Q1 2025 Earnings Summary
- Midyear Renewal Opportunities: The executives highlighted attractive terms in upcoming midyear renewals—such as in Florida—with growing demand for higher limits that could boost premium growth and portfolio quality.
- Strong Capital Returns and Share Buybacks: The management’s commitment to share repurchases—$200 million in Q1 with further buyback potential—and improving returns on capital demonstrate robust financial discipline and shareholder-friendly capital management.
- Attractive Risk-Adjusted Returns in Specialty Lines: Despite moderate pricing pressure, both the reinsurance and insurance divisions continue to secure attractive margins on specialty lines, supporting a sustainable and profitable growth profile.
- Elevated Combined Ratio and Catastrophe Losses: The Q&A discussion highlighted that the combined ratio stood at 102.7% due in large part to significant catastrophe losses (e.g., $442 million from the California wildfire), signaling ongoing underwriting challenges that could weigh on future profitability.
- Weakening U.S. Casualty Business: Nearly 50% of U.S. casualty written premium was not renewed this quarter, reflecting the company’s effort to shed unprofitable business. This significant reduction in core premium volume raises concerns about the ability to sustain premium growth and overall earnings.
- Margin Pressures from Pricing and Reserve Concerns: Moderating property catastrophe pricing along with potential inflationary/tariff pressures—which necessitate more conservative loss trend assumptions and could lead to higher reserve charges—may erode margins over time, despite current risk management efforts.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +3% | Total Revenue increased from $4,133M in Q1 2024 to $4,263M in Q1 2025 (+3% YoY) driven by growth in both Premiums Earned (+5.5%) and Net Investment Income (+7.5%), despite being partially offset by the swing in Other Income. |
Premiums Earned | +5.5% | Premiums Earned grew from $3,652M to $3,852M (+5.5% YoY), reflecting favorable timing differences in premium recognition and underlying increases in gross written premium performance from key business lines when compared to the previous period. |
Net Investment Income | +7.5% | Net Investment Income rose from $457M to $491M (+7.5% YoY), indicating improved returns from the investment portfolio likely supported by better performance in fixed maturity instruments and overall favorable market conditions relative to the prior period. |
Other Income | Shift from +$31M to –$73M | Other Income deteriorated sharply, moving from a positive $31M in Q1 2024 to a negative $73M in Q1 2025; this swing is largely due to adverse foreign currency exchange effects and other non-recurring items that reversed the prior period’s favorable results. |
Incurred Losses and LAE | +29% | Incurred Losses and Loss Adjustment Expenses (LAE) increased by approximately 29% (from $2,237M to $2,893M), driven by a rise in current year attritional losses and higher catastrophe losses—including specific events such as the Washington D.C. aviation accident and Southern California wildfires—compared to Q1 2024. |
Net Income | –71% | Net Income fell significantly, declining from $733M in Q1 2024 to $210M in Q1 2025 (approximately 71% YoY decrease), reflecting the compounded negative impacts of a deteriorated underwriting performance, increased incurred losses, and the negative swing in Other Income that overwhelmed the gains from higher investment income. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Attritional Loss Ratios | FY 2025 | 68.3% | No specific quantitative guidance; qualitative note of applying meaningful risk margins | lowered |
Catastrophe Pricing | FY 2025 | no prior guidance | Moderate catastrophe pricing pressure expected | no prior guidance |
Share Buybacks | FY 2025 | Planned opportunistic share repurchases | Continue meaningful share repurchases | no change |
U.S. Casualty Portfolio Remediation | FY 2025 | no prior guidance | On track to complete its one-renewal strategy for U.S. casualty lines | no prior guidance |
Capital Deployment | FY 2025 | no prior guidance | Confidence in supporting growth opportunities and share repurchases simultaneously with no constraints | no prior guidance |
Global Loss Triangles | FY 2025 | no prior guidance | Plans to publish global loss triangles in June 2025 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Capital Management & Share Buybacks | Q2 2024 saw share repurchases of $65 million while in Q4 2024 no buybacks were executed, though executives highlighted that the share price was compelling for future repurchases. | Q1 2025 featured a major buyback of $200 million funded out of excess capital, with a clear commitment to continue repurchases, signaling a disciplined capital allocation approach. | Increased activity and confidence in shareholder returns with a more aggressive buyback program, signaling strong capital discipline. |
U.S. Casualty Portfolio Performance & Remediation | Q2 2024 mentioned shedding approximately $300 million in casualty renewal premiums with cautious underwriting. In Q4 2024, executives reported a 40% non-renewal rate and significant reserve strengthening to remediate the portfolio. | Q1 2025 reported that 50% of casualty written premium with renewal dates was not renewed, coupled with aggressive rate increases (approx. 20%) to improve loss ratios and margin. | Consistent aggressive remediation in the casualty portfolio with incremental tightening of underwriting standards and higher rate increases to drive profitability. |
