Everest Group, Ltd.

Good morning, everyone, and welcome to the Everest Group Limited second quarter of 2023 earnings conference call. The Everest executives leading today's call are Juan Andreda, President and CEO, and Marco Ciencik, Executive Vice President and CFO. We are also joined by other members of the Everest management team. Before we begin, I will preface the comments on today's call by noting that Everest SEC filings include extensive disclosures with respect to forward-looking statements. Management comments regarding estimates, projections and similar are subject to the risk, uncertainties and assumptions as noted in these filings. Management may also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement. With that, I'll now hand the call over to Matthew Rohrman.

Good morning, everyone, and welcome to the Everest Group Limited second quarter of 2023 earnings conference call. The Everest executives leading today's call are Juan Andrade, President and CEO, and Mark Kosciancic, Executive Vice President and CFO. We are also joined by other members of the Everest management team. Before we begin, I'll preface the comments on today's call by noting that Everest SEC filings, including extensive disclosures with respect to forward-looking statements. Management comments regarding estimates, projections, and similar are subject to the risks, uncertainties, and assumptions as noted in these filings. Management may also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement.

With that, I'll turn the call over to Juan. Thank you, Matt. Good morning, everyone. Thank you for joining us. Everett's second quarter performance was outstanding. We grew the business at significantly expanded margins, taking full advantage of the hard re-insurance market and delivered industry-leading returns, including a near 22% operating return on equity and a record annualized 25% total shareholder return. We have strong momentum across the board. capitalizing on the hard market opportunity in reinsurance, which continues globally, and both underwriting businesses continue to benefit from the global flight to quality amidst excellent and persistent market conditions. In addition, our superb execution drove strong results in the June and July reinsurance renewals. We continue to invest in our primary insurance business, which is also benefiting from similar tailwinds with favorable pricing across a number of business lines. In May, we completed our successful $1.5 billion equity raise. Response from the market was excellent and validates the opportunity we see before us. We remain proactive and nimble with our capital deployment, and we are on track to fully deploy the capital raised by the January 1, 2024 renewal. We changed our official company name and stock ticker symbol during the quarter. This was another key milestone. Our updated Everest Group name with our newly branded ticker symbol, EG, is a testament about our hybrid strategy and steadfast commitment to global reinsurance and insurance. As we approach the back half of the year, our talent, underwriting discipline, and capital position give us significant firepower to achieve our objectives and drive superior returns. With that, I'll turn to our second quarter financial highlights, beginning at the group level. All of our group key financial metrics improved and included quarterly records for both operating income and total shareholder return. Growth was broad and diversified. we continue to see excellent opportunities for further expansion across our portfolio. We grew gross written premiums by 22% year-over-year in constant dollars, led by exceptional reinsurance growth, which hit a new written premium record. Net operating income increased to an all-time high of $627 million, up more than 62% year-over-year. This was supported by underwriting profits in excess of 400 million. The group combined ratio improved 410 basis points year over year to 87.7. This is an excellent result, especially considering this is projected to be the worst second quarter for U.S. catastrophe losses since 2011. Everest net catastrophe loss was just 27.2 million. Additionally, our investment portfolio performed well. producing $357 million in net investment income, a significant improvement from the prior year. Turning now to our reinsurance business. Second quarter reinsurance results were also excellent. They are a product of our lead market position, breadth of offering, and outstanding execution by our team. We grew our portfolio, and we expanded margins. The property cap pricing remained strong, and the 2023 hard market has now surpassed the post-Hurricane Andrew market. This provided the backdrop for excellent mid-year renewals. June 1st renewal, centered on the Florida market, was very strong, with prospective returns exceeding the January 1st renewal. This momentum persisted into the July 1 renewal. Pricing was up sharply in key markets around the world. For example, The Australian market underwent a complete restructuring, moving away from frequency covers to true catastrophe structures. Everest is the preferred market by many of our customers. And as I noted earlier, we continue to benefit from a flight to quality around the globe. We were able to deploy additional capacity to many of our core clients at attractive returns. Gross premiums for the quarter were up 27%. over the second quarter of 2022 on a constant dollar basis, $2.8 billion. As I noted earlier, this is a record for the division. Growth was widespread across business lines and geographies. Property cap premiums were up 30 percent from last year, along with casualty and property pro rata premiums at 16 and 35 percent, respectively. We also grew in specialty lines. including marine and aviation. International growth was strong, particularly in Asia, where we nimbly took share in dislocated markets like South Korea. Pre-tax catastrophe losses were modest, despite the active tax quarter for the industry. Our deliberate initiative is to shape the portfolio and manage volatility, continue to improve our results. We nearly doubled our underwriting profit to 337 million, equating to a combined ratio of 85.9%, a 5.9% improvement year-over-year. Approximately 90% of our portfolio now renewed in 2023 at significantly improved rates and terms. We enter the second half of the year well-positioned, and our outlook for the January 1, 2024 renewal is positive. Turning to insurance. We made strong progress in advancing our global insurance business. We grew the segment more than 14% in constant dollars, generating a record $1.4 billion in premiums. Growth was broad and diversified, both geographically and by product line, particularly strong in property, both domestically and internationally, as well as in specialty lines like marine, aviation, and energy. We maintained our disciplined approach to managing and diversifying the portfolio, reducing our exposure in lines where the market is not well-priced, like monoline workers' compensation and public company DNO. While it's still early days, we are also gaining traction in international markets where we are methodically expanding our capabilities and local expertise. Market response has been excellent, reinforcing the abundant global opportunity that we see. In aggregate, rate continues to exceed trend across our core portfolio. We achieved a double-digit rate increase, excluding workers' compensation and financial lines. Group pricing was particularly noteworthy in property, marine, and other specialty lines. The hardware insurance market contributed to positive pricing in the primary market. This, coupled with persistent industry cap losses and a heightened risk environment, supports continued favorable pricing and insurance. Despite severe weather in the U.S., our CAT losses were de minimis and reflect our consistent, proactive portfolio management and our focus on superior risk-adjusted returns. The enhancements we have made to augment our technology and streamline our infrastructure are yielding greater efficiencies in connectivity across our platform. Everything from claims to distribution is being scaled methodically around client need, allowing us to remain agile and responsive as we grow. I'm proud of Everest's performance in the second quarter and our team's consistent ability to adapt and serve the needs of our clients and deliver leading returns to our shareholders. We have built a long and durable runway to profitably grow our hybrid platform, and we're approaching the market opportunity with full force. With that,