EG Q2 2025: Property Cat Reinsurance Yields >25% as Loss Ratios Climb
- Highly attractive property catastrophe returns: The company’s property cat reinsurance yields returns north of 25%, with peak zones such as Southeast windstorm delivering even higher returns, making it more appealing than share repurchases.
- Strong international insurance expansion: The leadership highlighted a remarkable organic build, growing the international insurance business from over $1B to nearly $2B in premium within three to four years while turning underwriting profit, demonstrating robust market penetration and operational success.
- Effective portfolio and expense management: The aggressive and precise casualty remediation process is set to complete soon, which, alongside sound reserve management practices and operating leverage improvements, positions the company for sustainable profitability and margin growth.
- Elevated Expense Ratios: The insurance segment’s expense ratio increased to 18.5% (up from 16.8%) due to aggressive North American casualty remediation and international expansion efforts, which could pressure near-term profitability.
- Worsening Underlying Loss Ratio: Q&A discussion highlighted an underlying insurance loss ratio of around 69%, a 6 percentage point year-over-year rise, indicating persistent underwriting challenges and margin pressure.
- Increased Catastrophe Risk Exposure: The company is deploying additional capital into property catastrophe exposures, resulting in higher potential maximum loss (PML) levels that could lead to heightened volatility if severe events occur.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Underwriting results | Q2 2025 | no prior guidance | Discussed as a key focus area during the Q2 2025 call | no prior guidance |
Reserve positions | Q2 2025 | no prior guidance | Mentioned in the Q2 2025 discussion | no prior guidance |
Investment income | Q2 2025 | no prior guidance | Highlighted as part of the Q2 2025 performance discussion | no prior guidance |
Strategic actions | Q2 2025 | no prior guidance | Noted as key discussion points during Q2 2025 | no prior guidance |
Attritional Loss Ratios | FY 2025 | Shared qualitative insights with no specific guidance in Q1 2025 | no current guidance | no subsequent guidance |
Catastrophe Pricing | FY 2025 | Moderate catastrophe pricing pressure expected for the remainder of FY 2025 | no current guidance | no subsequent guidance |
Share Buybacks | FY 2025 | Indicated plans to continue meaningful share repurchases throughout FY 2025 | no current guidance | no subsequent guidance |
U.S. Casualty Portfolio Remediation | FY 2025 | On track to complete its one-renewal strategy in Q1 2025 for U.S. casualty lines | no current guidance | no subsequent guidance |
Capital Deployment | FY 2025 | Expressed confidence in supporting growth opportunities and share repurchases in Q1 2025 | no current guidance | no subsequent guidance |
Global Loss Triangles | FY 2025 | Announced plans to publish global loss triangles in June 2025 during Q1 2025 | no current guidance | no subsequent guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Property Catastrophe Returns and Risk Exposure | Q1 2025 emphasized attractive returns despite pricing moderation and disciplined risk management ; Q4 2024 noted maintained attractive returns with careful underwriting and reserve adjustments. | Q2 2025 highlighted very strong property catastrophe rates, high risk‐adjusted returns, and strategic exposure management with optimal risk layers. | Consistent confidence with refined risk layering and slightly improved return messaging. |
International Insurance Expansion | Q1 2025 showed strong growth and modest profitability with disciplined underwriting in key markets ; Q4 2024 stressed double-digit growth and focus on increasing scale in the 12 markets. | Q2 2025 reported 23% growth, improved margins, and a strategic focus on deepening presence in existing international markets through investments and scale. | Continued positive momentum with consistent expansion and deeper market penetration. |
U.S. Casualty Business Remediation and Performance Challenges | Q1 2025 detailed an aggressive one-renewal strategy with significant non-renewals and strong rate increases , while Q4 2024 highlighted heavy reserve strengthening and trimming of U.S. casualty exposures. | Q2 2025 reiterated aggressive remediation nearing completion in Q3 2025 with high non-renewal percentages and improved rate increases on retained accounts. | Remediation efforts remain aggressive and consistent, with gradual portfolio improvement over time. |