Catastrophe Losses Exposure & Property Catastrophe Reinsurance | Q2 2024 discussed moderate CAT losses (around $135 million) alongside more than 25% growth in property CAT reinsurance, while Q4 2024 highlighted losses from hurricane events and wildfire impacts with adjustments in European exposures. | Q1 2025 focused on significant CAT losses from California wildfires (with nearly $442 million in wildfire losses) while maintaining disciplined property reinsurance pricing and attractive expected returns despite moderate pricing pressures. | Steady risk management of CAT exposures with ongoing focus on attractive reinsurance returns; challenges persist yet are managed through disciplined pricing and portfolio adjustments. |
Pricing Strategy, Rate Increases & Margin Pressures | Q2 2024 noted average rate increases in the mid- to high-teens with disciplined underwriting against elevated loss trends. In Q4 2024, property pricing saw declines but casualty lines benefited from rate increases, despite margin pressures from higher expenses and reserve actions. | Q1 2025 continued to see strong rate increases (e.g., 20% on casualty lines) despite CAT pressure that added points to the combined ratio, indicating ongoing efforts to maintain margins through efficient pricing and selective portfolio management. | Persistent emphasis on pricing discipline to offset margin pressures; the company balances declining property pricing with robust casualty rate increases, maintaining a cautious yet proactive outlook. |
International Expansion, Portfolio Diversification & Execution Risks | Q2 2024 highlighted new market entries into Mexico, Colombia, Australia (with plans for Italy) and noted diversification into short-tail lines, while Q4 2024 underlined steady international growth with deliberate focus in 12 markets despite regulatory and execution challenges. | Q1 2025 reported strong international traction particularly in the U.K., Europe, and Asia with best-in-class accounts; simultaneously, the U.S. casualty portfolio is being aggressively remediated, indicating balanced global diversification while managing execution risks. | Sustained international expansion and diversification strategies remain core, with execution risks acknowledged but mitigated by local expertise and disciplined underwriting, reinforcing long-term strategic positioning. |
Reserve Management and Underwriting Discipline | Q2 2024 mentioned quarterly reserve reviews, prudent loss picks, and a diversified book benefiting reserve stability. In Q4 2024, Everest strengthened U.S. casualty reserves aggressively with significant reserve adjustments and disciplined shedding of high-risk business. | Q1 2025 highlighted improved reserve positions with significant risk margins above actuarial estimates and a continued rigorous approach to underwriting discipline across casualty, property, and specialty lines. | Increasingly stringent reserve management and underwriting discipline have become a consistent, fundamental pillar for managing risk and ensuring profitability, with progressively tightened loss picks and concentrated focus on quality business. |
Renewal Opportunities | Q2 2024 recorded excellent midyear renewals with property book growth over 25% and significant shedding of unprofitable casualty premiums. Q4 2024 reported a slight decline in reinsurance premiums due to casualty discipline during the January 1 renewal. | Q1 2025 expectations for midyear renewals are optimistic, showing 15% property growth and attractive terms, although casualty lines continue to be trimmed aggressively (50% non-renewals noted), maintaining a clear focus on favorable reinsurance and insurance renewals. | Ongoing improvement in renewal opportunities for property and specialty lines while continuing a focused, remedial approach to underperforming casualty renewals, indicating a strategic rebalancing of the portfolio. |
Specialty Lines Performance | Q2 2024 saw specialty lines grow by 26% driven by a shift toward short-tail lines and attractive loss ratios, while Q4 2024 noted growth above 30% offset by casualty specialty declines and runoff in A&H medical stop-loss. | Q1 2025 reported solid performance with over 20% growth in North America and robust growth internationally across specialty lines such as engineering, parametric, marine, and aviation. | Consistently strong specialty performance with steady growth and attractive margins, reinforcing the company's strategy to focus on high-margin, specialized underwriting despite competitive pressures. |
Social Inflation and Legal System Risks | Q2 2024 described social inflation as primarily a U.S.-specific issue influencing elevated loss trends, prompting a shift towards international markets less affected by these risks. Q4 2024 noted that sophisticated clients understand and manage these risks. | Q1 2025 maintained high casualty rate increases driven by ongoing concerns about social inflation, with a focus on portfolio management and selective underwriting to counteract legal system risks in the U.S.. | Persistent risk factor where social inflation continues to drive elevated U.S. casualty rates, prompting higher premiums and cautious underwriting, while international expansion serves as a mitigation strategy; sentiment remains cautious across periods. |
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Return on Capital
Q: Are returns on capital improving?
