Everest continues drive into primary market on back of hardening property lines

Everest Re continues its charge into the primary insurance sector with another set of impressive growth figures in its primary and reinsurance business in the first quarter of this year.

The Bermuda-based group has invested heavily into growing its domestic and international primary insurance business in recent times, notably in Europe, Asia Pacific and Latin America.

In Europe, it opened new operations in France and Germany last October and in Spain at the end of January. At the end of March, the group announced the appointment of Andrew Kendrick as non-executive chairman of the board of directors for Everest Insurance (Ireland), Dac, effective 7 April.

The insurer said the highly experienced Kendrick also serves as an advisor to Everest Insurance International as the company “continues to advance its international growth strategy”.

The investments appear to be paying off, with gross premiums up 12% on a constant dollar basis on the first quarter of 2022 and premiums written in excess of $1bn for the eighth consecutive quarter.

The group is riding the hardening property market as tough reinsurance conditions continue to drive prices up. Juan Andrade, president and CEO, said he expects further hardening in primary property lines in future renewals as he reported net income of $365m for Q1 2023, up from $298m for Q1 2022.

During the group’s analyst conference call, one analyst asked whether Everest would take further advantage of the positive market conditions in both reinsurance and insurance sectors by raising fresh capital.

Mark Kociancic, executive vice president and chief financial officer, did not rule it out. “We feel very good about our positioning in this market, our ability to execute our plan. We have got the franchise on a global basis. We are a leading reinsurance market. So I think the platform is clearly well demonstrated to meet this opportunity. We have a lot of financial flexibility, and I will just leave it that we are always exploring and evaluating our market opportunities and our capital structure to make it better,” he said, according to results reporting service Seeking Alpha.

Andrade said the group is bringing the “full power” of Everest to the primary market.

“In reinsurance, our leadership position was abundantly clear in the ongoing hard market flight to quality. Our team’s consistent execution resulted in record gross written premiums and expanded margins. We continue to invest in scaling our primary business while remaining disciplined. We capitalised on the diversification of our portfolio and strong pricing environment. This led to stronger underwriting profits over last year. Everest is uniquely positioned to succeed in this market. We are bringing the full power of the Everest global franchise, together with underwriting discipline and the best talent in the business, to drive sustainable returns,” he said.

The primary results are healthy. Everest reported a 92.4% combined ratio and an underwriting profit of $66m, up 12% year-over-year.

“We continue to grow and develop our world-class talent, capabilities and value proposition to enhance our portfolio and increase average share of the global insurance market. We grew the insurance segment by nearly 12% in constant dollars, and generated more than $1bn in premiums for the eighth consecutive quarter. Growth was broad geographically, driven by a diversified mix across property and specialty lines, particularly strong in marine, energy and construction. We remain cautious in certain lines, including monoline workers’ compensation and public company D&O,” added Andrade.

The group achieved an 8% rate increase, excluding workers’ compensation, across the primary insurance portfolio, led by property and excess liability with continued strong rates across other lines.

“This is the second sequential quarter with an increase in the overall level of rate changes achieved. We expect the hard market in reinsurance to put upward pressure on primary insurance pricing. This dynamic should extend the favourable pricing environment and insurance for the foreseeable future and will also benefit our pro rata business in the reinsurance segment,” predicted Andrade.

Andrade said hardening in the property market is driven by a structural supply and demand imbalance in both insurance and reinsurance property catastrophe business.

“On the supply side of things, you have essentially less capacity being deployed… you also have less of the ILS capital coming into the market. And on the demand side… you have inflation, which is putting upward pressure on values, there is volatility in the environment, social inflation… so our ceding partners basically are requiring to buy more insurance, more reinsurance along those lines. So that structural supply and demand are imbalanced,” he explained.

“We expect to see [attractive pricing] through 1 January 2024, maybe beyond. On the primary side, we’re seeing basically the same thing. We’re now seeing property rates up in the high teens into the 20s. And if you’re in wholesale, it’s plus 30%… we have both a wholesale and a retail channel, we are getting that rate on both sides of the equation. So, from our perspective, that also makes a lot of sense for us,” said Andrade.