Capital Management and Share Buybacks | Q4 2024 saw a pause in buybacks due to reserve review concerns , but Q1 2025 then showcased active repurchases and a strong capital position. | Q2 2025 continued share repurchases of $200 million (581,000 shares) while adopting a tempered approach due to seasonal considerations. | A shift from a temporary pause to active and disciplined buybacks, reinforcing a robust capital management strategy. |
Underwriting, Reserve, and Expense Management Challenges | Q1 2025 reported disciplined underwriting with combined ratios around 102.7%, conservative reserve practices, and higher expense ratios due to technology investments ; Q4 2024 focused on reserve strengthening amid wildfire losses and elevated insurance expense ratios. | Q2 2025 continued to face underwriting losses in insurance, an 18.9% expense ratio, and maintained robust reserve management and risk margins in both insurance and reinsurance. | A steady, cautious approach persists across periods with ongoing efforts to balance underwriting discipline and expense management. |
Pricing Dynamics, Renewal Opportunities, and Rate Adjustments | Q1 2025 highlighted aggressive casualty rate increases (around 20%) and stable property pricing, while Q4 2024 indicated a modest decline in property catastrophe premiums (5%-15%) and necessary adjustments. | Q2 2025 showcased strong pricing dynamics in property catastrophe markets, well-structured renewals (June 1 and July 1), and notable casualty rate increases averaging 16%. | An improving pricing environment with robust renewals and effective rate adjustments marking a recovery from earlier moderation. |
Emerging Social Inflation and Legal System Abuse Risks | Q4 2024 explicitly addressed a heavy social inflation environment and risks from legal system abuse, prompting disciplined underwriting and client selection ; Q1 2025 mentioned social inflation concerns with heightened loss picks and frequent reviews. | Q2 2025 reaffirmed that social inflation dynamics remain persistent yet within assumptions, with continued conservative loss picks and awareness of legal system abuse issues. | Risks remain consistently present; while legal system abuse was emphasized earlier, the focus in Q2 is on maintaining conservative underwriting amid persistent social inflation. |
Specialty Lines and Diversification of Risk | Q1 2025 noted attractive margins and over 20% growth in specialty lines alongside active diversification into international markets ; Q4 2024 highlighted over 30% growth in specialty lines and a strategic shift away from underperforming U.S. casualty exposures to diversify risk. | Q2 2025 reported robust specialty growth—with a 40% increase and 24% growth in accident & health—and continued portfolio diversification through international expansion and reduced U.S. casualty exposure. | A consistently bullish outlook on specialty lines, with robust growth and a clear diversification strategy reinforcing risk management. |
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Expense Ratio & Returns
Q: What is outlook on expense ratio and returns?
A: Management expects expense ratios to improve as remediation wraps up, with property cat returns north of 25% and a solid accident portfolio delivering returns above mid-teen levels. -
Risk Margin
Q: Will the 6% risk margin remain?
A: They foresee the current 6% uplift moderating over time as favorable mix shifts and reduced casualty exposure help balance loss picks. -
Pricing Pressure
Q: What drives sevenone renewal pricing softness?
A: Sevenone renewals face modest pricing pressure due to a more diverse, competitive set, especially in facultative markets, compared to the flat sixone pricing. -
PML Deployment
Q: Will PML levels increase in the market?
A: Management is deploying additional capacity at attractive, resilient rates, believing the risk-reward trade remains very favorable. -
Accident & Health
Q: How is the accident business performing?
A: They are de-emphasizing health while aggressively growing a low-severity, consistent accident line both in the U.S. and internationally. -
Reserves & Mortgage
Q: Will reserve releases and mortgage lines accelerate?
A: Expect more frequent attritional reserve releases as data supports development, while caution remains in financial lines like mortgage amid current rate pressures. -
Casualty Expense
Q: Will casualty expense ratios improve after remediation?
A: Once the aggressive casualty remediation completes, improved underwriting quality should ease expense ratios over time. -
Workers' Comp
Q: What is the status of California workers’ comp?
A: California workers’ comp is now a much smaller portion of the overall book, limited to broader portfolios, reflecting a strategic pullback.
Research analysts covering EVEREST GROUP.