A: Management noted that, excluding risk margin effects, returns on both reinsurance and insurance are improving thanks to strong fundamentals and favorable mix, implying an overall better return on capital. -
Buyback Capacity
Q: What is the share buyback scope for 2025?
A: They emphasized robust capital strength that supports both growth and share repurchases, with a $200 million buyback in Q1 and expectations for further repurchases, albeit with some seasonal caution. -
Buyback Funding
Q: Are buybacks funded by FHLB borrowings?
A: Management clarified that buybacks are funded entirely from excess capital; FHLB borrowings are handled separately as spread trades to enhance investment income. -
Property Returns
Q: Will property cat returns remain attractive?
A: Despite some rollback in property pricing, management is confident that property catastrophe returns stay very attractive, ensuring continued deployment of capital at favorable rates. -
Reinsurance Attrition
Q: What’s driving attritional loss ratio changes?
A: Aside from predictable aviation losses, the conservative risk margins in casualty drive attritional loss ratios, with a lag between premium reductions and net earnings that smooths mix improvements over time. -
Casualty Primary
Q: Are primaries pricing adequately?
A: Management stressed that primary markets maintain strong pricing and overall portfolio discipline, selecting only high-quality cedents to preserve favorable loss ratios. -
Insurance New Business
Q: How is new business affecting growth?
A: Although U.S. casualty premiums are flat due to remediation, new business in quality accounts and specialty lines—especially internationally—is bolstering the overall mix. -
Florida Growth
Q: Is the Florida midyear renewal attractive?
A: They expect the 06/01 renewal to be very attractive in Florida, driven by rising demand and solid client relationships across domestic and nationwide markets. -
European Catalysts
Q: Any shifts in European cat modeling?
A: Adjustments in Europe reflect significant changes in weather patterns, leading to a smaller European cat book while global pricing assumptions remain largely unaffected. -
Wildfire Recovery
Q: How will wildfire reimbursements be handled?
A: With most wildfire losses reinsured, potential subrogation recoveries will benefit the company over time, though these are slow to materialize and not currently credited. -
Reinsurer Pricing
Q: Is moderate cat pricing pressure concerning?
A: While there is some rollback from earlier peak pricing, the reinsurance market continues to deliver robust expected returns, supporting disciplined capacity deployment. -
Aviation Loss
Q: How significant was the aviation loss?
A: The aviation loss, amounting to several hundred million dollars, is consistent with expectations, and strong underwriting expertise ensures it remains manageable. -
Attritional LRs
Q: Are attritional loss ratios on target?
A: Excluding aviation losses, the attritional ratios in both insurance and reinsurance segments align with forecasts, reflecting disciplined underwriting and careful risk margin application. -
Exposure Assessment
Q: Is a 7–8% aviation share overexposure?
A: Management considers the 7–8% share in aviation typical and well-managed, crediting the expertise of top-tier underwriters to keep exposures in check. -
Reserve Review
Q: Are reserve review frequencies changing?
A: Loss trend assumptions are now reviewed more frequently, but formal reserve reviews remain annual, with ongoing quarterly assessments to stay current. -
Reserve Charge
Q: How are last year’s reserve charges performing?
A: The reserve charges are holding up well, with current performance meeting actuarial estimates and reinforcing confidence in the strength of the reserve position. -
Renewal Layers
Q: Will pricing differ between lower and upper layers?
A: Management expects most demand to concentrate in the upper layers—where cost barriers are lower—while lower-layer demand remains limited by pricing constraints. -
Renewal Terms
Q: Any changes in property reinsurance terms?
A: There is no expectation for changes in attachment points or other contractual terms at the midyear renewal, reflecting consistent discipline in the market. -
Tariff Impact
Q: How will potential tariffs affect loss costs?
A: With loss trend reviews now conducted more frequently, any tariff-induced cost pressures will be quickly addressed, minimizing impacts on open claims.
Research analysts covering EVEREST GROUP.