pay claims.
- Principal risks include catastrophe severity and accumulation, reserve uncertainty, pricing and underwriting adequacy, investment-market and interest-rate movements, foreign-exchange exposure, counterparty performance, liquidity, and regulatory or tax changes.
- The Bermuda Corporate Income Tax Act imposes a 15% tax beginning in 2025 on qualifying multinational groups. Everest recorded $578m of net deferred tax benefits at December 31, 2023 related primarily to the law’s transition adjustment.
- Everest has up to $350m of catastrophe-bond protection linked to Hurricane Ian industry losses. The April 2024 industry estimate exceeded the attachment point, but the company said any potential recovery was not expected to be material.
- Q1 included $35m of treasury-share purchases and $76m of dividends paid; the declared dividend was $1.75 per share. The company reported no material change in risk factors, no other material litigation beyond ordinary-course insurance and reinsurance disputes, and effective disclosure controls.
Investor verification priorities
- Assess whether premium growth and the improved combined ratio persist, particularly as catastrophe activity and market pricing change.
- Track reserve development and assumptions, including IBNR and asbestos/environmental exposures; reported prior-year development was nil this quarter.
- Review investment income quality and volatility, including limited-partnership valuation timing and the portfolio’s unrealized fixed-maturity losses.
- Monitor catastrophe losses, recoveries and the stated limited potential Hurricane Ian catastrophe-bond recovery.
- Confirm FHLB borrowing repayment/refinancing and the availability and use of committed and uncommitted letter-of-credit facilities.
- Evaluate the future earnings and cash-tax effects of Bermuda’s 2025 corporate tax regime; the filing does not provide a quantified future impact.